judgement:
Appeal No. 62 of 1964.
Appeal by special leave from the judgment and decree dated July 28, 1959 of the Allahabad High Court in Civil Miscellaneous Writ No. 2071 of 1959.
A. V. Viswanatha Sastri, Rameshwar Nath, section N. Andley and P. L. Vohra, for the appellant.
Gopal Singh and R. N. Sachthey, for the respondents.
The Judgment of the Court was delivered by Subba Rao, J.
The facts leading up to this appeal may briefly be narrated.
Gujarat Cotton Mills Co. Ltd., hereinafter called the Company, is a limited company having its registered office at Ahmedabad.
In the year 1938 the Company appointed Messrs. Pira Mal Girdhar Lal & Co., hereinafter called the Agency Firm, as its Managing Agents.
On February 28, 1938, a formal agreement was entered into between the Company and the Agency Firm.
The said Agency Firm was formed under an instrument of partnership dated February 26, 1938, with 11 partners 3 of them are compendiously described as the "Bombay Group" and the remaining 8 of them as the "Kanpur Group".
With certain variations in the constitution of the Agency Firm, the said firm functioned as the Managing Agents of the Company till September 1946.
In September 1946 shareholding of the partners of the Agency Firm in the Company was as follows: Kanpur Group 32,500 shares.
Bombay Group 26,362 shares.
538 Because of certain differences between the partners, they decided among themselves to sell their shares and to surrender their Managing Agency.
On September 7, 1946, the said 11 partakers entered into an agreement with the firm of Messrs. Chhuttu Ram & Sons of Bihar, hereinafter called the Purchaser Firm.
Under that agreement it was provided that 65012 shares held by the 11 partners of the Agency Firm, directly or through their nominees, should be sold to the Purchaser Firm at Rs. 65 per share and that the Agency Firm should before November 15, 1946, resign its 'office of Managing Agency of the Company.
It was a condition of the agreement that it should have operation only after the Purchaser Firm or its nominees were appointed as the Managing Agents of the Company.
On October 30, 1946, the Company held its General Body Meeting and accepted the resignation of the Agency Firm and by another resolution appointed the Purchaser Firm as the Managing Agents in its stead.
In terms of the agreement, the Purchaser Firm paid for the entire shareholding of the partners of the Agency Firm at Rs. 65 per share.
The appellant is a Hindu undivided family.
Its karta was one Dwarkanath and the present karta is his son Ramji Prasad.
The said family was 'one of the II partners of the Agency Firm belonging to 'the Kanpur Group.
Out of the total shareholding the appellant held 11,230 shares.
It received the price for the said shares at the rate of Rs. 65 per share.
It was assessed to income tax for the year 1948 49 and the Income tax Officer by his order dated June 5, 1952 assessed the excess amount of Rs. 2,98,909 realized by the assessee under the head "income from business", i.e., the difference in the amount for which it purchased the shares and that for which it sold them.
On appeal, the Appellate Assistant Commissioner of Income tax confirmed the same.
On further appeal, the Income tax Appellate Tribunal, Delhi Bench, held that the said receipt bad to be taxed as "capital gains" under section 12B. of the Income tax Act, 1922, and directed the Income tax Officer to modify the assessment in accordance with its order.
The assessee made an application under section 35 of the Income tax Act to the Tribunal for further directions and the Tribunal, by its order dated March 26, 1954, amended its previous order dated August 3, 1953, by substituting the word "processed" in place of the word "assessed" in its previous order.
The assessee raised various contentions before the Income tax Officer, inter alia, that the said income was not liable to be taxed under section 12B of the Income tax Act under the head "capital gains" and that in any case in order to determine the amount of capital gains the market value of the shares only should be taken into consideration, as the price of Rs. 65 per share included also the consideration for the relinquishment of the managing agency rights.
The Income tax Officer rejected the said contentions of the assessee.
He redetermined the assessable income under the heading "capital gains" but did not issue a notice of demand as prescribed in section 29 of the Income tax Act.
After making an infructuous attempt to get suitable directions 539 from the Appellate Tribunal, on March 5, 1956, the assessee filed an application before the Income tax Officer to issue a notice of demand under section 29 of the Income tax Act so that it might prefer an appeal against the same to the appropriate authority.
But the Income tax Officer refused to issue any such notice.
The assessee preferred an appeal against that order to the Appellate Assistant Commissioner under section 30 of the Income tax Act and that was dismissed on March 8, 1957, on the ground that it was not maintainable.
Meanwhile on September 27, 1956, the appellant filed an application before the Commissioner of Income tax under section 33A(2) of the Income tax Act for revising the order of the Income tax Officer dated September 28, 1955.
On March 28, 1959, the Commissioner dismissed the revision petition on two grounds, namely, (1) that it was not clear whether the revision petition under section 33A of the Income tax Act was maintainable, and (ii) on merits.
It may be noticed that long before the revision petition was dismissed, the appeal filed by the assessee against the order of the Income tax Officer to the Appellate Assistant Commissioner was dismissed on March 8, 1957.
On November 18, 1957, the attention of the Commissioner was also drawn to the fact that the Bombay High Court in the case of a reference to that Court at the instance of the Bombay Group held that the market value of the shares should be taken into consideration to ascertain the excess realized on the sale of the shares of the assessee for the purpose of capital gains tax.
The Commissioner ignored that decision in dismissing the revision.
Thereafter, on July 28, 1959, the assessee filed Writ Application No. 2071 of 1959 in the High Court of Judicature at Allahabad, inter alia, for a writ of certiorari or any other direction or order of like nature to quash the order of the Income.tax Commissioner, Lucknow, dated March 28, 1959, and the Order of the Income tax Officer dated September 28, 1955, and for a writ of mandamus or any other order or direction of the like nature directing the Commissioner to pass a fresh order in accordance with the decision of the Bombay High Court and direct the Income tax Officer to pass a fresh order in accordance with law and to issue a notice of demand as required by section 29 of the Income tax Act.
The High Court dismissed the said application in limine mainly on the following three grounds: (1) the affidavit filed in support of the writ petition was highly unsatisfactory and on the basis of such an affidavit it was not possible to entertain the petition; (2) the facts given in the affidavit were incomplete and confused; and (3) even on merits, there was no force in the revision petition Hence the appeal.
Mr. A.V. Viswanatha Sastri, learned counsel for the appellant, contended that the affidavit filed in support of the petition was in accordance with law, and that, even if there were any defects, the Court should have given an opportunity to the appellant to rectify them; and that the High Court should have held 540 that the revision against the order of the Income tax Officer to the Commissioner was maintainable under section 33A of the Act, as the appeal against that order to the Appellate Assistant Commissioner was not maintainable and that it should have directed the Commissioner to entertain the revision and dispose of it in accordance with law directing the Income tax Officer to issue a notice of demand under section 29 of the Income tax Act.
He further contended that the High Court went wrong in holding that the facts in the Bombay decision were different from those in the present case, for the facts in both the cases were the same and in fact they arose out of the same transaction, namely, the sale of the shares by the Agency Firm to the Purchaser Firm.
Mr. Gopal Singh, learned counsel for the Revenue, while supporting the order of the High Court raised a preliminary objection, namely, that the order of the Commissioner under section 33A of the Income tax Act was administrative act and, therefore, no writ of certiorari would lie to the High Court to quash that order under article 226 of the Constitution.
We shall first take the preliminary objection, for if we maintain it, no other question will arise for consideration.
Article 226 of the Constitution reads: " . . every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose."
This article is couched in comprehensive phraseology and it exfacie confers a wide power on the High Courts to reach injustice wherever it is found.
The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised.
It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression "nature", for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them.
That apart High Courts can also issue directions orders or writs other than the prerogative writs.
It enables the High Courts to mould the reliefs to meet the peculiar and complicated requirements of this county.
Any attempt to equate the scope of the power of the High Court under article 226 of the constitution with that of the English Courts to 541 issue prerogative writs is to introduce the Unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of government into a vast country like India functioning under a federal structure.
Such a construction defeats the purpose of the article itself.
To say this not to say that the High Courts can function arbitrarily under this article.
Some limitations are implicit in the article and others may be evolved to direct the article through defined channels.
This interpretation has been accepted by the Court in Basappa vs Nagappa(1) and P.J. Irani vs State of Madras(2).
But we are satisfied that this case falls directly within the confines of the certiorari jurisdiction as understood in England.
It is well settled that a writ of certiorari can be issued only to quash a judicial or a quasi judicial act and not an administrative act.
It is, therefore, necessary to notice the distinction between the said two categories of acts.
The relevant criteria have been laid down with clarity by Atkin, L.J., in King vs Electricity commissioners(3), elaborated by Lord Justice Scrutton in Rex vs London County Council(4) and authoritatively restated in Province of Bombay vs Kusaldas section Advani(5).
The said decisions laid down the following conditions to be complied with: (1) The body of persons must have legal authority; (2) the authority should be given to determine questions affecting the rights of subjects; and (3) they should have a duty to act judicially.
So far there is no dispute.
