judgement:
ivil Appeal No. 517 of 1967.
Appeal from the judgment and order dated October 3, 1966 of the Kerala High Court in Original Petition No. 934 of 1964.
M.R.K. Pillai, 'for the appellant.
R. Gopalakrishnan, for the respondents.
The Judgment of the Court was delivered by Ramaswami, J.
This appeal is brought by certificate from the judgment of the Kerala High Court in O.P. No. 934 of 1964.
The respondents are dealers in tobacco and tobacco preparations and are doing business in Mattancherry in the name and style of A.S. Bava, Tobacconist.
In the year 1909, Cochin Tobacco Act 7 of 1084 (M.E.) was enacted by the Maharaja of Cochin.
Section 4 of that Act prohibited the transport, import of export, sale and cultivation of tobacco except as permitted by the Act and Rules framed thereunder.
Section 6 of the Act gave power to the Dewan to make rules from time to time consistent with the Act, to permit absolutely or subject to any condition the possession for sale, or cultivation of tobacco.
In pursuance of the power given by this section the Dewan was making rules from time to time relating to the matters specified in the Act.
Cochin State was integrated with Travancore on April 1, 1960 in order to form the new .State of Travancore Cochin.
On that date, after the Constitution came into force the State of Travancore Cochin became a Part B State and by the Finance Act, 1960 the Central Excise and Salt Act 1 of 1944 was extended to the Travancore Cochin State.
Section 13(2) of the Act provided that if immediately before the first day of .April, 1960 there was in force in any State other than Jammu & Kashmir a law corresponding to, but 702 other than, an Act referred to in sub section
(1) or (2) of section 11, such law was repealed with effect from such date.
In consequence of this provision in the Finance Act rules which were in force on April 1, 1950 were changed in Cochin and by a notification dated August 3, 1950 the system of auction sales of A and B Class shops was done away with and instead graded licence fees were introduced for various classes of licences including 'C ' class licences.
The State of Travancore Cochin was collecting licence fee from the respondents for the period from August 17, 1950 to December 31, 1967 on the strength of the said rules framed by the Travancore Cochin State.
In 1956 the respondents filed O.P. No. 70 of 1956 in the High Court of Kerala for the refund of the licence fee collected after April 1, 1950 on the ground that the Cochin Tobacco Act stood repealed by the Finance Act, 1960 because of the extension of the Central Excise and Salt Act 1 of 1944 to the Part B State of Travancore Cochin and in consequence the notifications issued in August 1950 and January 1961 framing new rules for the issue of licences and prescribing fees therefor under the powers conferred by the Cochin and Travancore Acts were ab initio void because the Acts under which the notifications .were purported to be issued stood repealed from April 1, 1950.
The petition was opposed by the appellant on the ground that the Act and the rules were not repealed by the extension of the Central Excise and Salt Act 1 of 1944 to Travancore Cochin State.
The High Court dismissed the writ petition holding that the tax levied by virtue of the rules framed under the Travancore Cochin Tobacco Acts was not a duty of excise coming within the Union List but it was a tax on luxuries coming within entry 62 of the State List.
The respondents took the matter in appeal to this Court which held that the rules framed under the Cochin Tobacco Act of 1084 (M.E.) and the Travancore Tobacco Regulation of 1087 (M.E.) requiring licences to be taken out for storage and sale of tobacco and for payment of licence fee in respect thereof were law corresponding to the provisions of the Central Excise and Salt Act, 1944 and hence were superseded on April 1, 1960 by virtue of section 13(2) of the Finance Act, 1960.
Consequently, the new rules framed in August 1950 and January.
1951 for the respective areas of Cochin and Travancore for the issue of licences and payment of fee for storage of tobacco were invalid ab initio.
The Court did not consider it necessary to decide whether the Cochin and Travancore Acts were within the competence of the State Legislature under Entry 62 of List II for that question would only arise if those Acts were not repealed as corresponding law under section 13(2) of the Finance Act.
