judgement:
Civil Appeal No. 1912 (NT) of 1974 From the Judgment and order dated 23rd November.
1973 of the Patna High Court in Tax Case No. 46 of 1969.
S.C. Manchanda, K.P. Bhatnagar and Miss A. Subhashini for the Appellant.
The Judgment of the Court was delivered by SABYASACHl MUKHARJl, J.
This is an appeal from the decision and judgment of the High Court of Patna dated 23rd November, 1973.
The appeal is by certificate from the High Court under section 261 of the Income Tax Act, 1961, hereinafter called the 'Act '.
The assessee firm was registered in 1945 under the Indian Income Tax Act, 1922.
The registration was upto the assessment year 1961 62.
There was a change in the constitution of the firm on the last day of the previous year relevant to the assessment year 1962 63 on 8th November.
From November 9, 1961, a new instrument of partnership came into existence.
On September 29, 1962, the firm applied for registration under the Act in Form 11A.
The Income tax officer refused registration on the ground that the case fell under section 184(7) of the Act.
The Tribunal, thereafter upheld the order of the Income tax officer.
There was a reference to the High Court.
It was held by the High Court that the application was filed in September, 1962.
On that date the constitution of the firm had changed.
The 311 application for registration under the 1961 Act was for registration of the firm which was in existence throughout the length of the previous year in relation to the first assessment year under the Act of 1961.
That being so, in accordance with rule 22(4)(ii), Income Tax Rules, the application filed in Form 1 IA was a good and valid application.
The High Court, further, observed that the scheme of renewal of registration under the Act of 1961 was different from the one that obtained under 1922 Act.
Under the Act of 1922, application for renewal of registration meant application for registration every year and had the effect of registering the firm every year.
Under the Act of 1961 when once registration was granted under the Act of 1922 to any firm for any assessment year it enured for subsequent years also unless there was a change in the constitution of the firm.
A registration granted under the Act of 1922 would not have the effect of continuing the registration for the assessment year 1962 63 to which the Act of 1961 became applicable.
For that year an application for registration had to be made for the purposes of the Act of 1961 in accordance with section 184(1) and the fact that the registration under the Act had got to be noted under sub section (4) of section 185 of the Act.
A renewal of registration granted under the Act of 1922 is not a "recognition granted" or "order issued" within the meaning of section 297(2)(k) of the 1961 Act and was, therefore, not saved by the provisions of that section.
The question that was referred by the Tribunal to the High Court under section 256(1) of the Act was as follows: "Was the application for registration made in Form No. 11A on 29th September, 1962 validly refused?" The question of registration of the firm under the relevant Income Tax Acts was dealt with under section 26A of 1922 Act.
Section 26 of the 1922 Act dealt with the change in the constitution of a firm, as neither the revenue authorities nor the High Court has proceeded on any question of the constitution of the firm, it is not necessary for the present purpose to deal with that.
Section 26A of the 1922 Act dealt with the procedure in registration of the firm.
Under the provision, application might be made to the Income tax officer on behalf of any firm constituted under an instrument of partnership specifying the individual shares of the partners for registration for the purpose of that 312 Act and of any enactment for the time being in force either relating to income tax or super tax.
The application was required to be made by such person or persons and was required to contain such particulars and had to be in such form and was required to be verified in such manner as had been prescribed.
It was thereafter required to be dealt with by the Income tax officer in the manner prescribed.
The Act of 1922 contained power for the Central Board to make rules under the said Act.
Rule 2(a)(i) of said Rules required the filing of an application for registration within a period of six months of the constitution of the firm or before the end of the previous year of the firm whichever was earlier or in any other case before the end of the previous year, as was required by clause (ii).
Application for renewal of registration under rule 6 had to be filed before the 30th day of June of a particular assessment year.
There were two types of forms given in form I which was the form of application for registration of the firm under section 26A of 1922 Act.
One was an application for registration simpliciter where there was no registration but when the firm as constituted on the date of the application was different from the one whose income was under assessment then in schedule (B) of the form particulars of the apportionment of income, profits or gains or loss of the business in the previous years, between the partners who were entitled to shares in such income, profits or gains or loss had to be given.
The form of the renewal application was appended to rule (6).
It might be noted that the Central Board of Direct Taxes had extended the time for registration during the transitional period after coming into operation of the Act of 1961, upto 30th September, 1962.
It would thus be seen that when the application was filed it was in time, it was not necessary to fill up the two schedules but if the application was filed for the first registration of the firm, which was in existence in the previous year at a point of time when the firm was reconstituted then the particulars of both kinds had to be given.
But the assessment on the newly constituted firm on the date as it was constituted at the time of assessment could be made when it was found that the firm as constituted was different from the one which had earned the profit in the previous year.
It is apparent, therefore, that under the 1922 Act both the forms were meant for the purpose of first registration of the firm and not renewal, but the form of renewal appended to rule 6 was different.
Essentially, similar is the position under the 1961 Act.
Chapter XVI of the Act deals with that position.
Section 182 of the Act deals with assessment of registered firms, and section 184 of the Act deals with application for registration of firm.
Sub section (4) of section 184 313 stipulates that the application should be made before the end of the previous year for the assessment in respect of which registration was sought.
The Income tax officer had power to entertain application even after the end of the previous year.
The basic point that has to be borne in mind in this case is that the scheme for renewal under 1961 Act was different from one under the two Acts in one significant aspect, while under 1922 Act the application for registration meant application for registration for every year and if granted it was valid for one assessment year but under 1961 Act, once registration is granted, such registration enures for every subsequent year, if certain requirements are fulfilled.
Such requirements are as provided in sub section (7) of section 184 of the Act.
Such procedure, it seems to us.
has been substantially complied with.
The question which the High Court posed before it was whether the application filed on 29th September, 1961 in Form 11A was a good application in accordance with 1961 Act and the rules framed thereunder or whether ii was a case of continuance of the registration granted under 1922 Act within the meaning of sub section (7) of section 184 of the Act.
It is apparent from relevant provisions of the two Acts that registration granted under 1922 Act cannot have effect of continuing the registration for the assessment year 1962 63 where 1961 Act would apply.
For that year an application for registration of the firm has to be made under section 184 (1) of 1961 Act, and the fact of such registration noted under sub section (4) of section 185 of the Act.
Sub section (7) would not come into effect at that time, it would come into effect for the subsequent assessment year 1963 64.
In the instant case, the application was filed in September, 1962 on that date the constitution of the firm had changed the application for registration under 1961 Act was for registration of the firm which was in existence throughout the length of the previous year in relation to the first assessment under 1961 Act.
That was in accordance with rule 22(4)(ii) of the Rules and the application filed in Form 11A was a good and valid application.
The High Court so held.
We agree.
The other aspect whether section 297(2)(k) of 1961 Act was applicable, was also discussed by the High Court but it is not necessary to refer to it in the view we have taken.
In any view of the matter in the facts of this case and in view of so called alleged detects in the application according to the Income tax officer, the Income tax officer under sub section (2) of section 185 of the Act should have given an opportunity to the firm, and in not having done so, did not act validly and the rejection of the application 314 was invalid.
The question referred to the High Court was rightly answered in the negative.
The appeal fails and is dismissed.
Since the other side was not represented here, there will be no order as to costs.
M.L.A. Appeal dismissed.

summary/full:
The respondent assessee firm was registered in 1945 under the Indian Income Tax, 1922.
The registration was up to the assessment year 1961 62.
On 8th November, 1961, the last day of the previous year relevant to the assessment year 1962 63, there was a change in the constitution of the firm.
From November 9, 1961, a new instrument of partnership came into existence.
On September 29, 1962 the respondent assessee firm applied for registration in Form 11A under the Income Tax Act, 1961.
The Income Tax officer refused registration on the ground that the case fell under section 184(7) of the Act.
The Tribunal upheld the order of the Income Tax officer.
The High Court in a reference made by the Tribunal under Section 256(1) of the Act.
held that on the date of application, the constitution of the assessee firm had changed and that the application was for registration of the firm which was in existence throughout the length of the previous year in relation to the first assessment under the Act of 1961 and that being so, in accordance with Rule 22(4)(ii) of the Income Tax Rules, the application filed in Form 11 A was a good and valid application.
Dismissing the appeal by the revenue, this Court, ^ HELD: 1.
The High Court was right in holding that the application filed in Form 11 A was a good and valid application.
[313C D] 2.1 Section 26A of the 1922 Act dealt with the procedure in registration of the firm.
Under the provision, application might be made to the Income tax Officer on behalf of any firm constituted under an instrument of partnership specifying the individual shares of the partners 309 for registration for the purpose of that Act and of any enactment for the A time being in force either relating to income tax or super tax.