But in decided cases, particularly in India, there is some mixing up of two different concepts, viz., administrative tribunal and administrative act.
The question whether an act is a judicial act or an administrative one arises ordinarily in the context of the proceedings of an administrative tribunal or authority.
Therefore, the fact that an order was issued or an act emanated from an administrative tribunal would not make it anytheless a quasi judicial act if the aforesaid tests were satisfied.
The concept of a quasi judicial act has been conceived and developed by English Judges with a view to keep the administrative tribunals and authorities within bounds.
Parker, J., in R.V. Manchester Legal Aid Committee(1) brought out the distinction between judicial and administrative acts very vividly in the following passage: "The true view, as it seems to us, is that the duty to act judicially may arise in widely different circumstances which it would be impossible, and, indeed, inadvisable, to define exhaustively . .
When, on the other hand, the decision is that of an administrative body and is actuated in whole or in part by questions of policy, the duty to act judicially may arise in the course of arriving at that decision.
Thus, if in order to arrive at the decision, the (1) ; (2) ; (3) (4) (5) ; (6) , 428.542 body concerned had to consider proposals and objections and consider evidence, then there is the duty to act judicially in the course of that inquiry . . . . .
Further, an administrative body in ascertaining facts or law may be under a duty to act judicially notwithstanding that its proceedings have none of the formalities of and are not in accordance with the practice of a court of law . . . . .
If on the other hand, an administrative body in arriving at its decision at no stage has before it any form of his and throughout has to consider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any stage to act judicially".
The relevant principles have been succinctly stated in Halsbury 's Laws of England, 3rd Edn., Vol. 11, at pp.
55 and 56 thus: It is not necessary that it should be a court: an administrative body in ascertaining facts or law may be under a duty to act judicially notwithstanding that its proceedings have none of the formalities of, and are not in accordance with the practice of, a court of law.
It is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition.
A body may be under a duty, however, to act judicially (and subject to control by means of these orders) although there is no form of lis inter partes before it: it is enough that it should have to determine a question solely on the facts of the particular case, solely on the evidence before it, apart from questions of policy or any other extraneous considerations". "Moreover an administrative body, whose decision is actuated in whole or in part by questions of policy, may be under a duty to act judicially in the course of arriving at that decision . .
If, on the other hand, an administrative body in arriving at its decision has before it at no stage any form of lis and throughout has to consider the question from the point of view of policy and expediency, it cannot be said that it is under a duty at any time to act judicially".
These are innumerable decisions of this Court where it issued a writ of certiorari to quash a quasi judicial act of an administrative tribunal or authority.
This Court set aside the order of the Andhra Pradesh State Government approving the order of nationalisation of road transport made by the Andhra Pradesh Road Transport Undertaking in Gullapalli Nageswara Rao vs Andhra Pradesh State Road Transport Corporation(1), the order of the Examination (1) [1959] Supp. 1 S.C.R. 319.543 Committee cancelling the examination results on the ground that it did not give opportunity to the examinees to be heard before the order was made in Board of High School and Intermediate Education, U.P., Allahabad vs Ghanshyam Das Gupta(1), and the order of the Revenue Board made in a revision petition against the order of the Deputy Commissioner impounding the document without hearing the aggrieved party in The Board of Revenue, U.P. vs Sardarni Vidyawati(2).
In all these cases the Government, the Examination Committee and the Board of Revenue were administrative bodies, but the acts impugned were quasi judicial ones, for they had a duty to act judicially in regard thereto.
The law on the subject may be briefly stated thus: The provisions of a statute may enjoin on an administrative authority to act administratively or judicially.
If the statute expressly imposes a duty on the administrative body to act judicially, it is a clear case of a judicial act.
But the duty to act judicially may not be expressly conferred but may be inferred from the provisions of the statute.
It may be gathered from the cumulative effect of the nature of the rights affected, the manner of the disposal provided, the objective criterion to be adopted, the phraseology used, the nature of the power conferred or the duty imposed on the authority and other indicia afforded by the statute.
In short, a duty to act judicially may arise in widely different circumstances and it is not possible or advisable to lay down a hard and fast rule or an inflexible rule of guidance.
With this background let us look at the relevant provisions of the Income tax Act.
Section 33A(2).
The Commissioner may, on application by an assessee for revision of an order under this Act passed by any authority subordinate to the Commissioner, made within one year from the date of the order (or within such further period as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period), call for the record of the proceeding in which such order was passed, and on receipt of the record may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit.
Provided that the Commissioner shall not revise any order under this sub section if (a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has not been made, the time within which such appeal may be made has not expired, [1962] Supp. 3 S.C.R. 36.(2) [1962] Supl.3 S.C.R. 50 ' 544 or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal, or (b) where an appeal against the order has been made to the Appellate Assistant Commissioner, the appeal is pending before the Appellate Assistant Commissioner, or (c) the order has been made the subject of an appeal to the Appellate Tribunal.
Provided further that an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee.
Under this sub section an assessee may apply to the Commissioner for revision of an order under the Act by an authority subordinate to him.
Such application shall be filed within one year from the date of the order or within such further period as the Commissioner may think fit to allow.
On receipt of such an application the Commissioner may call for the record of the proceeding in which such order was made and make such enquiry or cause such enquiry to be made.
After such enquiry he can make an order not to the prejudice of the assessee but to his benefit.
Such revision is not maintainable if the time prescribed for an appeal against such an order to the appropriate authorities has not expired or if an appeal against such an order is pending before the appropriate authorities.
The scope of the revision is, therefore, similar to that prescribed under different statutes.
Prima facie the jurisdiction conferred under section 33A(2) of the Act is a judicial one.
The order that is brought before the Commissioner affects the right of the assessee.
It is implicit in revisional jurisdiction that the revising authority shall give an opportunity to the parties affected to put forward their case in the manner prescribed.
The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision.
The fact that the Commissioner cannot make an order to the prejudice of an assessee does not possibly change the character of the proceeding.
Though the Commissioner may not change the order of the inferior authority to the prejudice of the assessee, he may not give the full relief asked for by the assessee.
But it is said that the Commissioner exercising jurisdiction under section 33A of the Act is only functioning as an administrative authority and all his orders made thereunder partake that character.
Reliance is placed on the decision of the Judicial Committee in Commissioner of Income tax, Punjab, N.W.F. & Delhi Provinces, Lahore vs Tribune Trust, Lahore(1).
There, the Judicial Committee held that the assessments, which were duly made by the Income tax (1947) L.R. 74 I.A. 306. 317, 318. 545.
Officer in the proper exercise of his duty, were not a nullity, but were validly made and were effective until they were set aside; and that a reference to the High Court did not lie from an order under section 33 of the Act unless that order was prejudicial to the assessee in the sense that he was in a worse position than before the order was made.
But the Board incidentally made the following observations: "On the contrary, section 33 follows a number of sections which determine the rights of the assessee and is itself, as its language clearly indicates, intended to provide administrative machinery by which a higher executive officer may review the acts of his subordinates and take the necessary action on such review.
It appears that, as a matter of convenience, a practice has grown up under which the commissioner has been invited to act "of his own motion", under the section, and where this occurs a certain degree of formality has been adopted.
But the language of the section does not support the contention, which lies at the root of the third question and is vital to the respondent 's case, that it affords a claim to relief".
Continuing the same idea that Board observed: "The Commissioner may act under section 33 with or without invitation of the assessee: if he does so without invitation, it is clear that, if he does nothing to worsen the position of the assessee, the latter can acquire no right: the review may be a purely departmental matter of which the assessee knows nothing.
If, on the other hand, the commissioner acts at the invitation of the assessee and again does nothing to worsen his position, there is no justification for giving him a new right of appeal".
These observations were made in the context of a question whether a reference would lie to the High Court against an order of the Commissioner.
But the question whether the order of the Commissioner under section 33 of the Act was a judicial or a quasi judicial act subject to the prerogative writ of certiorari was neither raised nor decided in that case: that question was not germane to the enquiry before the Board, for the appeal did not arise out of any order made in a writ of certiorari.
Section 33, which was considered by the Privy Council was repealed by the Amending Act of 1939; but by Act XXIII of 1941 the revisional powers of the Commissioner were restored.
Section 33 A took the place of section 33 with certain modifications.
Sub section (1) of section 33A provided for the Commissioner acting suo motu; and sub section(2)thereof, on the application of the assessee.
Under this section the Commissioner can exercise the revisional jurisdiction subject to the conditions mentioned therein.
While section 33 only provided for the suo motu exercise of the jurisdiction, section 33A enables an assessee to apply to the Commissioner to revise the order of his subordinate officer.
Some of the High Courts, under the impression that the Privy Council held that the act of the Commissioner was an administrative one, ruled that a writ of certiorari.
would not lie to quash the order of the Commissioner under section 33A of the Act: see Sitalpore Colliery Concern Ltd. vs Union of India(1); Additional Income tax Officer, Cuddapah vs Cuddapah Star Transport Co. Ltd.(2); and Suganchand Saraogi vs Commissioner of Income tax, Calcutta(3).