Soon after the decision of this Court the respondent complained to the appellant that a sum of Rs. 1,11,750 had been illegally collected as licence fee from 1125 to 1133 M.N.
On 703 April 29, 1962 the appellant refunded a sum of Rs. 73,500 but did not return the balance.
On December 16, 1963 the Government of Kerala Promulgated Ordinance I of 1963 which was later replaced by Act 9 of 1964.
The Ordinance was promulgated in order to avoid the effect of the decision of this Court in A.B. Abdulkhadir & Ors vs The State of Kerala(1) in respect of the period from August 17, 1950 to December 31, 1957.
Section 3 of the Act provides: "For the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957 every person rending or stocking tobacco within any area to which this Act extends shall be liable and shall be deemed always to have been liable to pay a luxury tax on such tobacco in the form of a fee for licence for the vend and stocking of the tobacco, at such rates as may be prescribed not exceeding the rates specified in the schedule." Section 4 confers rule making power and states: "(1) The Government may, by notification in the Gazette, make rules to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for : (i) the prohibition of the vending of tobacco except under a licence; (ii) the issue of licences for the vend 'and stocking of tobacco and the procedure therefor; (iii) classification of licences and the rate at which tax in the form of a fee for licence may be levied for each class of licences; (iv) appeals from orders under the rules.
(3) The rules and notifications specified 'below purported to have been issued under the Tobacco Act of 1087 (Travancore Act I of 1087) or the Cochin Tobacco Act VII of 1084 as the case may be, in so far as they relate or purport to relate to the levy and collection of fees for licences for the vend and stocking of tobacco, shall be deemed to be rules issued ,under this (1) [1962] Supp.
S.C.R. 741.
704 section and shall be deemed to have been in force at all material times: . .
Section 5 provides: "Notwithstanding any judgment, decree or order of any court, all fees for licences for the vend or stocking of tobacco levied or collected or purported to have been levied or collected under any of the rules or notifications specified in sub section (39 of section 4 for the period beginning with the 17th day of August, 1950 and ending on the 31st day of December, 1957 shall be deemed to have been validly levied or collected in accordance with law as if this Act were in force on and from the 17th day of August, 1960 and the fees for licences were a luxury tax on tobacco levied under the provisions of this Act and accordingly (a) no suit or other proceeding shall be maintained or continued in any court for the refund of any fees, paid or purported to have been paid under any of the said rules or notifications; (b) no court shall enforce a decree or order directing the refund of any fees paid or purported to have been paid under any of the said rules or notification.
" Section 6 enacts: "Where any amount paid or purported to have been paid as a fee for licence under any of the rules or notifications specified in sub section (3) of section 4 has been refunded after the 24th day of January, 1962 and such amount would not have been liable to be refunded ' if this Act had been in force on the date of the refund,the person to whom the refund was made shall pay the amount so refunded to the credit of the Government in any Government treasury on or before the 16th day of April, 1964 where such amount is not so paid, the amount may be recovered from him as an arrear of land revenue under the Revenue Recovery Act for the time being in force." The notification dated January 25, 1951 issued under the Cochin Tobacco Act of 1084 reads as follows: "In exercise of the powers conferred by section 5 of the Cochin Tobacco Act VII of 1084 as subsequently 705 amended and as continued in force by the Travancore Cochin Administration and Application of Laws Act Vl of 1125 and in supersession of all previous notifications and Rules on the subject, the following Rules are prescribed under sanction of His Highness the Raj Pramukh for the import, export, sale, transport, possession, disposal of things confiscated and the grant of rewards under the said Act and for generally carrying out the provisions thereof. .
Clause 16: (i) Holders (stockist or 'A ' Class licences shall be entitled to purchase tobacco from any dealer within or without the State without any quantative restriction.
This class of licencees shall sell only to other 'A ' Class licencees or to 'B ' class licencees.
(ii) the annual fees for these licencees shall be as follows: Variety of tobacco Maximum Minimum fee Fee payable stocked Quantity Cds Prescribed for stocking Rs. additional qu antities Rs. A.Jaffna tobaco 100 1500 100 for additional quantity of 100 Cds or fraction thereof.