The application was required to be made by such person or persons and was required to contain such particulars and had to be in such form and was required to be verified in such manner as had been prescribed.
It was thereafter required to be dealt with by the Income tax Officer, in the manner prescribed.
[311G H; 312A B] The Act of 1922 contained power for the Central Board to make rules under the said Act.
Rule 2(a)(i) of said Rules required the filing of an application for registration within a period of six months of the constitution of the firm whichever was earlier or in any other case before the end of the previous year, as was required by clause (ii).
Application for renewal of registration under rule 6 had to be filed before the 30th day of June of a particular assessment year.
[312B C] 2.2 There were two types of forms given in form I which was the form of application for registration of the firm under section 26A of 1922 Act.
One was an application for registration simpliciter where there was no registration but when the firm as constituted on the date of the application was different from the one whose income was under assessment then in schedule (B) of the form particulars of the apportionment of income, profits or gains or loss of the business in the previous year, between the partners who were entitled to shares in such income, profits or gains or loss had to be given.
The form of the renewal application was appended to rule (6).
[312C E] 2.3 Under the 1922 Act both the forms were meant for the purpose of first registration of the firm and not renewal, but the form of renewal appended to rule 6 was different.
Essentially, similar is the position under the 1961 Act.
Chapter XVI of the 1961 Act deals with that position.
Section 182 of the Act deals with assessment of registered firms, and section 184 of the Act deals with application for registration of firm.
Sub section (4) of Section 184 stipulates that the application should be made before the end of the previous year for the assessment in respect of which registration was sought.
The Income tax Officer had power to entertain application even after the end of the previous year.[312G H; 313A B] 2.4 The scheme for renewal under 1961 Act was different from the one under the 1922 Act in one significant aspect, while under 1922 Act the application for registration meant application for registration 310 for every year and if granted it was valid for one asesessment year but under 1961 Act once registration is granted, such registration ensures for every subsequent year, if certain requirements are fulfilled.
Such requirements are provided in sub section (7) of section 184 of the Act.
[313B C] 2.5 It is apparent from relevant provisions of the two Acts that registration granted under 1922 Act cannot have effect of continuing the registration for the assessment year 1962 63 where 1961 Act would apply.
For that year an application for registration of the firm has to be made under section 184(1) of the 1961 Act, and the fact of such registration noted under sub section (4) of section 185 of the Act.
Sub section (7) would not come into effect at that time.
It would come into effect for the subsequent assessment year 1963 64.
[313D F]


judgement:
Appeal No.389 of 1956.
297 Appeal by special leave from the judgment and order dated April 19, 1955, of the Allahabad High Court in Agricultural Income tax Miscellaneous Case No. 202 of 1952.
G. section Pathak and G. C. Mathur, for the appellants.
K. L. Misra, Advocate General of Uttar Pradesh, and C. P. Lal, for the respondent.
September 4.
The Judgment of the Court was delivered by BHAGWATI, J.
This appeal with special leave against the judgment of the High Court of Judicature at Allahabad raises a question of the interpretation of section 11(1) of the U.P. Agricultural Income tax Act, 1948, Act III of 1949 (hereinafter referred to as "the Act").
The appellants are the trustees of the estate settled on trust under the last will and testament dated May 17,1917, of one J. J. Holdsworth which, inter alia, comprised of a certain zamindari estate known as the Lehra Estate situate in the District of Gorakhpur, Uttar Pradesh.
The clauses of the will so far as they are relevant for the purpose of this appeal provided that the trustees were to take possession of all real property in the United Provinces of Agra and Oudh and elsewhere in British India (including the houses at Lehra and Gorakhpur and the grounds thereof) and all live and dead stock in or about his estate in British India or any buildings thereon and the contents of any houses or stabling in British India belonging to him (which was called his estate) and manage the same in all respects and in such manner as they shall deem most advan.
tageous and with all the powers of absolute owners.
The trustees were to stand possessed of the net rents and profits of the settled estate after payment of the Government land revenue tax, and of all management expenses, upon trust to pay thereout certain annuities to 12 annuitants therein mentioned.
If the net rents and profits of the said estate were less than seventy thousand rupees in any year or if the said estate or any portion thereof shall be sold at less than twenty years purchase of the net rent of seventy thousand rupees or 298 an equivalent proportion thereof in respect of the proportion so sold, the annuities bequeathed as above and for the time being payable except annuities Nos.
(1), (2) and (3) were to abate proportionately and no such annuitant was entitled to have the deficiency of his or her annuity made good out of the rents and profits of the said estate in respect of any subsequent year.
If there was no survivor alive then it was to go William Orlando Holdsworth, the son of the testator.
Seven of the said annuitants died and at the relevant period the following annuities werepayable: (i) Mrs.
J. C. Holdsworthpound 2,500/ (ii) Mr. W. 0.
Holdsworthpound 1,000/ (iii) Miss Lucy Marion Holdsworthpound 50/ (iv) Lt. Col. L. R. J. C. Wilkinsonpound 500/ (v) Mr. Horace Claud Holdsworthpound 400/ The trustees entered upon the trust and managed the trust properties in accordance with the terms of the said will.
The Act came into force in 1949 and a notice of assessment of agricultural income tax was issued to the trustees for the year 1357 Fasli (1949 50).
The Additional Collector, Gorakhpur, the assessing authority for the area in question, by his order dated December 14, 1950, assessed the ' trustees to agricultural income tax upon the total agricultural income received by them, overruling their contention that the tax should be computed in accordance with the method of computation laid down in section 11(1) of the Act and that they should be called upon to pay the aggregate of the sums payable as agricultural income tax by each of the five annuitants.
The trustees preferred an appeal before the Agricultural Income tax Commissioner, Lucknow, who by an order dated November 22, 1951, upheld the order of the Additional Collector.
He observed that the beneficiaries were neither jointly interested in the land held by the trustees nor in the agricultural income derived therefrom, and that the agricultural income of the Lehra Estate accrued to the trustees and not to the beneficiaries directly as it left the hands of the various tenants who paid rent or from self cultivation that was done by the trustees themselves.
, 299 The trustees then moved an application under a. 24 (2) of the Act before the Agricultural Income tax Board, U.P., for reference of certain questions of law to the High Court for its decision.
The said Board however decided to act, under the third proviso to section 24(2) of the Act and to considerthe questions of law itself instead of referring them to the High Court for its decision.
In the exercise of this power the Board held inter alia that the entire property vested in the trustees and that the latter could not claim the benefit of section 11 of the Act and refused to make a reference.
The trustees moved an application under section 24(4) of the Act before the High Court of Judicature at Allahabad praying that the High Court may be pleased to require the Agricultural Income tax Board, U.P., Lucknow, to state a case and to refer to the High Court certain questions of law arising in the case.
The application was allowed by the High Court on February 5, 1953, and an order was passed directing the said Board to refer the relevant question of law to the High Court.
Accordingly a statement of case was drawn up by the Agricultural Income tax Board and submitted to the High Court and the following question of law was referred for its decision: " Whether on the facts and in the circumstances of the case the trustees can be said to be holding land on behalf of beneficiaries and can the beneficiaries be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of Section 11 (1) of the U.P. Agricultural Income tax Act, 1948 ?" The said reference was heard by the High Court and by its judgment dated April 19, 1955, the High Court held that the trustees could be said to be holding land on behalf of beneficiaries but the beneficiaries could not be said to be jointly interested in the land or in the agricultural income derived therefrom within the meaning of section 1 1 (1) of the Act and accordingly answered the first part of the question in the affirmative and the latter half in the negative.
300 Thereupon the trustees filed an application before the High Court under article 133(1) of the Constitution for leave to appeal to this Court which was rejected with the result that the trustees applied for and obtained on April 16, 1956, special leave to appeal against the judgment of the High Court.
Section 11(1) of the Act which falls to be considered by us runs as under: " Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income tax by each person on the agricultural income derived from such land and, received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income tax so payable by each such person and shall be liable to pay the same.
" This section concerns itself with the mode of computation of agricultural income tax in certain cases.
The charging section is however section 3 of the Act which talks of agricultural income tax and super tax at the rate or rates specified in the schedule to be charged for each year in accordance with, and subject to the provisions of the Act. and rules framed under cls.
(a), (b) and (c) of sub section
(2) of section 44, on the total agricultural income of the previous year of every person.
"1 Person " is defined in section 2(11) to mean an individual or association of individuals, owning or holding property for himself or for any other, or partly for his own benefit and partly for that of another, either as owner, trustee, receiver, manager, administrator, or executor or in any capacity recognized by law, and includes an undivided Hindu family, firm or company but not to include a local authority.