They did not consider the scope of the revision before the Commissioner and whether the orders made thereunder satisfied the well settled tests of "judicial act" laid down by this Court.
In our view, for the reasons mentioned by us earlier, the said judgments were decided wrongly.
That apart, on the assumption that the order of the Commissioner under section 33 A of the Act was an administrative one, the respondent would not be in a better position.
What the appellant complains is that the Income tax Officer in terms of section 29 of the Act is under an obligation to issue a demand notice.
If the said contention was correct, he did not discharge the duty imposed on him by the statute.
If the Commissioner only made an administrative order in refusing to give any direction to the Income tax Officer, it would not exonerate the said officer from discharging his statutory duty.
In that event the assessee would certainly be entitled to approach the High Court under article 226 of the Constitution for the issue of a writ of mandamus or other appropriate direction to the Income tax Officer to discharge his statutory duty.
We, therefore, reject the preliminary objection of the respondents.
The High Court mainly dismissed the writ petition on the ground that the affidavit flied in support of the writ petition was highly unsatisfactory and that on the basis of such an affidavit it was not possible to entertain the petition.
In exercise of the powers conferred by article 225 of the Constitution and of other powers enabling it in that behalf the High Court of Allahabad framed the Rules of Court.
Chapter XXII thereof deals with the procedure to be followed in respect of a proceeding under article 226 of the Constitution other than a writ in the nature of habeas corpus.
The relevant rule is sub r.(2) of r. 1 of Ch.XXII, which reads: "The application shall set out concisely in numbered paragraphs the facts upon which the applicant relies and the grounds upon which the Court is asked to issue a direction, order or writ, and shall conclude with a prayer stating clearly, so far as circumstances permit, the exact nature of the relief sought.
The application shall be accompanied by an affidavit or affidavits in proof of the facts referred to in the application.
Such affidavit or affidavits shall be restricted to matters which are within the deponent 's own knowledge".
The application filed in the High Court certainly complied with the provisions of sub r.(2) of r. 1 of Ch.XXII of the Rules of Court of the Allahabad High Court.
It set out concisely in numbered paragraphs the facts upon which the applicant relied, the grounds on which the Court was asked to issue the direction and the exact nature of the relief sought.
But it is said that the affidavit filed in support of the application did not speak to matters which were within the deponent 's own knowledge.
Dhruva Das, the deponent of the affidavit, is a relative of the petitioner and he also looked after the case on his behalf as his pairokar and was fully conversant with the facts.
He solemnly affirmed and swore as follows: "I Dhruva Das, aforesaid deponent do hereby solemnly affirm and swear that the contents of paras 1, 2, 3 and 50 partly are true to my personal knowledge, that the contents of paras.4, 5, 6, 7, 8, 9, 10.11, 12. 13, 14, 15, 16, 20, 21, 25, 27, 29 partly, 31, 32, 34, 37, 38.41, 42, 44 are based on 46 and 50 partly and paras 17, 18, 19, 22, 23, 24, 26, 28, 29, partly 30, 33 ', 35, 36, 39, 40, 43, 48 partly are based on perusal of the record, those of paras 47, 48 partly 49 and 50 partly are based on legal advice, which I believe to be true, that no part of this affidavit is false and nothing material has been concealed in it".
In paragraphs which are based on a perusal of the record the deponent referred to the relevant orders of the Income tax authorities and also to the relevant agreements and the copies of the said orders and agreement were also annexed to the affidavit as schedules.
It is not clear from the schedules whether certified copies or the original of the orders received by the appellant were filed.
The said agreements and the orders afford sufficient basis to appreciate the case of the appellant and for disposing of the same.
"Deponent 's own knowledge" in r. 1(2) of Ch.XXII of the Rules is wide enough to comprehend the knowledge of the appellant derived from a perusal of the relevant documents; and the affidavit in express terms disclosed and specified the documents, the source of the appellant 's knowledge.
He swore in the affidavit that the documents annexed to the affidavit were true copies of public documents.
If they are certified copies of public documents, they prove themselves; if they are original of the orders sent to the appellant, the deponent, as his agent, speaks to their receipt.
It is, therefore, not correct to say that the facts stated in the affidavit are not based on the deponent 's knowledge.
The other facts alleged in the affidavit are only introductory in nature and if they are excluded the result will not be affected.
That apart, if the affidavit was defective in any manner the High Court, instead of dismissing the petition in limine, should have given the appellant a reasonable opportunity to file a better affidavit complying with the provisions of r. 1 of Ch.XXII of the Rules.
We cannot, therefore, agree with the High Court that the petition was liable to be dismissed in limine in view of the alleged defects in the affidavit.
548 Nor can we agree with the High Court that the facts given in the affidavit are incomplete and confused.
On the other hand, a careful perusal of the affidavit, along with the documents annexed thereto, discloses clearly the appellant 's case: it gives the necessary facts and the reliefs sought for.
We do not find any missing link in the narrative of facts or any confusion in the nature of the reliefs asked for.
We cannot also agree with the High Court that the decision of the Bombay High Court in Baijnath Chaturbhuj vs Commissioner of Income tax, Bombay City 11(1) was given on different facts and that it was impossible to contend that any part of the money paid by Messrs. Chaturam & Sons was really compensation for the managing agency rights.
The Bombay decision was given in the context of the dispute between the Bombay Group and the Income tax authorities and was based upon the consideration of the very documents which are the basis of the appellant 's claim.
We do not propose to express any opinion on the correctness or otherwise of that decision.
But, the fact that a Division Bench of one of the High Courts in India had taken the view in favour of the appellant indicates that the question raised is, in our view, an arguable one and it requires serious consideration.
We are satisfied that this is not a case where the High Court should have dismissed the writ petition in limine.
We find in the decree issued by the High Court that Sri Gopal Behari appeared on behalf of the opposite parties; presumably he appeared as the appellant must have issued notice in terms of r. 1(4) of Ch.XXII of the Rules.
Be that as it may, the High Court did not finally decide two important questions that really arose 'for consideration before it, namely: (i) whether a revision lay to the Commissioner under section 33 A(2) of the Act against the order of the Income tax Officer; and (ii) whether the Income tax Officer should have issued a demand under section 29 of the Act.
If a revision lay to the Commissioner, the Commissioner should have considered the second question before dismissing it.
Therefore, the question is whether a revision lay to the Commissioner under section 33 A(2) of the Act.
A revision does not lie to the Commissioner against an order where an appeal against that order lies to the Appellate Assistant Commissioner but has not been made and the time within which such an appeal may be made has not expired or where an appeal against the order has been made, it is pending before him.
It follows that if no appeal lies against the order an officer to the Appellate Assistant Commissioner, the Commissioner can revise that order under section 33 A of the Act.
In the present case, pursuant to the directions of the, Tribunal, Delhi Bench, the Income tax Officer determined the assessee 's capital gains under section 12 B of the Act; but the Income tax Officer did not make any order under section 23(3) of the Act, nor (1957) 31/.T.R. 643.
549 did he issue a regular notice of demand as prescribed under section 29 of the Act.
The result was, no appeal lay against the computation made by the Income tax Officer to the Appellate Assistant Commissioner.
Indeed, on March 8, 1957, the Appellate Assistant Commissioner rejected the appeal filed by the appellant as being not maintainable.
As no appeal lay to the Appellate Assistant Commissioner against the calculations made by the Income tax Officer, the Commissioner had certainly power to revise the said order.
On March 5, 1956, the appellant flied an application requesting the Income tax Officer to issue a notice of demand as required by section 29 of the Act.
But the said Officer declined to issue the notice of demand.
The question is whether he was bound to issue a notice of demand under section 29 of the Act.
Section 29 of the Act reads: "When any tax, penalty or interest is due in consequence of any order passed under or in pursuance of this Act, the Income tax Officer shall serve upon the assessee or other person liable to pay such tax, penalty or interest a notice of demand in the prescribed form specifying the sum so payable".
Under this section, if a tax is due in consequence of an order from an assessee, the Income tax Officer is under a duty to serve on him a notice of demand.
Pursuant to the directions given by the Tribunal the Income tax Officer made fresh calculations under the head 'capital gains ' and ascertained the amount due from the assessee.
In the circumstances, pursuant to the said calculation, he should have passed an order and issued a notice of demand to the assessee.
In not doing so, it must be held that the Income tax Officer did not discharge his duty which he was bound to do under the Act; with the result he had become amenable to a writ of mandamus directing him to do what he should have done under the ,Act.
In the result, the order of the High Court is set aside and we issue a writ of certiorari quashing the order of the Commissioner and a writ of mandarnus directing the Income tax Officer to pass an order and issue a notice in accordance with law.
The appellant will have his costs throughout.
Appeal allowed.

summary/full:
Pursuant to the directions of the Income tax Appellate Tribunal, the Income tax Officer, determined the assessee 's capital gains under section 12B of the Income tax Act, 1922.
He did not, however, make any order under section 23(3) of the Act, nor did he issue a notice of demand under section 29 of the Act.
The assessee filed an application before the Commissioner of Income tax, under section 33A(2) of the Act, for revising the computation made by the Income tax Officer drawing his attention to a decision of the Bombay High Court in Baijnath 's case, , as to how the capital gains should be ascertained.