B.Tobacco produced 100 1000 Rs 750 Do.
in India(Mfd) C.Beedi or Beedi 25 1000 Rs 750 for addit tobacco.
ional quantity of 25 Cds or fraction thereof D.Tobacco preparation to the 1000 Rs 750 for addi of all kinds.
Value of tional quantity to 20,000 the value of 20,000 or fraction thereof.
N.B: For the purpose of calculating stockist license fee in respect of tobacco preparations,the cost price of the article will be taken into account.
The licence fee will be realised only for the quantities brought in from outside the State." After the enactment of Act 9 of 1964 the appellant made a demand on the respondent to repay the amount of Rs. 73,500 which had been refunded to the respondent in accordance with the Supreme Court judgment.
Thereupon the respondent filed writ petition 706 No. C.P. 984 of 1964 which was allowed by the High Court on the ground that Act 9 of 1964 and the rules were ultra vires the Constitution of India.
It was held by the High Court that in the absence of any production of tobacco inside the Kerala State it was not competent for the Kerala Legislature to impose a tax on tobacco imported from outside the State and therefore the provisions of the Luxury Tax on Tobacco (Validation) Act, 1964 violated the guarantee contained in articles 301 and 304 of the Constitution.
In reaching this conclusion the High Court purported to follow the decision of this Court in Kalyani Stores vs The State of Orissa(1).
It is necessary at this stage to set out the relevant Articles in Part XIII of the Constitution as it stood at the material time: "Article 301: Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.
Article 302: "Parliament may by law impose such restrictions on the freedom of trade, commerce or intercourse between one State and another or within any part of the territory of India as may be required in the public interest.
" Article 304: ' "Notwithstanding anything in Article 301 or Article 303, the Legislature of a State may by law: (a) impose on goods imported from other States (or the Union territories) any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and 'goods so manufactured or produced and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest; Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the (1) [19661 1 S.C.R. 865.
707 Legislature of a State without the previous sanction of the President.
" The true scope and effect of those Articles was the subject matter of consideration in Atiabari Tea Co. Ltd. vs The State of Assam(1). ' The majority view vas expressed by Gajendragadkar J. at p. 860 as follows: "In construing article 301 we must, therefore, have regard to the general scheme of our Constitution as well as the particular provisions in regard to taxing laws.
The construction of article 301 should not be determined on a purely academic or doctrinnaire considerations; in construing the said Articles we must adopt a realistic approach and bear in mind the essential features of the separation of powers on which our Constitution rests.
It is a federal Constitution which we are interpreting, and so the impact of article 301 must be judged accordingly.
Besides, it is not irrelevant to remember in this connection that the Article we are construing imposes a constitutional limitation on the power of the Parliament and State Legislatures to levy taxes, and generally, but for such limitation, the power of taxation would be presumed to be for public good and would not be subject to judicial review or scrutiny.
Thus considered we think it would be reasonable and proper to hold that restrictions freedom from which is guaranteed by article 301, would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade.
Taxes may and do amount to restrictions; but it is only such taxes as directly and immediately restrict trade that would fall within the purview of article 301.
The argument that all taxes should be governed by article 301 whether or not their impact on trade is immediate or mediate, direct or remote, adopts, in our opinion, an extreme approach which cannot be upheld.
If the said argument is accepted it would mean, for instance, that even a legislative enactment prescribing the minimum wages to industrial employees may fall under Part XIII because in an economic sense an additional wage bill may in directly affect trade or commerce.
We are, therefore, satisfied that in determining the limits of the width and amplitude of the freedom guaranteed by article 301 a rational and workable test to apply would be: Does the impugned restriction operate directly or immediately on trade or its movement ?" (1) ; 708 In the Automobile Transport (Rajasthan) Ltd vs The State of Rajasthan(1) the view of Gajendragadkar, J., was accepted as correct by the majority of the Judges.
The principle was reiterated by this Court in Andhra Sugars Ltd. vs State of Andhra Pradesh(2).