According to the above definition the trustees before us would be included in the definition of " person " and would as such be liable to agricultural income tax under the 301 charging section.
That liability to pay income tax would however be on the trustees as a "person" without anything more.
Where however section 11(1) comes into operation the agricultural income tax would be assessed not on the ordinary computation but on the computation specified therein which has the effect of reducing the incidence of the tax by reason of the person being liable to pay only the aggregate of the sums payable as agricultural income tax by each of the persons jointly interested in such land or in the agricultural income derived therefrom.
Two conditions are requisite before section 11 (1) can come into operation: (1) that the person holds land from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of other persons and (2) such persons should be jointly interested in such land or in the agricultural income derived therefrom.
If both these conditions are satisfied the person holding such land is liable to be assessed in the manner specified in section 11(1) of the Act and the aggregate of the sums payable as agricultural income tax by each of these persons jointly interested on his share of the agricultural income derived from such land and actually received by him is to be assessed on such common manager, receiver, administrator or the like, and the latter is to be deemed the assessee in respect of the agricultural income tax so payable by each such person and is liable to pay the same.
It is to be noted that the primary liability for the payment of agricultural income tax is on the person who is interested in the land or in the agricultural income derived therefrom.
The incidence of the tax is on that person and the amount of tax is determined with reference to the aggregate income derived by him.
Inasmuch as however such land is held by some other person who@ is a common manager, receiver, administrator or the like on behalf of such person and others jointly interested in such land or in the agricultural income derived therefrom, the agricultural income tax is assessed on such common manager, 302 receiver, administrator or the like instead of the assessment being made on each of such persons who is jointly interested in such land or, in the agricultural income derived therefrom.
Section 11.(1) prescribes a mode of assessing such common manager, receiver, administrator or the like and he is deemed to be the assessee in respect of agricultural income tax so payable by each such person and is liable to pay the same.
Such common manager, receiver, administrator or the like would certainly be covered by the definition of person contained in section 2(11) of the Act because he would be holding property for others as receiver, manager, administrator or the like and would be liable to pay the agricultural income tax on the agricultural income derived by him from the land which he thus held.
If there was nothing more, the incidence of the tax would be on the total income which has come to his hands.
But, in so far as he holds the land from which agricultural income is derived as such common manager, receiver, administrator or the like on behalf of the persons jointly interested in such land or in the agricultural income derived therefrom, the agricultural income tax is levied not on the computation of the whole agricultural income which has come to his hands but if; limited to the aggregate of the sums payable as agricultural income tax by each of the persons jointly interested in such land or in the agricultural income derived therefrom and received by him.
The agricultural income tax in such cases is determined with reference to each of the persons jointly interested in such land or in the agricultural income derived therefrom, and the agricultural income tax payable by each of such persons is computed on the actual amount of the agricultural income derived from such land and received by him and the aggregate of the sums payable as agricultural income tax by each of such persons is assessed on such common manager, receiver, administrator or the like with the result that he pays agricultural income tax which would be substantially lower than what he would have otherwise had to pay if the computation of such tax was on the total agricultural income 303 derived from such land and come to his hands.
Such common manager, receiver, administrator or the like would in the course of management or administration of such land debit to the account of each such person an aliquot share of the whole of the agricultural income tax paid by him.
If such common manager, receiver, administrator or the like were assessed on the total income derived from the land which comes to his hands, the amount thus debited to each of such persons would be larger than the amount which the latter would have to pay by way of agricultural income tax, if agricultural income tax was levied on the actual amount of agricultural income derived from such land and received by him as falling to his share.
This provision therefore is designed to lower the incidence of the agricultural income tax upon each such person and such common manager, receiver, administrator or the like by virtue of these provisions is deemed to be the assessee in respect of agricultural income tax so payable by each such person and is made liable to pay the same.
This position however is not available unless and until such common manager, receiver, administrator or the like holds, the land from which agricultural income is derived on behalf of persons jointly interested in such land or in the agricultural income derived therefrom.
Such common manager, receiver, administrator or the like should hold the land on behalf of these persons and not on his own behalf.
The very words " on behalf of " predicate that the land is held by such common manager, receiver, administrator or the like not as the owner but as the agent or representative of these persons and he manages or administers the same either in accordance with law or the terms of the agreement arrived at between the parties.
There is no vestige of ownership in him and all that he is entitled to do is to manage or administer the land on behalf of persons who are jointly interested in the agricultural income derived therefrom.
This could be predicated of receivers managers, administrators or the like but cannot be predicated of owners or 304 trustees who are equally with the manager, receiver, administrator or the like included within the definition of " person " contained in section 2(11) of the Act.
The case of the owner does not require any elaboration.
He holds the land on his own behalf and also for his own benefit.
Ho certainly cannot come within the scope of section 1 1 (1) of the Act.
The position of a trustee is also similar to that of the owner.
A trust is thus defined in English Law: " A trust in the modern and confined sense of the word, is a confidence reposed in a person with respect to property of which he has possession or over which he can exercise a power to the intent that he may hold the property or exercise the power for the benefit of some other person or object." (Vide Halsbury 's Laws of England, Hailsham Ed., Vol.
33, p. 87, para. 140).
" The property affected by the confidence is called the trust property or trust estate.
It is usually in the legal ownership or under the legal control of the trustee.
The cestui que trust is said to have a beneficial or equitable interest in it." (Ibid p. 89 para.
A trustee is thus usually the legal owner of the trust property or the trust estate and holds it for the benefit of the certui que trust.
Reliance was however placed upon an observation of Sir John Romilly, M. R., in Lister vs Pickford (1) " A trustee, who is in possession of land is so on behalf of his cestuis que trust, and his making a mistake as to the persons who are really his cestuis que trust cannot affect the question.
" What the Court was considering there was the question of limitation and adverse possession and these observations were made in that context.
It is significant however to note the further observations of the Master of the Rolls in that very context at p. 583: " Suppose that they had imagined bona fide that they themselves were personally entitled to the property, and that they were not trustees of it for anyone, it would, nevertheless, have been certain that they would (1) (1865)34 Beav.
576, 582; ; 305 have been trustees for the cestuis que trust, and no time would run while they were in such possession.
The legal estate was vested in them, no other person could have maintained an ejectment against them; they are bound to know the law, they ought to have taken possession as soon as they saw who were the real beneficiary devisees, and, being in possession, they ought to have applied the proper proportion of the rents for the benefit of such residuary devisees.
" The passage quoted above makes it abundantly clear that the legal estate is vested in the trustees and they hold it for the benefit of the beneficiaries.
Whatever be the position in English Law, the (II of 1882) is clear and categoric on this point.
Section 3 of that Act defines a Trust as an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner: the person who accepts the confidence is called the "trustee": the person for whose benefit the confidence is accepted is called the "beneficiary": "the beneficial interest" or "interest" of the beneficiary is his right against the trustee as owner of the trust property; the subject matter of the trust is called "trust property" or "trust money.
" These definitions emphasize that the trustee is the owner of the trust property and the beneficiary only has a right against the trustee as owner of the trust property.
The trustee is thus the legal owner of the trust property and the property vests in him as such.
He no doubt holds the trust property for the benefit of the beneficiaries but he does not hold it on their behalf.
The expressions " for the benefit of " and " on behalf of " are not synonymous with each other.
They convey different meanings.
The former connotes a benefit which is enjoyed by another thus bringing in a relationship as between a trustee and a beneficiary or cestui que trust, the latter connotes an agency which brings about a relationship as between principal and agent between the parties, one of whom is acting on behalf of another.
Section 11(1) therefore can only 39 306 come into operation where the land from which agricultural income is derived is held by such common manager, receiver, administrator or the like on behalf of, in other words, as agent or representative of, persons jointly interested in such land or in the agricultural income derived therefrom.
Even though such persons were the beneficiaries cestui que trust under a deed of trust, they would not be comprised within the category of persons on whose behalf such land is held by the trustees and the trustees would not be included in the description of common manager, receiver, administrator or the like so as to attract the operation of section 11(1).
Trustees do not hold the land from which agricultural income is derived on behalf of the benefi ciaries but they hold it in their own right though for the benefit of the beneficiaries.
The beneficiaries are also not necessarily persons who are jointly interested in such land or in the agricultural income derived therefrom.
The term "jointly interested" is well known in law and predicates an undivided interest in the land or in the agricultural income derived therefrom as distinguished from a separate or an individual interest therein.