That decision was based upon a consideration of the very documents which were the basis of the assessees ' claim.
The Commissioner dismissed the revision petition as not maintainable, as well as on merits, ignoring the Bombay decision.
Meanwhile, the assessee filed an application requesting the Income tax Officer to issue a notice of demand under section 29, to enable him to file an appeal, but the Officer declined to do so.
The assessee filed a writ application in the High Court for issuing appropriate writs to the Commissioner and the Income tax Officer, but the High Court dismissed it in limine.
In his appeal to this Court, the assessee contended that (i) the High Court erred in holding that the affidavit filed in support of the writ petition was not in accordance with law, and that even if there were any defects the High Court should have given him an opportunity to rectify them, and (ii) the High Court erred in distinguishing the Bombay decision and in holding that there was no force in the revision filed before the Commissioner, and that, the High Court should have directed the Commissioner to entertain the revision and dispose of it in accordance with law by giving suitable directions to the Income tax Officer.
The respondent raised a preliminary objection that as the order of the Commissioner was an administrative act, article 226 of the Constitution could not be invoked.
HELD:(i) As no appeal lay to the Appellate Assistant Commissioner against the calculations made by the Income tax Officer, the Commissioner had powers under section 33A(2) to revise the Income tax Officer 's order.
The jurisdiction conferred on the Commissioner by the section is a judicial one, The nature of the jurisdiction and the rights decided carry with them necessarily the duty to act judicially in disposing of the revision.
Further, the fact that a Division Bench of one of the High Courts in India had taken a view in favour of the assessee, indicated that the question raised was arguable and required serious consideration.
Therefore, a writ of certiorari quashing the order of the Commissioner dismissing the assessee 's revision petition, should be issued.
[544E G; 548D] 537 Sitalpore Colliery Concern Ltd. vs Union of India, , Additional Income tax Officer, Cuddapah vs Cuddapah Star Transport Co. Ltd. and Suganchand Saraogi vs Commissioner of Income tax, , overruled.
Even if the Commissioner only made an administrative order in refusing, to give any direction to the Income tax Officer, the assessee would still be entitled to approach the High Court under article 226, and a writ of mandamus directing the Income tax Officer to discharge his statutory duty of passing the order and issuing the notice of demand in accordance with law, should be issued.
[546C E] (ii)The affidavit filed on behalf of the assessee was complete and compiled with the rules made by the High Court.
The affidavit spoke only of matters which were within the deponent 's own knowledge, because, the phrase "deponent 's own knowledge" is wide enough to comprehend the knowledge derived from a perusal of relevant documents.
Even if the affidavit was defective in any manner, the High Court instead of dismissing the petition in limine should have given the assessee, a reasonable opportunity to file a better affidavit.
[547F G, H] (iii)The High Court was also in error in holding that the decision of the Bombay High Court was given on different facts, for the facts in both cases were the same and they arose out of the same transaction.
[548B C]


judgement:
Appeal No. 41 of 1964.
Appeal from the judgment and order dated April 10, 1961 of the Madhya Pradesh High Court in Misc.
Civil Case No. 154 of 1959.
N.D. Karkhanis, Rameshwar Nath, S.N. Andley and P.L. Vohra, for the appellant.
C.K. Daphtary, Attorney General, R. Ganapathy Iyer and R.N. Sachthey, for the respondent.
643 The Judgment of Subba Rao and Sikri, JJ. was delivered by Subba Rao, J. Shah, J. delivered a dissenting Opinion.
Subba Rao, J.
The appellant is a Hindu undivided family carrying on business at Jaora.
It was a branch of a larger joint Hindu family composed of two branches one was Govindram and the members of his family and the other was Bachhulal and the members of his family.
In the year 1942 there was a partition suit between the said two branches and under the decree made therein each item of the property was put up for sale by competitive bidding.
One of the items of the said property, the sugar factory at Jaora, was knocked down in favour of Govindram for a sum of Rs. 34 lakhs.
After all the items of the property were sold to one or other of the parties, final adjustments were made by cash payment.
After the said partition Govindram and the members of his branch of the family continued to run the factory.
For the assessment year 1950 51 the Income tax Officer, Ratlam, assessed the appellant in respect of the income from the said factory.
The appellant contended that it was entitled to depreciation as provided under section 10(2) (vi) of the Income tax Act, 1922, hereinafter called the Act, on the said amount of Rs. 34 lakhs, being the amount for which it purchased the factory in the auction that was held pursuant to the partition decree.
The Income tax Officer and, on appeal, the Appellate Assistant Commissioner rejected that contention and held that the value to be adopted for the purpose of depreciation would be the original cost of the said factory to the larger joint family.
On a further appeal, the Income tax Appellate Tribunal held that so far as the 10/16th share in the factory which belonged to the appellant was concerned the cost to the appellant was the original cost to the larger branch; and so far as the 6/16th share of Bachhulal 's branch in the said factory was concerned the original cost was the amount for which the appellant 's branch purchased the 6/16th share of the other branch, i.e., Rs. 12,75,000/ .
The following question was referred by the Tribunal to the High Court of Madhya Pradesh: "Whether on the facts and in the circumstances of this case, the assessee Hindu Undivided Family is entitled to claim depreciation in respect of the assets of the old Hindu Undivided Family on the basis of the original cost to the family or on the basis of the valuation at which the assessee took over the assets".
The High Court held that the depreciation allowance should be computed on the basis of the original cost to the larger joint family and not on the basis of the valuation at which the assessee took over the assets.
The assessee, by certificate granted by the High Court, has preferred the present appear to this Court against that order.
The only question that arises in this appeal is whether the depreciation allowance should be computed in respect of the 644 10/16th share in the factory on the basis of the original cost to the larger joint family or on the basis of the valuation at which the assessee took over the factory.
The answer to this question turns upon the relevant provisions of the Act and they read: Section 10(2): Such profits or gains shall be computed after making the following allowances, namely: (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed: Section 10(5) of the Act defines "written down value" thus: "written down value" means (a) in the case of assets acquired in the previous year, the actual cost to the assessee: (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act repealed thereby, or under executive orders issued when the Indian Income tax Act, 1886 (II of 1886) was in force".
It is not disputed that no previous depreciation was allowed under any Act repealed by the Indian Income tax Act, 1922, or under any executive order issued under the Indian Income tax Act, 1886.
Therefore, the appellant would be entitled to depreciation allowance on the original cost to it of the factory.
What is the original cost of the 10/16th share in the factory to the appellant '? Two expressions in d. (vi) of sub section
(2) of section 10 give the clue to the answer, and they are, (i) "being the property of the assessee", and (ii) "the original cost thereof".
Therefore.
depreciation is given in respect of property of an assessee on the original cost of the said property to him.
The factory is the property of the assessee.
What was the original cost of the property to the assessee '? Admittedly Govindram purchased it in the auction for Rs. 34 lakhs.
Ordinarily that would be the cost of the factory to the assessee.
It was conceded that it would be so if a third party had purchased it.
But as the auction was only a step in the partitioning of the property of the larger family among the branches composing it, Govindram did not purchase it but only got it in the partition.
It was then 645 contended that partition did not involve any conveyance or transfer, but it was only a process in and by which joint enjoyment was transformed into an enjoyment in severality and that, therefore, the.
appellant did not get any new title to the factory or at any rate to the 10/16th share therein, but its title was traceable to the ownership of the larger joint family.
On the said reasoning it was argued that the original cost of the factory to the larger joint family was the cost to the assessee within the meaning of the said provisions.
The entire argument is based on a misapprehension of the scope of partition under Hindu Law.
Coparcenery is a creature of Hindu law.
The concept involves "community of interest, unity of possession and common enjoyment".
Each coparcener 's right extends to the whole joint family property; though each one of them has interest in the whole family property, he has no definite share therein.
Partitioning is the ascertainment of individual shares and it can be brought about by an unambiguous declaration of their intention to divide, ie., by a conscious alteration of their status.
Such a declaration brings about a division in status.
At that stage ' the members of an erstwhile joint family become tenants in common.
The next step is the division by metes and bounds where under separate properties are allotted towards the said definite shares of the individuals.
Whether the said process involves transfer or not within the meaning of the Transfer of Property Act, it certainly confers on a divided member an absolute title to a specified property, whereas before the partition he had only some interest in the entire joint family property.
Though in one sense his interest in the property of the larger joint family has become crystallized into a specific property, in substance he acquires a title to a specific property.
Even from a practical standpoint the legal fiction of "pre existing title" cannot be stretched too far.
Take the following illustration: A and B were members of a joint Hindu family in 1930 and continued to be so till 1960 when a partition was effected between them.
They had 4 houses in 4 villages; and the original cost of each of the houses was Rs. 100/ .
If a partition had taken place in 1930 or thereabout, each one of the two brothers would have got 2 houses each, and the partition would have been equitable and fair.
But during these 30 years one village developed into a town and the value of the house therein had increased to Rs. 500/ .