In that case the question which arose was whether section 21 of the Andhra Pradesh Sugarcane (Regulation of Supply and Purchase) Act which authorised the State Government to levy a tax at such rate . not exceeding five rupees per metric tonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory Was constitutionally valid.
It was held by this Court that normally a tax on the sale of goods did not ,directly impede or hamper the flow of trade and section 21 was no exception and was not violative of article 301 of the Constitution.
A similar view was expressed in the State of Madras vs K. Nataraja Mudaliar(3) in which the question at issue was whether sections 8(2) and 8(5) of the were intra vires of articles 301 and 303 of the Constitution.
It was pointed out that an Act which was merely enacted for the purpose of imposing.tax which was to be collected and to be retained by the State did not amount to a law giving or authorising the giving of, any preference to one State over another, or making, or authorising the making of, any discrimination between one State and another, merely because of varying rates of tax prevailing in different States.
At p. 150 of the report Shah, J., speaking.
for the Court observed: "The flow of trade does not necessarily depend upon the rates of sales tax: it depends upon a variety of factors, such as the source of supply, place of consumption, existence of trade channels, the rates of freight, trading facilities, availability of efficient transport and other facilities for carrying on trade.
Instances can easily be imagined of cases in which notwithstanding the lower rate of tax in a particular part of the country goods.
may be purchased from another part, where a higher rate of tax prevails.
Supposing in a particular State in respect of a commodity the rate of tax is 2 per cent, but if the benefit of that low rate is offset by the freight which a merchant in another State may have to pay for carrying that commodity over a long distance, the merchant would be willing to purchase the goods from a nearer State even though the rate of tax in that State may be.
higher.
Existence of long standing business relations, availability of communications, credit facilities and a host of other factors natural and business enter into the maintenance of trade relations and the free flow of (1) [1963] 1 S.C.R. 491.
(2) ; (3) ; 709 trade cannot necessarily be deemed to have been obstructed merely because in a particular State the rate of tax on sales is higher than the rates prevailing in other States.
On behalf of the appellant it was contended that the High Court was not right in holding that the ratio of Kalyani Stores case(1) applied to the present case and, that, Kerala Act 9 of 1964 was violative of article 301 of the Constitution.
The view taken by the High Court was that in the absence of any production of tobacco inside Kerala State it was not competent for the Kerala Legislature to enact the impugned Act under article 304(a) of the Constitution.
In support of this view the High Court relied upon the following passage from the judgment of this Court: "Exercise of the power under article 304(a) can only be effective if the tax or duty imposed on goods imported from other States and the tax or duty imposed on similar goods manufactured or produced in that State are such that there is no discrimination against imported goods.
As no foreign liquor is produced or manufactured in the State of Orissa the power to legislate given by article 304 is not available and the restriction which is declared on the ground of trade, commerce or intercourse by article 301 of the Con stitution remains unfettered.
" In our opinion the High Court has not correctly appreciated the import of the decision of this Court in the Kalyani Stores case(1).
The appellant in that case challenged the imposition of a duty of excise on 'foreign liquor ' imported ' into the Orissa State which had been levied at Rs. 40 per L.P. Gallon until March 31, 1961 by virtue of a notification issued in 1937 under section 27 of the Bihar and Orissa Excise Act, 1915 and which had been enhanced with effect from April 1, 1961 by a fresh notification.
It was contended on behalf of the appellant that since no 'foreign liquor ' was .manufactured within the State and consequently no excise duty was being levied on any locally manufactured 'foreign liquor ' countervailing duty could not be charged on such liquor brought from outside the State and that the impost was in violation of articles 301,303 and 304 of the Constitution.
It was held by the majority of Judges that the notification dated March 31,1961 enhancing the levy by Rs. 30 per L.P. Gallon infringed the guarantee of freedom under article 301 and may be saved only if it falls within the exception contained in article 304.
As no liquor was produced or manufactured within the State, the protection of article 304 was not available.