If on a true reading of the provisions of the deed of trust the interest which is created in the beneficiaries is a separate or individual interest of each of the beneficiaries in the land or in the agricultural income derived therefrom, merely because they have a common interest therein, that cannot make that interest a joint interest in the land or in the agricultural income derived therefrom.
The words "jointly interested" have got to be understood in their legal sense and having been used in a statute are not capable of being understood in a popular sense as meaning a common interest or an interest enjoyed by one person in common with another or others.
If regard be bad to the above construction put upon the terms of section 11 (1) of the Act, it follows that the appellants who were trustees of the deed of trust in the present case did not hold the land from which agricultural income is derived as common manager, receiver, administrator or the like on behalf of the annuitants 307 and the annuitants were not jointly interested in the land or in the agricultural income derived therefrom with the result that section 11(1) of the Act did not come into operation at all.
The appellants were the legal owners of the trust estate and did not hold the land from which agricultural income was derived "on behalf of" the annuitants.
Each of the annuitants, moreover, was separately or individually interested in the agricultural income derived from the land comprised in the trust estate to the extent of the annuity payable to him under the deed of trust and the interest of one annuitant was not affected by whatever happened to the interest of the other.
There was thus no fulfilment of either of the two conditions pre requisite before section 11(1) of the Act could come into operation at all.
The learned judges of the High Court were therefore in error in answering the first part of the question referred to them in the affirmative, though their answer to the latter part in the negative was correct.
We are of opinion that both the parts of the question should have been answered by them in the negative.
The ultimate result however is the same and this appeal of the appellants is therefore bound to fail.
The appeal will accordingly stand dismissed with costs.
Appeal dismissed.

dataset_name: IN-Abs

summary/full:
Section 11( 1) of the U. P. Agricultural Income tax Act, 1948, provided: "Where any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income tax by each person on the agricultural income derived from such land and received by him, shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income tax so payable by each such person and shall be liable to pay the same.
" The appellants were the trustees of an estate settled on trust under a will which inter alia provided that the trustees were to take possession of the trust properties and to manage the same with all the powers of absolute owners and to pay the annuities to certain persons.
The assessing authority assessed the appellants to agricultural income tax upon the total agricultural income received by them, overruling their contention that the tax should be computed in accordance with the method of computation laid down in section 11(1) of the Act and that they should be called upon to pay the aggregate of the sums payable as agricultural income tax by each of the annuitants.
Held: (1) that the trustees who were the legal owners of the trust property did not hold the land from which agricultural income was derived, on behalf of the annuitants and that each of the annuitants was separately or individually interested in the agricultural income derived from the land comprised in the trust estate to the extent of the annuity payable to him.
(2) that section 11(1) of the Act was not applicable to the case and that the appellants were liable to pay agricultural income tax upon the total agricultural income received by them


judgement:
Civil Appeal No. 220 (NT) of 1986 370 From the Judgment and order dated 20th November, 1985 of the Karnataka High Court in Writ Petition No. 27805 of 1982.
C.K. Viswanath Iyer, K.M.K. Nair and S.T. Desai for the Appellants B.R.L. Iyengar, M. Veerappa for the Respondents.
The Judgment of the Court was delivered by BHAGWATI, C.J.
The short question that arises for determination in this appeal by certificate is whether shrimps, prawns and lobsters subjected to processing like cutting of heads and tails, peeling, deveining, cleaning and freezing cease to be the same commodity and become a different commodity for the purpose of the .
Can they still go under the description of shrimps, prawns and lobsters or in other words, when we use the words 'shrimps, prawns and lobsters ' do they mean only raw shrimps, prawns and lobsters as caught from the sea or do they also include processed and frozen shrimps, prawns and lobsters.
This question which falls for determination in the present appeal arising out of the following facts.
The appellants are a partnership firm carrying on business as dealers in shrimps, prawns and lobsters and other sea food products.
The appellants are registered as a dealer both under the Karnataka Sales Tax Act, 1957 and the .
The appellants in the course of their business purchase shrimps, prawns and lobsters locally for the purpose of complying with orders for export and they cut the heads and tails of the shrimps, prawns and lobsters purchased by them, peel, devein and clean them and after freezing and packing them in cartons, they export them to foreign buyers outside India under prior contracts of sale.
The appellants filed their statement of monthly turn over for the month of April 1982 before the Assistant Commissioner of Commercial Taxes, Mangalore and in this statement of monthly turn over, they claimed total exemption from tax in respect of the purchase turn over of shrimps, prawns and lobsters on the ground that the same had been purchased in the course of export.
The appellants relied on sub section (3) of section 5 of the which reads as follows: "Notwithstanding anything contained in sub section (1) the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the 371 territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.
" The appellants contended that since the purchases of shrimps, prawns and lobsters had been made by them for the purpose of complying with the orders for export, such purchases of shrimps, prawns and lobsters must be deemed to be in the course of export and they were accordingly not taxable under the Karnataka Sales Tax Act 1957.
This contention of the appellants was rejected by the Assistant Commissioner of Commercial Taxes and on 30th July 1982 an order was made by the Assistant Commissioner of Commercial Taxes for the month of April 1982 under section 12 B (2) of the Karnataka Sales Tax 1957 assessing the appellants to purchase tax and other incidental taxes in respect of the purchases of shrimps, prawns and lobsters made by them during the said period.
The Assistant Commissioner of Commercial Taxes also passed another order dated 3rd August 1982 assessing the appellants to purchase tax and other incidental taxes in respect of the purchases of shrimps, prawns and lobsters made by them during the month of May, 1982.
These two orders made by the Assistant Commissioner of Commercial Taxes were followed by issue of notices of demand for Rs.52,610.71 and Rs.44,237.88 respectively against the appellants.
The appellants thereupon filed a writ petition in the High Court of Karnataka challenging the assessment orders and the notices of demand issued against them and sought appropriate direction, order or writ restraining the respondents from imposing or collecting purchase tax on purchase turn over of shrimps, prawns and lobsters under the Karnataka Sales Tax Act 1957.
The writ petition was dismissed by the High Court, but having regard to the importance of the question involved, a certificate under Article 133 of the Constitution was granted by the High Court and that is how the present appeal by certificate has come before us.
It is clear on a plain reading of sub section (3) of Section 5 of the that in order to attract the applicability of that provision, it is necessary that the goods which are purchased by an assessee for the purpose of complying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India.
The words "those goods" in this subsection are clearly referable to "any goods" mentioned in the preceding part of the sub section and it is therefore obvious that the goods 372 purchased by the assessee and the goods exported by him must be the same.
If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export.
The question which therefore arises for consideration is as to what happens when shrimps, prawns and lobsters purchased by the assessee are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing before export.
Do they cease to be the original commodity and become commercially a new commodity or do they still retain their original identity as shrimps, prawns and lobsters? Before we proceed to consider this question, it is necessary to refer to certain provisions of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as the 'Karnataka Act ') which came into force on 1st October 1957.
Section 5 of the Karnataka Act which enacts the charging section provides for levy of tax on sales and purchases of various commodities described in the Schedules to the Act.
The Third Schedule to the Karnataka Act, as originally enacted, enumerated the commodities on which a single point tax was leviable under subsection 3(b) of section 5 and there were 13 entries in this Schedule.
None of these 13 entries included shrimps, prawns and lobsters with the result that the purchases of shrimps, prawns and lobsters were not exigible to purchase tax.
This position continued right from the time of the original enactment until 31st March 1973 when the Karnataka Sales Tax (Amendment) Act, 1973 introduced a new Entry '13a ' in the Third Schedule with effect from Ist April 1973.
This entry included "shrimps, prawns and lobsters" in the Third Schedule.
There was another amendment made in the Karnataka Act in 1978 by the Karnataka Sales Tax (Amendment) Act, 1978 and section 9 of this Amending Act made certain amendments in Entry 13a with retrospective effect, so that from 1st April 1973 Entry 13a included in the Third Schedule "shrimps, prawns and lobsters other than processed or frozen shrimps, prawns and lobsters" and the Explanation to Entry 13a provided that "processing" shall include "all or any of the following, namely, cutting of head or tail, peeling, deveining, cleaning or freezing".
But, Entry 13a in this form continued only up to 31st August 1978 and with effect from 1st September, 1978, a further amendment was made by the Karnataka Taxation and Certain Other Laws (Amendment) Act, 1982 and after this amendment which was made 373 with retrospective effect from 1st September 1978, Entry 13a read: "Shrimps, prawns and lobsters other than frozen shrimps, prawns and lobsters".
The amendment made by the 1982 Amendment Act excluded from the scope and ambit of Entry 13a, frozen shrimps, prawns and lobsters and brought within the net of taxation only purchases of shrimps, prawns and lobsters other than frozen shrimps, prawns and lobsters, provided they were last purchases within the State.