There was no appreciable rise in price in regard to the other 3 houses and they together would fetch only Rs. 500/ in the market.
In the result at the partition that was effected in 1960 the house, in the town was given to one of the brothers and the other three houses together were given to the other brother.
What would be the cost of the house in the town to the brother to whom it was allotted? Clearly it would be Rs. 500/ , though the original cost of the house at the time it was built or purchased was only Rs. 100/ .
Because of the uneven rise in prices of the different houses, instead of two houses he got only one house at the partition.
The cost to him, therefore.
would be the cost at which the 646 property was valued at the partition or at which it was auctioned for the purpose of partition.
Take another illustration: Instead of partitioning the properties by evaluation thereof, the houses were sold to a third party.
So far as the third party was concerned the cost price would be the price at which he purchased them.
If instead, the properties were sold by auction between the brothers and the difference in prices was adjusted by cash payment, it would be incongruous to say that in the former the cost of the houses would be the cost actually paid by the third party purchaser and in the latter the cost of the houses would not be the price for which they were auctioned but the nominal price they bore in a remote past.
Other illustrations may be visualized.
Barring the cases of fraud, collusion and inflation and deflation of values for ulterior purposes, cost of an asset to a divided member must necessarily be its cost to him at the time of partition, whether mentioned in the partition deed or ascertained aliunde.
Analogy drawn from comparable cases may also throw some light on the question.
In the case of an assessee acquiring a property by purchase, gift, bequest or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor but its actual cost to him at the time of the purchase, gift, bequest or succession, as the case may be: see Commissioner of Income tax, Madras vs The Buckingham & Carnatic Company, Ltd., Madras (1), and Jagta Coal Co. Ltd. v Commissioner of Income tax, West Bengal(2) purchase; Indian Iron & Steel Co. Ltd. vs Commissioner of Income tax, Bengal("), and Francis Vallabarayar vs Commissioner of Income tax, Madras(4) succession; and Commissioner of Income tax, Burma vs Solomon & Sons(5) bequest.
A Division Bench of the Nagpur High Court in Commissioner of Income tax, U.P. & C.P.v.
Seth Mathuradas Mohta(6) dealt with a case of partition.
Therein, it held that the cost to the assessee, who was a divided member, of a property was the cost of it to the original joint Hindu family at the time it was acquired.
The learned Judges gave various illustrations in support of their conclusion.
It is true that, if the valuation of the properties was given nationally as a mode of choosing properties, there will be some plausibility in the contention that there is no change in the valuation between the date the property was purchased and the date when it was allotted to one of the members of the family.
But, if the valuation of a property was not notional but was real and that was the basis for allocating properties to different shares, we do not see how the cost of a property allocated to a member would be that at which it was purchased in the remote past.
We cannot agree with the view expressed by the Nagpur High Court.
(1) (2) (3) (5) (4) (6) 647 In substance we do not see any difference in the matter of ascertaining the cost of an asset to an assessee whether he is a donee, purchaser, legatee, successor or a divided member of a joint Hindu family.
It may be that in strict legal theory partion may not involve transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu family, who has only an interest in the entire joint family property acquires an absolute title to a specific property.
The cost of the property to the member at the date of partition would be the value given to it for the purpose of allotment, provided it was real, or the price at which he purchased it in auction or the value of it ascertained otherwise.
It is nobody 's case in the present appeal that the valuation given to the property was notional and not a real one: indeed, the, property was sold in open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of the partition.
We, therefore, answer the question as follows: That depreciation allowance should be computed on the basis of the valuation at which the assessee took over the assets.
In the result, the appeal is allowed with costs here and in the High Court.
Shah, J. A sugar factory in the former Indian State of Jaora belonged to a Hindu undivided family of Govindram and his nephew Bachhulal.
In a suit filed by Bachhulal in 1942 in the Civil Court at Jaora against Govindram for partition of the properties of the undivided family, Govindram was declared entitled to a 10/16th share in the property of the family and Bachhulal to the remaining 6/16th share.
A Commissioner was appointed for dividing the properties.
Certain properties of the family were incapable of division by metes and bounds, and by order of the Court in which the suit was instituted those properties were put up for sale by "competitive bidding between the parties".
A sugar factory at Jaora called 'the Govindram Sugar Factory ' was put up for competitive bidding, and the bid of Govindram for Rs. 34 lakhs being accepted, the sugar factory was allotted to his share.
Other assets of the family were similarly allotted to Govindram or to Bachhulal according as he offered the higher bid.
Account was then made between Govindram and Bachhulal of properties allotted on the basis of the bids accepted at the competitive bidding and Govindram was found liable to pay Rs. 11,26,200/ after taking into account a debit item of Rs. 12,75,000/ being the value of the 6/16th share of Bachhulal in the sugar factory.
Govindram died in 1943, and the appellant is the Hindu undivided family which represents the branch of Govindram.
648 The Indian Income tax Act 9 of 1922 was applied to Part 'B ' States by the Finance Act 25 of 1950.
In the assessment year 1950 51 which was the first year of assessment after the State of Jaora became part of the Indian Union, the appellant Hindu undivided family claimed depreciation allowance under section 10(2) (vi) of the Indian Income tax Act in respect of the sugar factory computed on a valuation of Rs. 34 lakhs.
The Income tax Officer rejected the claim of the appellant and allowed depreciation only on the actual cost to the Hindu family of Govindram and Bachhulal before it was divided.
The order of the Income tax Officer was confirmed by the Appellate Assistant Commissioner in appeal.
The Income tax Appellate Tribunal held that the value for purposes of depreciation should be 10/16th share of the original cost to the larger Hindu undivided family plus Rs. 12,75,000/ (paid by Govindram on behalf of the assessee to Bachhulal for the latter 's 6/16th share in the sugar factory).
At the instance of the appellant, the Tribunal referred the following question to the High Court of Madhya Pradesh under section 66(1) of the Income tax Act: "Whether on the facts and in the circumstances of this case, the assessee Hindu Undivided Family is entitled to claim depreciation in respect of the assets of the old Hindu Undivided Family on the basis of the original cost to the family or on the basis of the valuation at which the assessee took over the assets?" The High Court of Madhya Pradesh recorded the following answer: "that the depreciation allowance should be computed on the basis of the original cost to the joint family and not on the basis of the valuation at which the assessee took over the assets".
In so answering the question, the High Court committed a clear error of law.
The Commissioner had acquiesced in the order of the Tribunal and had not claimed that the original value to the larger Hindu Undivided Family was the only amount on which depreciation allowance was to be computed.
The Income tax authorities had held ' that for the purpose of computing the depreciation allowance, the original cost to the joint family had to be the basis, but the Tribunal did not accept that view and held that the depreciation allowance in respect of the sugar factory was to be computed on the basis of 10/16th of the original value plus Rs. 12,75,000/ .
The Commissioner having acquiesced in the order of the Tribunal, the only question on which the High Court was called upon to advise was whether in respect of the 10/16th share which fell to the share of Govindram, depreciation aIlowance may be computed on the basis of the original cost to the larger undivided family or on the basis of Rs. 34 lakhs being the value of the factory offered at the auction.
649 In the computation of profits and gains of any business carried on by an assessee, under the head "Profits and gains of business" by section 10 sub section
(2) the assessee is entitled to an allowance for depreciation under el.
The material part of sub section
(2) cl.
(vi) provides: "(2) Such profits or gains shall be computed after making the following allowances, namely : (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and in any other case, to such percentage on the written down value thereof as may in any case or class of cases be prescribed: The assets in respect of which the depreciation allowance is claimed being a factory, a percentage on the written down value as may be prescribed in respect of the buildings, machinery, plant and furniture therein is admissible as allowance.
Sub section (5) of section 10 defines "written down value".
It provided, insofar as it was material at the relevant time: "written down value ' means (a) in the case of assets acquired in the previous year, the actual cost to the assessee: Provided Provided further (b) in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this Act or any Act repealed thereby, or under executive orders issued when the Indian Income tax Act, 1886 (II of 1886), was in force:" The depreciation allowance under section 10(2)(vi) in respect of a factory has to be allowed in the manner prescribed on the actual value to the assessee limited to the buildings, machinery, plant and furniture.
No previous depreciation has been allowed under any Act repealed by the Indian Income tax Act, 1922 or under any executive order issued under the Indian Income,tax Act, 1886 and therefore the appellant is entitled to depreciation allowance under section 10 (2) (vi) on the actual cost to the assessee of assets for which depreciation is admissible.
650 The factory originally belonged to a larger Hindu undivided family.
In the scheme of partition devised under the preliminary decree the factory was allotted to Govindram, his bid of Rs. 34 lakhs having been accepted by the Court.
The true effect of the scheme under which the properties were put up for competitive bidding under the order of the Court was that the interest of the other member was to be conveyed at a value based on the offer made by the higher bidder.
In other words, each party was given an option to purchase the share of the other, but the option was exercisable only by the person who offered the higher bid for the asset.
By the preliminary decree, the share of Govindram was defined at 10/16th and he became entitled to that share in every item of property and Bachhulal became entitled to the remaining 6/16th share in each such item.