The decision was based on the (1) ; 710 assumption that the notification dated 31 3 1961 enhancing duty, on foreign liquor infringed the guarantee under article 301 and may be saved if it fell within the exceptions contained in article 304 of the Constitution.
The Court did not intend to lay down the proposition that the imposition of a duty or tax in every case would be tantamount per se to an infringement of article 301.
As we have already pointed out it is well established by numerous authorities of this Court that only such restrictions or impediments which directly and immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301.
A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every impoSition of tax does not do so.
Every case must be judged on its own facts and in its own setting of time and circumstance.
In the present case the High Court has not gone into the question whether the provisions of Act 9 of 1964 and the notification dated January 25, 1951 issued under the Cochin Tobacco Act constitute such restrictions or impediments as directly and immediately hamper free flow of trade, commerce and intercourse and, therefore, fall within the prohibition imposed under article 301 of the Constitution.
Unless the High Court first comes to the finding on the available material whether or not there is infringement of the guarantee under article 301 of the Constitution the further question as to whether the statute is saved under article 304Co) does not arise and the principle laid down by this Court in Kalyani Stores case(1) cannot be invoked.
It was also said on behalf of the respondents that the State Legislature had no power to levy and collect licence fee under the impugned Act as it was in substance a duty of excise falling under the Union List.
The contrary viewpoint was presented on behalf of the appellant and it was contended that the legislation falls under Entry 62 of List II and the State Legislature was competent to enact.
It is open to the parties to argue this matter before the High Court at the time of re hearing.
For the reasons already expressed we hold that the appeal should be allowed and the judgment of the Kerala High Court dated October 3, 1966 in O.P. 934 of 1964 should be set aside and the case should go back for hearing in the light of the law laid down in this judgment.
It is desirable that the High Court should give an opportunity to the parties to file further affidavits before taking up the case for re hearing.
(1) ; 711 On behalf of the appellants Mr. Chagla has given an undertaking that the provisions of the Act would not be enforced against the respondents for a month from this date.
The respondents say that they will apply.
to the Kerala High Court for stay in the meanwhile.
Y.P. Appeal allowed.

summary/full:
To avoid the decision of this Court in A. B. Abdul Khadir vs The State of Kerala, , wherein rules framed for the issue of licences and payment of fee for storage of tobacco were 'held to be invalid, the appellant State promulgated Ordinance I of 1963 which was later replaced by Luxury Tax on Tobacco (Validation) Act 9 of 1964.
Consequently the appellant State made a demand on the respondent to repay the amount which had been refunded to the respondent in accordance with the aforesaid judgment.
Thereupon, the respondent filed a writ petition in the High Court.
The High Court relying upon the decision of this Court in Kalvani Stores vs State of Orissa, [1966] 1 S.C.R. 865, held that in the absence of any production of tobacco inside the appellant State it was not competent for the State Legislature to impose a tax on tobacco imported from outside the State and therefore, the provisions of the Act (9 of 1964) violated the guarantee contained in articles 301 and 304 of the Constitution.
HELD: The High Court had not correctly appreciated the import of the decision in Kalyani Stores ' case.
The decision was based on the assumption that the notifications therein enhancing duty on foreign liquor infringed the guarantee under article 301 and may be saved if it fell within the exceptions contained in Art 304 of the Constitution.
As no liquor was produced or manufactured within the State the protection of article 304 was not available.
This Court did not intend to lay down the proposition that the imposition of a duty or tax in every case would be tantamount per se to an infringement of article 301.
Only such restrictions or impediments which directly and immediately impede the free flow of trade, commerce and intercourse fall within the prohibition imposed by article 301.
A tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax does not do so.
Every case must be judged on its own facts and in its own setting of time and circumstance.
In the present case the High Court had not gone into the question whether the provisions of the Act and the notifications constituted such restrictions or impediments as directly and immediately hamper the free 701 flow of trade, commerce and intercourse, and, therefore, fell within the prohibition.
imposed under article 301 of the Constitution.
Unless the High Court first comes to the finding whether or not there is the infringement of the guarantee under article 301 of the Constitution the further question as to whether the statute is saved under article 304(b) does not arise and the principle laid down in Kalyani Stores ' case cannot be invoked.