It is in the context of these provisions of the Karnataka Act that we have to consider whether shrimps, prawns and lobsters, when subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, retain their original character and identity or become another distinct commodity.
The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity.
It is necessary to point out that it is not every processing that brings about change in the character and identity of a commodity.
The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage.
With each process suffered, the original commodity experiences change.
But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original, has come into being.
The test is whether in the eyes of those dealing in the commodity or in commercial parlance the processed commodity is regarded as distinct in character and identity from the original commodity vide Sales Tax Board vs PIO Food Packers ; It is clear on an application of this test that processed or frozen shrimps, prawns and lobsters are commercially regarded the same commodity as raw shrimps, prawns and lobsters.
When raw shrimps, prawns and lobsters are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity.
They are in common parlance known as shrimps, prawns and lobsters.
There is no essential difference between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters.
374 The dealer and the consumer regard both as shrimps, prawns and lobsters.
The only difference is that processed shrimps, prawns and lobsters are ready for the table while raw shrimps, prawns and lobsters are not, but still both are, in commercial parlance, shrimps, prawns and lobsters.
It is undoubtedly true that processed shrimps, prawns and lobsters are the result of subjecting raw shrimps, prawns and lobsters to a certain degree of processing but even so they continue to possess their original character and identity as shrimps, prawns and lobsters, notwithstanding the removal of heads and tails, peeling, deveining and cleaning which are necessary for making them fit for the table.
Equally it makes no difference in character or identity when shrimps, prawns and lobsters are frozen for the purpose of preservation and transfer to other places including far off countries in the world.
There can therefore be no doubt that processed or frozen shrimps, prawns and lobsters are not a new and distinct commodity but they retain the same character and identity as the original shrimps, prawns and lobsters.
This view finds ample support from the decision of the Supreme Court of the United States in East Texas Motor Freight Lines vs Frozen Food Express, ; , where the question was whether dressed and frozen chicken was a commercially distinct article from the original chicken.
The Supreme Court held that it was not a commercially distinct article but was commercially and in common parlance the same article as chicken.
The Supreme Court pointed out: "Killing, dressing and freezing a chicken is certainly a change in the commodity.
But it is no more drastic a change than the change which takes place in milk from pasturising, homogenizing, adding vitamin concentrates, standardising and bottling".
and proceeded to add in words clear and explicit: " . . there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cottonseed in the field and cottonseed at the gin, than between a chicken in the pen and one that is dressed.
The ginned and baled cotton and the cottonseed, as well as the dressed chicken, have gone through a processing stage.
But neither has been "manufactured" in the normal sense of the word." 375 If dressed and frozen chicken is not a commercially distinct article from the original chicken, it must follow on a process of analogical reasoning that processed and frozen shrimps, prawns and lobsters cannot be regarded as commercially distinct commodity from raw shrimps, prawns and lobsters.
This conclusion on principle was not disputed by the High Court in its judgment and the High Court conceded that even after processing such as cutting of heads and tails, peeling, deveining, cleaning and freezing, shrimps, prawns and lobsters subjected to such processing continued in common parlance to be called 'shrimps, prawns and lobsters '.
But the High Court took the view that Entry 13a after the amendment effected in it with retrospective effect from 1st September, 1978, made a distinction between raw shrimps, prawns and lobsters and processed or frozen shrimps, prawns and lobsters.
In view of this distinction made in Entry 13a, it was not possible to hold that processed or frozen shrimps, prawns and lobsters were the same commodity as raw shrimps, prawns and lobsters.
The argument was that when the State Legislature itself made a distinction between these categories of commodities by making purchases of one category amenable to sales tax under Entry 13a and leaving out of the scope of taxation under Entry 13a the other category, how could it be said that both these categories represent the same commodity and there is no difference in character and identity between the two.
This argument, we are afraid, is not well founded.
It is based on a total misapprehension in regard to the true object and intendment of Entry 13a and it erroneously seeks to project that Entry in the interpretation and application of Section 5 sub section (3) of the .
In fact Entry 13a as amended, supports the argument that even processed or frozen shrimps, prawns and lobsters are known commercially and in the trade as 'shrimps, prawns and lobsters '.
It is because Entry 13a as it stood prior to its amendment, would have, on the plain natural meaning of the expression 'shrimps, prawns and lobsters ' included processed and frozen shrimps, prawns and lobsters, that it became necessary for the State Legislature to amend Entry 13a with retrospective effect so as to exclude from the scope and ambit of that entry processed or frozen shrimps, prawns and lobsters.
Now when the State Legislature excluded processed or frozen shrimps, prawns and lobsters from the ambit and coverage of Entry 13a, its object obviously was that the last purchases of processed or frozen shrimps, prawns and lobsters in the State should not be exigible to State Sales Tax under Entry 13a.
The State Legislature was not at all concerned with the question as to 376 whether processed or frozen shrimps, prawns and lobsters are commercially the same commodity as raw shrimps, prawns and lobsters or are a different commodity and merely because the State Legislature made a distinction between the two for the purpose of determining exigibility to State Sales Tax, it cannot be said that in commercial parlance or according to popular sense, processed or frozen shrimps, prawns and lobsters are recognised as different commodity distinct from raw shrimps, prawns and lobsters.
The question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State Sales Tax because even where the commodity is the same in the eyes of the persons dealing in it the State Legislature may make a classification for determining liability to sales tax.
This question, for the purpose of the , has to be determined on the basis of what is commonly known or recognised in commercial parlance.
If in commercial parlance and according to what is understood in the trade by the dealer and the consumer, processed or frozen shrimps, prawns and lobsters retain their original character and identity as shrimps, prawns and lobsters and do not become a new distinct commodity and are as much 'shrimps, prawns and lobsters ', as raw shrimps, prawns and lobsters, sub section (3) of section 5 of the would be attracted and if with a view to fulfilling the existing contracts for export, the assessee purchases raw shrimps, prawns and lobsters and processes and freezes them, such purchases of raw shrimps, prawns and lobsters would be deemed to be in course of export so as to be exempt from liability to State Sales Tax.
Here in the present case, it was not disputed on behalf of Revenue that the purchases of raw shrimps, prawns and lobsters were made by the appellants for the purpose of fulfilling existing contracts for export and after making such purchases the appellants subjected raw shrimps, prawns and lobsters purchased by them to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing and exported such processed and frozen shrimps, prawns and lobsters in fulfilment of the contracts for export.
The only argument raised on behalf of Revenue was that the goods which were exported were not the same as the goods purchased by the appellants because raw shrimps, prawns and lobsters after processings ceased to be the same commodity and became a new distinct commodity.
But, for reasons which we have already discussed, this argument cannot be sustained.
377 The shrimps, prawns and lobsters purchased by the appellants did not lose their original character and identity when they were subjected to processing for the purpose of export.
So far as commercial parlance or popular usage is concerned, they remained the same goods and hence the purchases of raw shrimps, prawns and lobsters by the appellants must be held to be purchases in the course of export and hence exempt from liability to tax under the Karnataka Sales Tax Act.
We, accordingly, allow the appeal, set aside the judgment of the High Court as also the Orders made by the Assistant Commissioner of Commercial Taxes and direct that the purchases of raw shrimps, prawns and lobsters made by the appellants for the purpose of fulfilling the existing contracts for export shall not be included in the tax able turnover of the appellants.
The respondents will pay the costs of the appeal to the appellants.
S.R. Appeal allowed.

summary/full:
The appellants are a partnership firm carrying on business as dealers in shrimps, prawns and lobsters and other sea food products.
They are registered as a dealer both under the Karnataka Sales Tax Act, 1957 and the .
The appellants in the course of their business purchase shrimps, prawns and lobsters locally for the purpose of complying with orders for export and they cut the heads and tails of the shrimps prawns and lobsters purchased by them, peel, devein and clean them and after freezing and packing them in cartons, they export them to foreign buyers outside India under prior contracts of sale.
The appellants filed their statement of monthly turnover for the month of April 1982 before the Assistant Commissioner of Commercial Taxes, Mangalore and claimed total exemption from tax in respect of the purchase turn over of shirmps, prawns and lobsters under the Karnataka Sales Tax Act, 1957.
The Assistant Commissioner of Commercial Taxes rejected the said claim by his two assessment orders and issued two notices of demand for Rs.52,610.71 and Rs.44,237.88 respectively against the appellants.
The appellants, thereupon, filed a writ petition in the High Court of Karnataka challenging all the said orders and notices of demand and sought appropriate direction, order or writ restraining the respondents from imposing or collecting purchase tax on purchase turn over of shrimps, prawns and lobsters under the Karnataka Sales Tax Act, 1957.