But some of the properties were found incapable of physical division and a scheme was devised under which one of the sharers was entitled to purchase the share of the other on a valuation based on the bid offered by him, provided it was the higher of the two bids.
Value of the bid was however taken into account only for making up accounts.
In substance the appellant purchased by being declared the higher bidder the 6/16th share belonging to Bachhulal in the sugar factory for Rs. 12,75,000/ .
He was, and remained the owner of the 10/16th share, and that share was neither sold nor conveyed to him: he merely purchased the share of Bachhulal for Rs. 12,75,000/ .
The Tribunal was therefore right in holding that in respect of the 6/ 16th share, Rs. 12,75,000/ paid by Govindram was the actual cost to him.
On this part of the case apparently no dispute was or could be raised before the High Court.
But the appellant contends that even for the purpose of the 10/16th share, the depreciation allowance should be computed on the basis of a valuation of Rs. 34 lakhs bid by Govindram for the factory.
Our attention was invited to a large number of authorities in support of the contention raised by the appellant that the price of the sugar factory on the basis of which the share of Bachhulal was valued should be regarded as decisive of the value of the asset on which depreciation allowance is admissible.
The argument in substance is that the actual cost of the sugar factory is Rs. 34 lakhs, that being the price at which the factory was acquired by Govindram.
An asset which is admissible to depreciation allowance may be obtained by gift, inheritance or succession.
In such a case the person who acquires an interest in the asset pays no price for it, but on that account it cannot be said that he is not entitled to depreciation allowance.
In respect of such an asset, in the absence of any statutory provision, depreciation would be computed on the market value on the date of acquisition of interest.
An asset may be acquired by purchase, in which case in the absence of evidence to show that the valuation was unduly inflated, the value 651 paid by the assessee is the actual cost to him, and not the value paid by his vendor for acquiring it.
Again property which is owned jointly by more persons than one, by the acquisition of the interest of the other joint owners becomes the property of a single owner.
In Francis Vallabarayar vs Commissioner of Income tax, Madras(1) a Division Bench of the Madras High Court held that an assessee is entitled in assessment of tax under section 10 of the Income tax Act, to depreciation allowance in respect of machinery or plant, which he acquires by inheritance, on the market value of such property at the date of inheritance.
The same principle would apply to cases of gift and succession.
The Legislature has by adding cl.
(c) in sub section
(5) of section 10 by section 8 of the Indian Income tax (Amendment) Act 25 of 1953, defined 'written down value ' in the case of assets acquired by the assessee by way of gift or inheritance as being the written down value as in the case of previous owner or the market value thereof whichever is less.
In the case of purchase, as we have already observed, in the absence of fraudulent over valuation with a view to obtain an unfair advantage, the price paid by the purchaser would be regarded for the purpose of depreciation allowance as the actual cost to him, and not the original cost to the vendor: Commissioner of Income tax vs The Buckingham Carnatic Company Ltd. C): Jogta Coal Company Ltd. vs Commissioner of Income tax, West Bengal C).
Cases in which full title to an asset, in respect of which depreciation is claimed, is obtained in consequence of partition of a Hindu undivided family introduce a complication, which is a peculiar product of the rules of Hindu law.
Under the Mitakshara system the essence of a coparcenary is unity of ownership, and so long as the family remains joint no individual member can claim that he has a definite share in the joint property.
Until partition takes place, there is community of interest and unity of possession between all the members: it is only on partition that the interest of each member becomes definite. "Partition . . . is really a process in and by which a joint enjoyment is transferred into an enjoyment in severalty.
Each one of the sharers had an antecedent title and therefore no conveyance is involved in the process . "Gutta Radha kristnayya vs Gutta Sarasamma(4).
By the preliminary decree Govindram and BachhuIal acquired definite interest in the sugar factory proportionate to the shares declared by the decree in the entirety of the estate, and.
the scheme by which Govindram became owner of the sugar factory was in truth one by which he purchased 6/16th share of Bachhulal.
He was by the decree, which recognised his pre existing title, entitled to 10/16th share and he purchased the remainder.
The (1) 40/.T.R. 426.
(2) 3/.T.R. 385.
(3) 36/.T.R. 521.
(4)I.L.R. 5scI 3 652 scheme of "competitive bidding" was adopted only for the purpose of valuing the interest of the other sharer at which the first sharer was to purchase it.
The highest bidder took the entire asset and paid a share of the value bid by him equal to the share of the other sharer in the family estate.
Govindram was the owner of 10/16th share: by offering the bid for Rs. 34 lakhs he did not purchase the 10/16th share.
He merely purchased the 6/16th share of Bachhulal at a price based on total valuation of the sugar factory at Rs. 34 lakhs.
The dicta to the contrary in Commissioner of Income tax U.P. & C.P.v.
Seth Mathuradas Mohta (1) on which the High Court relied do not, in my judgment, lay down the correct rule.
In that case coparceners of a Hindu family consisting of two members owning a Ginning Factory which was originally purchased for Rs. 23 lakhs decided to separate, and as the Ginning Factory could not be divided it was put to auction and purchased by 'A ' for Rs. 28 lakhs. 'A ' was debited in taking account with half the amount offered by him.
Subsequently 'A ' claimed depreciation allowance on the basis of Rs. 28 lakhs which he had paid alleging that that was the original cost to him.
The Income tax authorities rejected the claim, and adopted the original value to the joint family as the actual value to 'A ' for computing depreciation allowance under section 10(2)(vi).
In dealing with a reference made by the Tribunal on the question whether the Income tax Officer had the power to ignore the valuation made by the parties in ascertaining the original cost of the machinery and building to the assessee, the High Court observed: " . the original cost is the cost of acquiring title.
The cost of acquiring title is to be ascertained at the time when the property is acquired by the coparcenary.
Thereafter one is not concerned with cost strictly so called but one is concerned with a mode of partition.
As a result of the partition each (fraud, over reaching and the like being put on one side) is to be regarded as having got half by the mode of division adopted whether that mode be through Court, arbitration, private auction or drawing lots or any other mode agreed upon.
The original cost of the property is not increased though one side might in the result get what a third person would regard as less than half though what the person concerned (at least in the case of private auction) thought at the time was at least equal to half; otherwise he would not have bid so much".
These observations were not necessary for the purpose of answering the question posed before the Court.
The question posed before the High Court related not to what the true value for computing the allowance for depreciation was.
but to the power of the (1) 7 I.T.R.160.
653 Income tax Officer to ignore the valuation placed by the parties in the deed of partition in ascertaining the true value for the purpose of such computation.
Death or birth of coparceners does not alter the identity of the Hindu undivided family which utilizes an asset for earning income or profit.
Death of a coparcener merely extinguishes an existing interest, but there is no devolution of that interest.
But where the joint family status is severed and the rights of the parties are crystalised and a member acquires the interest of the other in any item of property though arbitration, agreement, decree of the Court or a private auction, there is a transfer of interest from one to the other in that property and the value paid or taken into account for acquisition of that interest would normally be regarded qua that share as the actual cost to the acquirer for the purpose of section 10(2)(vi), but the value of his own share is determined by the actual cost to the family.
Counsel for the appellant placed strong reliance upon Commissioner of Income tax vs Bai Shirinbai K. Kooka (1) which belongs to a different branch of the law of Income tax.
Where an assessee brings his investments into his business, the question arises whether in assessing income tax payable on income earned by sale or disposition of such investment the original value at which they were acquired or the market value as at the date on which they were brought into the business has to be taken into account.
In Shirinbai 's case(1) the assessee who held by way of investment several shares in different companies commenced a business in shares by converting the shares into stock in trade of the business.
The assessee subsequently sold those shares in the course of the business at a profit.
A majority of this Court held that the assessee 's assessable profits on the sale of the shares was the difference between the sale price of the shares and the market price of the shares prevailing on the date when the shares were converted into stock in trade of the business, and not the difference between the sale price and the price at which the shares were originally purchased by the assessee.
The Court in that case distinguished the earlier case decided by this Court Sir Kikabhai Premchand vs Commissioner of Income tax(2) in which it was held that the assessee was entitled to value at cost price, certain business assets which were after withdrawal from the business settled upon trust.
But neither of these cases has a bearing on the computation of depreciation allowance which is qua building, machinery, plant (not being ships) or furniture to be a percentage of the written down value.
A person who transfers his investments which are not part of his business into the stream of his business may value the investments at the prevailing market rate on the date on which they are brought into the business.
In Shirinbai 's case(1) the Court was (1) (2) 654 called upon to ascertain commercial profits earned by sale of stockin trade and in so doing regarded the owner as investor and as businessman as two different entities.
S.K. Das, J., speaking for the majority observed that normally the commercial profits out of a transaction of sale of an article must be the difference between.
what the article cost the business and what it fetched on sale.
But it is difficult to appreciate how that principle would apply in the computation of depreciation allowance.
The asset viz. the sugar factory at all material times remained a business asset.
It was at one time owned by Govindram and Bachhulal, and if the Income tax Act, 1922 had then applied, depreciation allowance would have been computed on the basis of the value to the family.