This case, therefore must go back to the High Court.
[709 E 710 E] Atiabari Tea Ca., Ltd. vs The State of Assam, ; , Automobile Transport (Rajasthan) Ltd. vs The State of Rajasthan, [1963] 1 S.C.R. 491, Andhra Sugars Ltd. vs State of Andhra Pradesh; , and State o/Madras vs K. Nataraja Mudaliar; , , referred to.


judgement:
Appeal No. 156 of 1954.
Appeals by Special Leave against the Judgment and Order dated the 24th December, 1953, of the Election Tribunal, Gwalior, Madhya Bharat, in Election Petition No. 263 of 1952.
N.C. Chatterjee, (section K. Kapur and Ganpat Rai, with him) for the appellants.
C.K. Daphtary, Solicitor General for India (section P. Varma, with him) for the respondents Nos.
I and 5.
C.K. Daphtary, Solicitor General for India (C. P. Lal, with him) for respondent No. 4. 1954.
September 28.
The Judgment of, the Court was delivered by BOSE J. This is an appeal from a decision of the Election Tribunal of Gwalior in which the petitioner, an elector, sought to set aside the elections of the appellants (respondents 1 and 2 to the petition) who were the successful candidates.
The constituency is Bhilsa, a double member constituency in Madhya Bharat.
The petitioner seems to have been fighting on behalf of the 6th and 7th respondents to the petition because one of his prayers is that they be declared to have been duly elected in place 'of the appellants (respondents 1 and 2).
The petitioner succeeded and the Tribunal declared the elections of the two appellants to be void and further declared that the 6th and 7th respondents had boon duly elected, 609 We will first consider that part of the decision which declares the election of the two appellants to be void.
The Tribunal finds, among other things, that the ' appellant No. 1 (1st respondent) published certain pamphlets which contain statements listed as (a), (b), (c), (e), (f) and (g) by the Tribunal.
The Tribunal holds that these statements are false and that the 1st appellant (1st respondent) did not believe them to be true.
It also holds that these statements reflect on the personal character and conduct of the 6th respondent and are reasonably calculated to prejudice his prospects in the election.
These findings were contested and the learned counsel for the appellants contended that the attack was on the public and political character of the 6th respondent and was a legitimate attack.
We do not intend to examine this as a Court of appeal because this is a special appeal and all we are concerned to see is whether a Tribunal of reasonable and unbiased men could judicially reach such a conclusion.
We have had some of these pamphlets read out to us and we are of opinion that the conclusion of the Tribunal is one which judicial minds could reasonably reach.
We decline to examine the matter further in special appeal.
Under the law the decision of the Tribunal is meant to be final.
That does not take away our jurisdiction but we will only interfere when there is some glaring error which has resulted in a substantial miscarriage of justice.
On those findings a major corrupt practice on the part of the 1st respondent (1st appellant here) under section 123(5) of the Representation of the People Act, 1951, is established.
The next finding concerns the 2nd respondent (appellant No. 2).
The Tribunal finds that he made a systematic appeal to Chamhar voters to vote for him on the basis of his caste.
There is evidence to support this finding.
The leaflets marked N and 0 place that beyond doubt.
This constitutes a minor corrupt practice under section 124(5) of the Act.
Both these provisions, namely sections 123(5) and 124(5), were challenged as ultra vires article 19(1)(a) of the Constitution, It was contended that article 245(1) 78 610 prohibits the making of laws which violate the Constitution and that the impugned sections interfere with a citizen 's fundamental right to freedom of speech.
There is nothing in this contention.
These laws do not stop a man from speaking.
They merely prescribe conditions which must be observed if he wants to enter Parliament.
The right to stand as a candidate and contest an election is not a common law right.
It is a special right created by statute and can only be exercised on the conditions laid down by the statute.
The Fundamental Rights Chapter has no bearing on a right like this created by statute.
The appellants have no fundamental right to be elected members of Parliament.
they want that they must observe the rules.