The writ petition was dismissed by the High Court, but having regard to the importance of the question 368 involved a certificate under Article 133 of the Constitution was granted by the High Court.
Allowing the appeal, the Court ^ HELD: 1.1.
In order to attract the applicability of sub section (3) of section 5 of the , it is necessary that the goods which are purchased by an assessee for the purpose of com plying with the agreement or order for or in relation to export, must be the same goods which are exported out of the territory of India.
The words "those goods" in sub section (3) are clearly referable to "any goods" mentioned in the preceding part of the sub section and, therefore, the goods purchased by the assessee and the goods exported by him must be the same.
If by reason of any processing to which the goods may be subjected after purchase, they change their identity so that commercially they can no longer be regarded as the original goods, but instead become a new and different kind of goods and then they are exported, the purchases of original goods made by the assessee cannot be said to be purchases in the course of export.
1.2 The test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity.
It is not every processing that brings about change in the character and identity of a commodity.
The nature and extent of processing may vary from one case to another and indeed there may be several stages of processing and perhaps different kinds of processing at each stage.
With each process suffered, the original commodity experiences change.
But it is only when the change or a series of changes take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct commodity that it can be said that a new commodity, distinct from the original. has come into being.
Sales Tax Board vs PIO Food Packers ; applied. 1.3 The shrimps, prawns and lobsters purchased by the appellants did not lose their original character and identity when they were subjected to processing for the purpose of export.
so far as commercial parlance or popular usage is concerned, they remained the same goods.
369 The dealer and the consumer regarded both as shrimps, prawns and lobsters.
The only difference is that processed shrimps, prawns and lobsters are ready for the table while raw shrimps, prawns and lobsters are not but still both are in commercial parlance, shrimps, prawns and lobsters.
The fact that they undergo a certain degree of processing or frozen for the purpose of preservation and transfer to other places including far off countries in the world makes no difference in character or identity as the original shrimps, prawns and lobsters.
Hence, the purchases of raw shrimps, prawns and lobsters by the appellants must be held to be purchases in the course of export and hence exempt from liability to tax under the Karnataka Sales Tax Act, 1957 as amended.
[377A B] East Taxes Motor Freight Lines vs Frozen Food Express (100) L.Ed. 917 quoted with approval.
1.4 Entry 13a of the Third Schedule to the Karnataka Act also makes it clear that even processed or frozen shrimps, prawns and lobsters are known commercially and in the trade as shrimps, prawns and lobsters.
When the State Legislature excluded processed or frozen shrimps, prawns and lobsters from the ambit and coverage of Entry 13a, its object obviously was that the last purchases of processed or frozen shrimps, prawns and lobsters in the State should not be exigible to State Sales Tax under Entry 13a.
The State Legislature was not at all concerned with the question as to whether processed or frozen shrimps, prawns and lobsters are commercially the same commodity as raw shrimps, prawns and lobsters or are a different commodity.
Merely because the State Legislature made a distinction between the two for the purpose of determining exigibility to State Sales Tax, it cannot be said that in commercial parlance or according to popular sense, processed or frozen shrimps, prawns and lobsters are recognised as different commodity distinct from raw shrimps, prawns and lobsters.
Further the question whether raw shrimps, prawns and lobsters after suffering processing retain their original character or identity or become a new commodity has to be determined not on the basis of a distinction made by the State Legislature for the purpose of exigibility to State Sales Tax because even where the commodity is the same in the eyes of the persons dealing in it the State Legislature may make a classification for determining liability to sales tax.


judgement:
ing been subsequently filled in by introducing section 132A of the Act with effect from October, 1975, it will be open to the income tax authorities to approach the appropriate authorities to realise any amount of money or to recover any books of account or documents in accordance with the law.
[307D E] & CIVIL APPELLATE JURISDICTION: Civil Appeal No.1666 (NT) of 1974.
297 From the judgment and order dated 26th November, 1973 of the A Punjab & Haryana High Court in Civil Writ No. 3355 of 1972.
S.C. Manchanda, M.B. Rai and Ms. A. Subhashini for the Appellants.
Harbans Singh for the Respondents.
The Judgment of the Court was delivered by SABYASACHI MIJKHARJI, J.
This appeal is by special leave from a judgment and order of Punjab and Haryana High Court in an application under article 226 of the Constitution.
The judgment in question is reported in By a petition under articles 226 and 227 of the Constitution the order of the Income Tax Department dated 10th May, 1972, passed under section 132 of the Income tax Act, 1961 (hereinafter called the 'Act ') and Rule 112(II) of the Income tax Rules, 1962 (hereinafter called the 'Rules ') was challenged.
The division bench by the impugned judgment allowed the petition, quashed the search and seizure warrants and directed the Income Tax Department to return the moneys to the Customs authorities and gave certain consequential directions.
In order to appreciate the points involved, it is necessary to refer to certain facts as found by the High Court.
On 23rd August, 1970 the petitioner before the High Court, who is the respondent here, was travelling by car, alleged to be belonging to his brother from Ambala to Batala.
He was intercepted near the Beas river by the Customs officer and was forcibly taken along with the driver, Gurnam Singh, to the Customs House at Amritsar.
The said petitioner in that application was searched along with his driver and the Customs authorities took into possesion Rs.93,500 in Indian currency, 10 gold sovereigns and the car.
On the 24th August, 1970, the petitioner was produced before a Duty Magistrate at Amritsar and was granted bail.
In the meantime, the Customs department took proceedings under section 110(2) of the and extended the period of issuing of the show cause notice under section 124 of the .
These proceedings were challenged in the High Court by Writ Petition and the order of the Customs authority under section 110(2) was quashed by an order of the learned single judge of the High Court on 24th April, 1972.
The appeal against that decision was dismissed by the division bench along with this petition by the High Court.
After the said judgment of the learned single judge, the respondent had approached the Customs authorities for the return of H 298 the money and the car.
The gold sovereigns were not demanded be cause according to the said petitioner, these did not belong to him.
He had been directed to come on the following day to get back the currency notes and the car.
In the meantime on 12th May, 1972 the Income tax officer, had served the warrant of authorisation dated 10th May, 1972 issued under section 132 of the Act and rule 112(II) of the Rules on the respondent as well as on the Customs department, with the result that only the cash was taken possession of by the income tax authorities.
Thereafter, the respondent filed the petition under articles 226 and 227 of the Constitution before the High Court in respect of which the judgment impugned here was rendered.
It was submitted that the authorisation warrant was illegal, be cause the money was not in his possession but was in the possession of the Customs authorities.
It was secondly urged that the action taken by the Income tax authorities under section 132 of the Act militated the provisions of section 110(2) of the .
The High Court felt that so far as the first contention was concerned, it was concluded by the decision of the said High Court in The Commissioner of Income tax vs Ramesh Chander & Ors., The High Court relied on the following observations at pages 478 479 of the report: "I have come to the conclusion that the search and seizure warrants issued under sub section (1) of section 132 of the Income tax Act were illegal, firstly, because the search and seizure warrants were issued in the name of Ramesh Chander and he was in fact not in possession of either the currency notes or account books, and secondly, the income tax authorities could not seize the currency notes and account books from the police officer who is duty bound to proceed with the case property in accordance with the pro visions of the Code of Criminal Procedure.
" The High Court held that where the amount was seized by the Customs authorities and the seizure was held illegal by the Court, Customs authorities were bound to return the money to the person entitled to it under the relevant provisions of section 110 of the .
The Income tax authorities could not seize such an amount from the Customs authorities under section 132 of the Act.
Moreover, the authorisation was illegal if issued in the name of the person who did not have possession of the article, in respect of which it was issued.
The High Court further held that in the facts and circum 299 stances of the case the order under section 132 of the Act was not Justified.
Therefore, the High Court held that the search and seizure warrants were liable to be quashed and the money returned to the customs department.
The judgment of the High Court is reported in The validity of the judgment is impugned in this appeal.
It is necessary in order to appreciate the contentions urged in this case to refer to the relevant provisions of section 132 of the Act.