Acquisition of the interest of Bachhulal by Govindram did not alter the character or use of the asset: nor did it make any fundamental alteration in its value to the appellant so as wholly to displace its original value even in respect of the share which Govindram continued to own.
Superficial analogies are often misleading and more so in taxation laws.
In computing profits assets brought into the business and subsequently sold may be regarded as inducted at the prevailing market rates, for the taxing authority is concerned to deal with the business profits, arising out of a transaction of sale to the business.
When depreciation allowance is to be computed, the taxing authorities have to consider what the original cost to the assessee was and valuation of a business asset adopted for the purpose of valuing the share of one of the owners from whom his share was purchased cannot be regarded by any principle of commercial accounting as notionally altering the original cost of his own share in the asset to the acquirer.
The assessee does not purchase his own share at the valuation put by him at the private auction: he merely purchases the share of the other sharer at a valuation made on the bid offered by him.
I am unable therefore to agree with counsel for the appellant that for the purpose of valuing 10/16th share of Govindram the basis should be the valuation of Rs. 34 lakhs which was adopted for valuing Bachhulal 's share.
therefore answer the question as follows: That depreciation allowance should be computed on the basis of 10/16th share of the original cost to the joint family of the assets which are admissible to depreciation allowance plus an appropriate amount attributable to the assets admissible to depreciation allowance on the footing that the value of 6/16th share of Bachhulal in the factory was Rs. 12,75,000/ .
The order passed by the High Court will accordingly be modified.
There will be no order as to costs.
ORDER In accordance with the majority judgment, the appeal is allowed with costs here and in the High Court.

dataset_name: IN-Abs

summary/full:
On partition being effected through a suit, a Hindu joint family who has only an interest in the entire joint family property acfamily.
The preliminary decree passed by the Court determined 10/16 as the share of the appellant family and 6/16 as that of the other branch.
Those assets of the erstwhile larger joint family which could not be physically divided were auctioned between the two branches and in this manner a sugar mill was purchased for 34 lacs by the appellant family.
In Income tax proceedings depreciation under section 10(2) (vi) of the Indian Income tax Act, 1922 was claimed on the above valuation of 34 lacs.
The claim was rejected by the Income tax Officer as well as the Appellate Assistant Commissioner, on the ground that the value for the purpose of depreciation was not the price determined at the family auction, but the original cost to erstwhile larger joint family.
The Tribunal held that the 6/16 share of the other branch was purchased at the auction and its value had to be taken as the basis of the price determined at the auction, but the appellant family 's own share of 10/16 was not purchased at the auction and therefore had to be valued at the original cost to the larger joint family.
In reference, the High Court held that the distinction made by the Tribunal was wrong and that the shares of both branches had to be valued on the basis of the original cost to the larger family.
Appeal was filed before this Court with certificate.
HELD: Per Subba Rao and Sikri, JJ.
It may be that in strict legal theory partition may not involve a transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu family who has only an interest in the entire joint family property acquires an absolute title to a specific property.
The cost of the property to the member at the date of partition would be the value given to it for the purpose of allotment.
provided it was real, or the price at which he purchased it in auction, or the value of it ascertained otherwise.
[647A C] In the case of assessees acquiring a property by purchase, gift, bequest, or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor but its actual cost to him at the time of the purchase, gift, bequest or succession.
In substance there is no difference in the matter of ascertaining the cost of an asset to an assessee whether he is a donee, purchaser, legatee, successor, or a divided member e.f a joint Hindu family.
[646D; 647A] 642 Commissioner of Income tax, Madras vs The Buckingham & Carnatic Company, Ltd., Madras (1935)3 I.T.R. 384(P.C.), Jagata Coal Co. Ltd. vs Commissioner of Income tax, West Bengal , Indian Iron & Steel Co. Ltd. vs Commissioner of Income tax, Bengal, (1943) 11 I.T.R. 328 (P.C.), Francis Vallabaravar vs Commissioner of Income tax, Madras and Commissioner of Income tax, Bombay vs Solomon & Sons , referred to.
Commissioner of Income tax, U.P. & C.P.v.
Seth Mathuradas Mohta, (1939)7 I.T.R. 160, disapproved.
In the present case the valuation given to the property was not notional but a real one; indeed the property was sold in the open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of partition.
[647 C D] Therefore, even in respect of the appellant 's own share of 10/16, the valuation for the purposes of section 10(2)(vi) had to be on the basis the price which the appellant bid at the auction.
Per Shah, J. (dissenting).
By the preliminary decree the appellant family became entitled to a 10/16th share in every item of the property of the larger joint family; the other branch became entitle to the remaining i.e. 6/16th share in each item.
The appellant being already owner of 10/16th share could not purchase the same at the auction.
In substance the appellant purchased, by being declared the highest bidder, the remaining 6/16th share belonging to the other branch.
[650 C E] The asset in question, viz, the sugar factory, at all material times remained a business asset.
Acquisition of the interest of the other branch by the appellant did not alter the character or use of the asset; nor did it make any fundamental alteration in its value to the appellant so as wholly to displace its original value even in respect of its share which it continued to own.
[654 B D] The Tribunal therefore, had rightly held that in respect of the 6/16th share of the other branch, depreciation had to be allowed to the appellant on the basis of the auction price.
The High Court wrongly interfered with this finding the Revenue not having appealed against it.
On the appellant 's 10/16th share, which the appellant could not be said to have purchased, depreciation had to be calculated on the basis of original cost to the larger family.
[654 E G] Case law discussed.


judgement:
Appeals Nos./55 157 1964.
Appeals by special leave from the judgment and order dated August 8, 1961 of the Andhra Pradesh High Court in Case Referred No. 25 of 1957.
section V. Gupte, Solicitor General, N. D. Karkhanis and R.N. Sachthey, for the appellant (in all the appeals).
G.S. Pathak, B. Datta and T. Satyanarayan, for the respondent (in all the appeals).
The Judgment of the Court was delivered by Subba Rao, J.
These appeals by special leave raise the question of construction of section 24(2) of the Indian Income tax Act, 1922, hereinafter called the Act.
The material facts may briefly be stated.
The, Cocanada Bank Ltd., Kakinada, hereinafter called the assessee, is a private limited company carrying on banking business with its head office at Kakinada and a branch at Dayal Bagh.
The assessee 's sources of income are banking business and interest from government securities.
For the assessment year 194950 its income was assessed as follows: Interest on securities .
Rs. 84,880 Other banking activities .
Rs. 64,400 (loss) Net loss .
Rs. 55,912 The following tabular form shows at a glance the factual position in regard to the income of the assessee under different heads during the said three years: Business Year of assessment Interest on income or securities loss as finally Total decided by the A.A.C. 1 2 3 4 Rs. Rs. Rs. 1.
1950 51 . 5,191 886 6077 2. 1951 52 . 2174 1,177 3351 3. 1952 53 . 1885 9,121 11,006 621 For the three succeeding years the department showed the income under the said two separate heads but allowed the said loss to be set off against the income under the head "business" and disallowed it against the income under the head "interest on securties".
The view of the Income tax Officer was confirmed, on appeal, by the Appellate Assistant Commissioner and ', on further appeal, by the Income tax Appellate Tribunal.
The following question was referred by the Tribunal to the High Court for its opinion: "Whether on the facts and in the circumstances of the case, the assessee was entitled to set off the business loss of Rs. 55,912 brought forward from the preceding year against the entire income including interest on securities held by the assessee.
" The High Court, having regard to the decision of this Court in United Commercial Bank Ltd., Calcutta vs Commissioner of Income tax, West Bangal(1) remitted the case to the Income tax Tribunal, Hyderabad Bench, for making a fuller statement of case on the question whether these securities in question formed ' part of the trading assets held by the assessee in the course of its business as a banker and whether its dealing with the securities from which it received interest was as much the assessee 's business as receiving deposits from clients and withdrawals by them.
The Income tax Tribunal, on a further hearing, held that the receipt of interest from securities was as much the assessee 's business as its other banking activities like receiving deposits from the clients and withdrawals by them.
On receipt of the supplementary statement of case from the Tribunal the High Court answered the reference in favour of the assessee.
Hence the present appeals.
Learned counsel for the Revenue argued that the income from business and securities fell under different heads, namely, section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceding year to the succeeding year and set off under section 22(4) of the Act against the income from securities held by the assessee.
Learned counsel for the assessee, on the other hand, contended that though for the purpose of computation of income, the income from securities and the income from business were calculated separately, in a case where the securities were part of the trading assets of the business, the income therefrom was part of the income of the business and, therefore.
the losses incurred under the head "business" could be set off during the succeeding years against the total income of the business, i.e., income from the business including the income from the securities.
The relevant section of the Act which deals with the matter of set off of losses in computing the aggregate income is section 24.
The (1) ; 622 relevant part of it, before the Finance Act, 1955, read: "(1) Where any assessee sustains a loss of profits or gains in any years under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year." (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under subsection (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following year.
While sub section
(1) of section 24 provides for setting off of the loss in a particular year under one of the heads mentioned in section 6 against the profit under a different head in the same year, sub section
(2) provides for the carrying forward of the loss of one year and setting off of the same against the profit or gains of the assessee from the same business in the subsequent year or years.
The crucial words, therefore, are "profits and gains of the assessee from the same business", i.e., the business in regard to which he sustained loss in the previous year.
The question, therefore, is whether the securities formed part of the trading assets of the business and the income therefrom was income from the business.
The answer to this question depends upon the scope of section 6 of the Act.
Section 6 of the Act classified taxable income under the following several heads: (i) salaries; (ii) interest on securities; (iii) income from property; (iv) profits and gains of business, profession or vocation; (v) income from other sources; and (vi) capital gains.
The scheme of the Act is that income tax is one tax.
Section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee.
Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the trading assets.
Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles.
To put it in other words, did the securities in the present case which yielded the income form part of the trading assets of the assessee? The Tribunal and the High Court found that they were the assessee 's trading assets and the income therefrom 623 was, therefore, the income of the business.
If it was the income of the business, section 24(2) of the Act was immediately attracted.
If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income.
A comparative study of sub sections
(1) and (2) of section 24 yields the same result.
While in sub s.(1) the expression "head" is used in sub section
(2) the said expression is conspicuously omitted.
This designed distinction brings out the intention of the Legislature.
The Act provides for the setting off of loss against profits in four ways.
To illustrate, take the head "profits and gains of business, profession or vocation".
An assessee may have two businesses.
In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses.
So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head.
Even so, he may still sustain loss under the same head.
He can then set off the loss under the head "business" against profits under another head, say "income from investments", even if investments are not part of the trading assets of the business.
Notwithstanding this process he may still incur loss in his business.
Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business.
Be it noted that clause (2) of section 24, in contradistinction to cl.
(1) thereof, is concerned only with the business and not with its heads under section 6 of the Act.
Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act.
Some of the decisions cited at the Bar may conveniently be referred to at this stage.
The Judicial Committee in The Punjab Cooperative Bank Ltd. vs Commissioner of Income tax, Punjab(1) has clearly brought out the business connection between the securities of a bank and its business, thus: "In the ordinary case of a bank, the business consists in its essence of dealing with money and credit.
Numerous depositors place their money with the bank often receiv ing a small rate of interest on it.
A number of borrowers receive loans of a large part of these deposited funds at somewhat higher rates of interest.
But the banker has al ways to keep enough cash or easily realisable securities to meet any probable demand by the depositors . . ." In the present case the Tribunal held, on the evidence, and that was accepted by the High Court, that the assessee was investing its amounts in easily realisable securities and, therefore, the said securities were part of the trading assets of the assessee 's banking business.
The decision of this Court in United Commercial Bank Ltd., 624 Calcutta vs Commissioner of Income tax, west Bengal(1) does not lay down any different proposition.
It held, after an exhaustive review of the authorities, that under the scheme of the Income,tax Act, 1922, the head of income, profits and gains enumerated in the different clauses of section 6 were mutually exclusive, each specific head covering items of income arising from a particular source.
On that reasoning this Court held that even though the securities were part of the trading assets of the company doing business, the income therefrom had to be assessed under section 8 of the Act.
This decision does not say that the income from securities is not income from the business.
Nor does the decision of this Court in East India Housing and Land Development.
Trust Ltd., vs Commissioner of Incometax, West Bengal(2) support the contention of the Revenue.
There.
a company, which was incorporated with the objects of buying and developing landed properties and promoting and developing markets, purchased 10 bighas of land in the town of Calcutta and set up a market therein.
The question was whether the income realised from the tenants of the shops and stalls was liable to be taxed as "business income" under section 10 of the Income tax Act or as income from property under section 9 thereof.
This Court held that the said income fell under the specific head mentioned in section 9 of the Act.
This case also does not lay down that the income from the shops is not the income in the business.
In Commissioner of Income tax, Madras vs Express Newspapers Ltd.,C), this Court held that both section 26(2) and ' the proviso thereto dealt only with profits and gains of a business, profession or vocation and they did not provide for the assessment of income under any other head, e.g., capital gains.
The reason for that conclusion is stated thus: "It (the deeming clause in section 12B) only introduces a limited fiction, name ly, that capital gains accrued will be deemed to be income of the previous year in which the sale was effected.
The fiction does not make them the profits or gains of the business.
It is well settled that a legal fiction is limited to the purpose for which it is created and should not be extended beyond its legitimate field . .
The profits and gains of business and capital gains are two distinct concepts in the Income,tax Act; the former arises from the activity which is called business and the latter accrues because capital assets are disposed of at a value higher than what they cost the assessee.
They are placed under different heads; they are derived from different sources; and the income is computed under different methods.
The fact that the capital gains are connected with the capital assets of the business cannot make them the profit of the business.
They are only deemed to be income of the previous year and not the profits or gains arising from the business during that year." (1) ; (2) (3) , 260 625 It will be seen that the reason for the conclusion was that capital gains were not income from the business.
Though some observations divorced from content may appear to be wide, the said decision was mainly based upon the character of the capital gains and not upon their non inclusion under the heading "business".
The limited scope of the earlier decision was explained by this Court in Commissioner of Income tax, Bombay City Iv.
Chugandas & Co.(1).
Therein this Court held that interest from securities formed part of the assessee 's business income for the purpose of exemption under section 25(3).
Shah, J., speaking for the Court, observed: "The heads described in section 6 and further elaborated for the purpose of computation of income in sections 7 to 10 and 12, 12A, 12AA and 12B are intended merely to indicate the classes of income: the heads do not exhaustively delimit sources from which income arises.
This is made clear in the judgment of this Court in the United Commercial Bank Ltd. 's case(" ').
that business income is broken up under different heads only for the purposes of computation of the total income: by that break up the income does not cease to be income of the business, the different heads of income being only the classification prescribed by the Indian Income tax Act for computation of income.
" The same principle applies to the present case.
We, therefore, hold that under section 24(2) of the Act the income from the securities which formed part of the assessee 's trading assets was part of its income in the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income also in the succeeding years.
In the result, we hold that the High Court was right in answering the question referred to it in the affirmative.
The appeals are dismissed with costs.
One hearing fee.
Appeals dismissed.
(1) [19651 ; , 24.

summary/full:
The respondent bank had income from banking business and interest on securities.
For the assessment year 1949 50 its loss from banking business was set off against the income from interest on securities but for the succeeding three years the income tax officer set off the said loss which had been carried forward, only against the income.
from banking business and disallowed it against the income under the head 'interest on securities '.
The view of the Income Tax Officer was upheld by the Appellate Assistant Commissioner and on further appeal by the Appellate Tribunal.
The Tribunal however referred to the High Court, at the instance of the assessee, the question whether the assessee was entitled to set off business loss brought forward from the preceding assessment year against the entire income including interest on securities.
The High Court remitted the case to the Tribunal for a finding whether the securities in Question formed part of the trading assets held by the assessee.
The Tribunal held that the receipt of interest from securities was as much the assessee 's business as its other banking activities.
On receipt of the supplementary statement of case the High Court answered the reference in favour of the assessee.
The Revenue appealed to this Court.
It was urged for the Revenue that the income from business and securities fell under different heads, namely section 10 and section 8 of the Act respectively, that they were mutually exclusive and, therefore, the losses under the head "business" could not be carried forward from the preceeding year to the succeeding year and set off under section 24(2) of the Act against the income from securities held by the assessee.
HELD: (i) While subs.
(1) of section 24 provides for setting off of the loss in a particular year under one of the heads in section 6 against the profit under a different head in the same year, subs.
(2) provides for the carrying forward of the loss of one year and setting off the same against the profit or gains of the assessee from the same business in subsequent years.
This cl.
(2) of section 24 in contradistinction to cl.
(1) thereof is concerned only with the business and not with its heads under section 6 of the Act.
This designed distinction brings out the intention of the legislature to give further relief to an assessee carrying.
on business and incurring loss in the business though the income therefrom falls under different heads under section 6 of the Act.
[622E; 623E F] (ii) The scheme of the Act is that income tax is one tax.
Section 6 only classifies the income under different heads for the purpose of computation of the net income of the assessee.
Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest on securities does not cease to be part of the income from business if the securities are part of the 620 trading assets.
Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of s.6 but on commercial principles.
[622G H] (iii) In the present case the Tribunal and the High Court found that the securities were the assessee 's trading assets and the income therefrom was, therefore, the income of the business.
If it was income of the business, section 24(2) of the Act was immediately attracted.
If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income.
[622H 623A] The Punjab Co operative Bank Ltd. vs Commissioner of Incometax, Punjab, (1940)8 I.T.R. 635 and Commissioner of Income tax Bombay City I vs Chugandas & Co. (1965) 55 I.T.R. 17, relied on.
United Commercial Bank Ltd. vs Commissioner of Income tax West Bengal; , , East India Housing and Land Development Trust Ltd. vs Commissioner of Income tax, West Bengal , and Commissioner of Income tax, Madras vs Express Newspapers Ltd. , distinguished.