Sub section ( I) of section 132 provides as follows: "Search and Seizure (1) Where the Director of Inspection or the Commissioner [or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board,] in consequence of information in his possession, has reason to believe that (a) any person to whom a summons under sub section (1) of section 37 of the Indian Income tax Act, 1922 (XI of 1922), or under sub section (1) of section 131 of this Act, or a notice under sub section (4) of section 22 of the Indian Income Tax Act, 1922, or under sub section (1) of section 112 of this Act was issued to produce or cause to be produced any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to any proceeding under the Indian Income tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, disclosed] for the purposes of the Indian Income tax Act, 1922 (XI of 1922), or this Act H 300 (hereinafter in this section referred to as the undisclosed income or property), [then, (A) the Director of Inspection or the Commissioner, as the case may be, may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income tax officer, or (B) such Deputy Director of Inspection or Inspecting Assistant Commissioner, as the case may be, may authorise any Assistant Director of Inspection or Income tax officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer to ) (i) enter and search any [building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia)search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;] (iii)seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) place mark of identification on any books of ac count or other documents or make or cause to be made extracts or copies therefrom; 301 (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing; " The only other sub section to which reference need be made is sub section (3) which is as follows: B "The authorised officer may, where it is not practicable to seize any such books of account, other document, money bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub section.
" It is not necessary to refer to the other provisions for the present purpose.
But the procedure indicated that if necessary, force may be used for search seizure.
Rule 112 of the said Rules provides the manner in which such search and seizure should be conducted.
On a construction of the section; and the context, in which the words "search", "possession" and "seizure" have been used in the said section and the rules indicate that there cannot be any order in respect of goods or moneys or papers which are in the custody of another department under legal authority.
It is important to note that the expression "possession" has not been defined in the Act.
It may be noted that sub section (3) of section 132 of the Act uses the expression "who is in immediate possession or control thereof".
"Possession" is a word of ambiguous meaning and its legal senses do not always coincide with the popular sense.
Reference may be made to Halsbury 's Laws of England, Vol. 35, 4th Edn.
articles 1111 11267 pages 617 627.
Possession again may not always be synonymous with manual detention or physical retention of the goods or moneys.
It appears to us that when the physical custody of the moneys and goods were with the customs authorities, and that too by a legal sanction and authority to have that custody, it would be improper to contend that possession as used in section 132 of the Act was still with the respondent.
The use of the expression "immediate possession" in sub section 302 (3) of section 132 does not detract from the meaning of possession in the popular sense.
This construction is not unmindful of the fact that in some of the sub sections of section 132 the expressions "retention" and "custody" have been used, but reading these expressions in the context these have been used, it cannot be said that where an authority or a person has retention and custody with the legal sanction behind it, it was not the intention of the legislature to say that he was not in possession as contemplated in section 132 of the Income tax Act, 1961.
In this connection, reference may be made to Burrows Words & Phrases Judicial Dictionary, 4th Edn.
page 306.
All these aspects were discussed by the Calcutta High Court (by one of us, Sabyasachi Mukharji, J singly) in Laxmipat Chororia vs K.K. Ganguli & ors., 82 l.
T.R. 306 (Cal).
This decision was affirmed on appeal and the bench decision of the said Court is reported in 93 I.T 'R. at p. 489.
This aspect of the matter has been clearly dealt with by a judgment of the division bench of the Allahabad High Court in Motilal and ors.
vs Preventive Intelligence officer, Central Excise and Customs, Agra and others, where the judgment was delivered by one of us (R.S. Pathak, J.).
There the Court held that the power conferred under section 132(1) of the Act was contemplated in relation to those cases where the precise location of the article or thing was not known to the Income tax department and therefore, a search was necessary for it, and where it would not be ordinarily yielded over by the person having possession of it.
The view that section 132(3) of the Act would include a case where the location of the article or thing was known and where ordinarily the person holding custody of it would readily deliver it up to the Income tax department was not correct, it was so held by the division bench of the Allahabad High Court.
It was further held that consequently goods in the custody of the Assistant Collector of Customs and Central Excise were not things which could be the subject of an order under section 132(3) of the Act.
Pathak, J. spoke for the division bench there at p. 422 of the report thus: "In my opinion, the power conferred under section 132(1) is contemplated in relation to those cases where the precise location of the article or thing is not known to the income tax department and, therefore, a search must be made for it, and where it will not be ordinarily yielded over by the person having possession of it and, therefore it is necessary to seize it.
If it is only such article or thing which 303 is contemplated by section 132(1) then it is such article or A thing alone which can be the subject of an order under section 132(3).
I am unable to accept the contention on behalf of the Income tax department that section 132(3) will include a case where the location of the article or thing is known and where ordinarily the person holding custody of it will readily deliver it up to the Income tax department.
Such article or thing, I think, requires neither search nor seizure. " Mr. S.C. Manchanda, learned advocate for the revenue, drew our attention to several decisions including the decision in Noor Mohd. Rahimatulla Gillani, vs The Commissioner of Income tax Vidrabha and Marathwada, Nagpur and another, 1976 Taxation Law Reports 688 (Bombay).
In that case, after referring to the views expressed by the division bench of Allahabad High Court and division bench of Punjab and Haryana High Court in the judgment under appeal and the Calcutta High Court, as indicated before, Chandurkar J. Of the Bombay High Court observed as follows: "We are not inclined to accept the submission that no valid authorisation to seize the amount Lying with the Collector of Central Excise and Customs, Nagpur could have been issued under Section 132(1).
The relevant provision in the instant case is to be found in Section 132(1) (c) of the Act and all that is required in order to issue an authorisation under Section 132(1) is that either the Director of Inspection or the Commissioner must have reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Act or the Income tax Act of 1922.
It is the character of money or assets as undisclosed income or property and their possession that gives jurisdiction to issue the authori risation.
Merely because some authority has seized that money or property, its character which is believed to be that of undisclosed income or property does not change.
The seizure of the cash amount of Rs.3.05.530 by the 304 Central Excise Authorities in the instant case no doubt transferred physical possession of that amount from the petitioner to the Central Excise Department, but the legal ownership of that money still continued to be with the petitioner.
As long as that amount was not confiscated or did not become the property of the Central Excise Depart ment by virtue of an order passed under the relevant provision of law if at all any order could be so passed the property or the money did not cease to be that of the petitioner.
Though the Collector of Central Excise and Customs was in possession of the money, since its alleged character of being undisclosed income or property remained unattended the Collector satisfied the description of "any person" being in possession of undisclosed income or property though the property represented the undisclosed income or property of the petitioner himself.
The words used in section 132(1) (c) are "any person".
Such a person may be a person who is in possession of his own undisclosed income or property or a person who is in possession of somebody else 's undisclosed income or property.
The fact that the Collector of Central Excise and Customs happened to be an officer of the Government of India was not relevant because the Income tax Authorities and the Central Excise Authorities were functioning under two separate enactments which created two different liabilities the enforcement of which was entrusted to independent authorities under the law.
Disagreeing, therefore, with the authorities relied upon by the 3 petitioner, we must hold that the authorisation issued even against the Collector of Central Excise and Customs enabling the Income tax officer to seize that amount was a valid authorisation.
In any case, in the instant case, a subsequent order under section 132(3) was already made and even by the order under section 132(5) that amount was directed to be released.
" It is true that the title was not transferred to the Customs authorities by seizure under the .
But in the context.
in which the expressions "possession" and "seizure" have been used, it p cannot be considered to mean that the possession was where the legal title was, physical possession was with the Customs authorities, title Was with the respondent herein.
In this context, the physical posses 305 sion having regard to the language used is relevent and material.
Physical possession was with the Customs authorities when the seizure authorisation was passed.
Therefore, where the exact location of the property was known and there was no need to seize the money, the Income tax department could direct handing over the money to the Income tax authorities or take steps for such direction through appropriate authorities.
In that view of the matter we are unable to sustain the view of Chandurkar, J. as the learned Chief Justice then was of the Bombay High Court.
Mr. Manchanda also drew our attention to the case of Pannalal vs Income Tax officer, B Ward, Chhindwara and ors.
, 93 I.T.R. p.480 (M.P.) where the division bench of the Madhya Pradesh High Court was of the view that an order under section 132(3) could only be passed after an authorisation for search and seizure had been made under section 132(1) of the Act.
The thing in respect of which the order is made must be one regarding which the conditions mentioned in clauses (a), (b) and (c) of section 132 are satisfied.
But there was nothing in the requirements of section 132 to support the view that if the Commissioner has definite knowledge that the books of account, documents, money, bullion, etc., sought to be searched and seized are in the possession of a particular person he cannot issue an authorisation for search and seizure of the same.
In our opinion.
it may be mentioned that if the location was certain, then there was nothing to search or look for.
Madhya Pradesh High Court, however, observed that the expression "has reason to believe" signified that the Commissioner has reason to be satisfied that the things to be searched are in the possession of a particular person.
The object of section 132 was according to the High Court, not merely to get information of the undisclosed income but also to seize the money, bullion, etc.
representing the undisclosed income and to retain.
them for purposes mentioned in section 132(5).
Section 132(1)(C) of the Act did not contain a condition either expressly or impliedly that the thing to be seized should not be in the possession of a person who may willingly part with his possession.
There is no obligation on any one, not even on Government officers of other department, to deliver anything to G the income tax authorities except when the law requires them to do so.
The person authorised by the Commissioner could enter and search any building, break open the lock of any door etc.
But that did not mean that in every case the person authorised by the warrant would have to exercise all those powers in making the search and seizing the thing, according to the High Court.
It was not necessary that an actual 306 search must precede an order under section 132(3) directing a person not to part with articles in his possession.
Section 132(1)(c) did not contemplate that the person who has not disclosed his income or property for the purposes of the Income tax Act should himself be in possession of money, bullion, etc.
representing such income.
Clause (c) spoke of "any person who is in possession" and it did not specifically refer to possession by the person who had not disclosed his income.
All that the clause required was that the money, bullion etc. should be such which represents either wholly or partly income or property which had not been disclosed for purposes of the Income tax Act and such money, bullion, etc.
should be in the possession of a person.
This construction was supported by the use of words "immediate possession" in section 132(3) of the Act.
This was the view of the High Court.
There an order under section 132(3) was passed by the Commissioner of Income tax on the Collector of Customs and Central Excise in respect of currency notes of the value of Rs.2,02.500 belonging to a firm, which the Collector was holding under the Gold Control Act and which, as no offence was committed under that Act, the Collector had ordered to be released.
It was also held by the High Court that the Collector was under a legal obligation to return the currency notes to the firm after the proceedings under the Gold Control Act had been finalised.
The power of the Collector was only to retain the currency notes for a limited period.
It could be held that the currency notes were held by the Collector for and on behalf of the firm and the order passed under section 132 was valid.
For the reasons mentioned hereinbefore, we are unable to sustain that view of the High Court.
As mentioned before though legal title might have been with the person whose income was sought to be taxed the physical possession was with the Customs authorities.
Our attention was drawn to a bench decision of the Madras High Court where similar view was taken in Gulab and Company and Anr.
vs Superintendent of Central Excise (Preventive) Trichy, and ors.
For the reasons we have indicated hereinbefore, we are also unable to sustain this view.
The Kerala High Court in the case of Assainar and Anr.
vs Income tax Officer, Calicut and on,., also accepted this view.
We are, for the aforesaid reasons, unable to sustain this view with respect.
The High Court observed that the word "search" has varied meanings and it should be given the general meanings "to look for" or "seek" which are also well known.
But in the context the expression "seizure" and in the context 307 the expression "search" where the location of the property was known A to the Government, we are of the opinion that it could not be said that one government department could search any other government department, and seize those documents.
Relying on the decision of the Allahabad High Court in Motilal 's case (supra) as well as the decision of the Calcutta High Court in Laxmipat 's case (supra), the learned single judge of the Punjab and Haryana High Court in Ramesh Chander vs Commissioner of Income Tax (supra) held that the word "seizure" implied forcibly taking from the owner or who has the possession and who was unwilling to part with the possession.
In that case custody was with the police and it would be inappropriate to accept the position that the income tax department which was another department of the Union of India had to be armed with authority to seize from the unwilling persons.
We are in agreement with these views of the learned single judge.
This view of the learned single judge has been confirmed in the judgment of the division bench, already referred to hereinbefore (reported in 93 I.T.R. p. 450).
The lacuna in law has subsequently been filled in by 132A of the Act with effect from October, 1975.
In the view of the law as it stood at the relevant time, we are unable to sustain the challenge to the order, impugned in this appeal.
The appeal, therefore, fails and is accordingly dismissed with the . observations that it will be open to the Income tax authorities to approach the appropriate authorities to realise any amount of money or to recover any books of account or documents in accordance with law.
In the facts and the circumstances of the case, parties will pay and bear their respective costs.
S.R. Appeal dismissed.

summary/full:
On 23rd August, 1970, when the respondent was travelling by car, alleged to be belonging to his brother, from Ambala to Batala, the Customs officer intercepted him near the Beas river and forcibly taken along with the driver, Gurunam Singh to the Customs House at Amritsar.
The respondent along with the driver was searched and the customs authorities took into possession Rs.33,500 in Indian currency, 10 gold sovereigns and the car in which he travelled.
The Customs authorities, thereupon initiated departmental proceedings under section 110(II) of the and extended the period of issuing of the show cause notice under section 124 of the .
These proceedings were quashed by an order of the Learned Single Judge of the High Court of Punjab on 24th April, 1372 following an earlier decision of that Court.
After the said judgment, the respondent approached the customs authorities for the return of the money and the car on 11.5.1972.
The gold sovereigns were not demanded because ac cording to the respondent these did not belong to him.
He had been directed to come on the following day to get back the currency notes and the car.
On the next day, however the Income Tax officer served the warrant of authorisation dated 10th May, 1972 issued under section 132 of the Income Tax Act, read with Rule 112(II) of the Rules on the respondent as well as on the customs department with the result the cash was taken possession of by the Income Tax authorities.
Thereafter 295 the respondent filed another writ petition under Article 226 and 227 of A the Constitution.
The customs authorities also filed an appeal against the decision of the Single Judge dated 24th April, 1972.
The writ petition and the appeal were heard together by a Division Bench of the Punjab High Court.
Dismissing the appeal and allowing the writ petition the High Court held that where the amount was seized by the customs authorities and the seizure was held illegal by the Court customs authorities were bound to return the money to the person entitled to it under the relevant provisions of section 110 of the ; that the Income Tax authorities could not seize such an amount from the customs authorities under section 132 of the Income Tax Act and authorisation of search and seizure was illegal if issued in the name of the person who did not have possession of the Article in respect of which it was issued.
Hence this appeal by the revenue by special leave.
Dismissing the appeal, the Court, ^ HELD: 1.1 on a construction of section 132 of Income Tax Act, 1961 and the context, in which the words "search", "possession", and "seizure" have been used in the said section and the rules indicate that there cannot be any order in respect of goods or moneys or papers which are in the custody of another department under legal authority where the location of the property was known to the Government one government department could not search another department and seize them.
[301E F] 1.2 Sub Section (3) of section 132 of the Act uses the expression "who is in immediate possession or control thereof".
"Possession" is a word of ambiguous meaning and its legal senses do not always coincide with the popular sense.
Possession again may not always be synonymous with manual detention or physical retention of the goods or moneys.
When the physical custody of the moneys and goods were with the customs authorities, and that too by a legal sanction and authority to have that custody, it cannot be said that possession as used in section 132 of the Act was still with the respondent Tarsem Kumar.
[30 1F H] 1.3 Reading the expressions "retention" and "custody" in some of the sub sections of section 132 in the context these have been used, it cannot be said, that where an authority or a person has retention and custody with the legal sanction behind it, it was not the intention of the legislature to say that he was not in possession as contemplated in section 132 of the Income Tax Act, 1961.
[302A B] 296 The Commissioner of Income Tax vs Ramesh Chander & Ors.
, PunJab; Tarsem Kumar & Anr.
vs The Commissioner of Income Tax, Haryana, Himachal Pradesh & Delhi & ors.
, ; Laxmipat Chororia vs K.K. Ganguli Motilal and ors.
vs Preventive Intelligence officer, Central Excise and Customs, Agra & Ors., Allahabad, distinguished and partly overruled.
Noor Mohd. Rahimatulla Gillani vs The Commissioner of Income tax Vidrabha and Marathwada, Nagpurand Anr., [1976] Taxation Law Reports, 688, Bombay; Pannalal vs Income Tax officer, Ward.
Chhindwara and ors.
, 93 ITR p. 480 Madhya Pradesh; Gulab and Company and Anr.
vs Superintendent of Central Excise (Preventive) Trichy, and ors.
, Madras; Assainar and Anr.
vs Income tax officer, Calicut and ors.
, Kerala, overruled.
1.4 It is true that in the instant case, the title was not transferred to the Customs authorities by seizure under the .
But in the context, in which the expressions "possession" and "seizure" have been used, it cannot be considered to mean that the possession was where the legal title was, physical possession was with the Customs authorities, title was with the respondent herein.
In this context, the physical possession having regard to the language used is relevant and material.
Physical possession was with the Customs authorities when the seizure authorisation was passed.
Therefore, where the exact location of the property was known and there was no need to seize the money, the Income tax department could direct handing over the money to the Income tax authorities or take steps for such direction through appropriate authorities and not by resort to section 132 of the Income Tax Act.
This is so because if the location was certain then there was nothing to search or look for.
[304G H; 305A B]