If they prefer to exercise their right of free speech outside these rules, the impugned sections do not stop them.
We hold that these sections are intra vires.
In addition to these findings, the Tribunal found that both the appellants committed an illegal practice within the meaning of section 125(3) in that they issued a leaflet and a poster which did not have the name of the printer on them.
This is a pure question of fact.
The result of committing any corrupt practice is that the election of the candidate is void under section 100(2)(b).
It is not necessary to prove that the result of the election was materially affected thereby because clause (b) is an alternative that stands by itself.
All that need be proved is that a corrupt practice has been committed, and that the Tribunal finds to be the fact.
The Tribunal was accordingly justified in declaring the election of the first appellant to be void.
In addition to this the Tribunal found that the corrupt practice committed by the second appellant respondent No. 2) also materially affected the result of the election.
This was challenged but we need not go into that because the finding that the second appellant committed a minor corrupt practice and also an illegal practice is clear and so his case falls under clause (a) of sub section (2) of section 100.
Sub section (2)(a), so far as it is material here, runs. . . . if the Tribunal is of opinion 611 (a)that the election of a returned candidate has been procured or induced or the result of the election has been materially affected, by any corrupt or illegal practice the Tribunal shall declare the election of the returned candidate to be void.
" The Tribunal finds as a fact that the second appellant 's election was procured by a corrupt practice.
His case therefore falls within the first of the three alternatives envisaged by clause (a), so it is not necessary to enquire whether it also falls under the third.
We hold that this election was also rightly declared to be void.
That disposes of the first and second appellants (respondents 1 and 2).
We now turn to respondents 6 and 7 to the petition.
They are the 4th and 5th respondents before us, Ramsahai and Sunnu La].
The Tribunal, acting under section 101 (b), declared them to be duly elected.
Here, we are of opinion that the Tribunal was wrong.
Before this can be done, it must be proved that " but for the votes obtained by the returned candidate by corrupt or illegal practices. such other candidate would have obtained a majority of the valid votes.
" The Constituency was a double member constituency.
The following stood for the General Constituency and obtained the votes shown against them: Jamuna Prasad Mukhariya (Respt. No. 1) 13,669 Keshav Shastri (Respt. No. 3) 1,999 V. N. Sheode (Respt. No. 4) 1,350 Ram Sabai (Respt. No. 6) 12,750 The Tribunal says that the difference invotes between respondents I and 6 is 919.
We presume that this is meant to show that the voting between them was close.
From that the Tribunal jumps to the following conclusion: " Considering the scandalous nature of the false statement regarding respondent No. 6 and the mode 612 of systematic appeal on the basis of caste made by respondent No. 2 we have no doubt in our minds that. respondent No. 1 got more votes simply because of corrupt practices and if these.
corrupt practices had not been there respondent No. 6 undoubtedly would have obtained a majority of valid votes.
" This, in our opinion, is pure speculation and is not a conclusion which any reasonable mind could judicially reach on the data set out above.
There is nothing to show why the majority of the 1st respondent 's voters would have preferred the 6th respondent and ignored the 3rd and 4th respondents.
An exactly similar process of reasoning was followed in the case of the 7th respondent.
He was a Scheduled Caste candidate and the voting there was as follows: Chaturbhuj Jatav (Respt.
No. 2) 12,452 Hira Khusla Chamar (Respt.
5) 601 Sunnulal (Respt. 7) 10,889 Here, again, there is no basis for concluding that those who voted for the 2nd respondent would, if they had not done so, have preferred the 7th respondent to the 5th.
We set aside this part of the order.
The result is that the appeal fails in so far as it attacks the Tribunal 's declaration voiding the election of the two appellants but succeeds against that part of the order which declares the 6th and 7th respondents to have been elected.
In the circumstances there will be no order about costs in either Court.
Order accordingly.

dataset_name: IN-Abs

summary/full: Held, that sections 123(5) and 124(5) of the Representation of the People Act (XLIII of 1951) are not ultra vires article 19(1) (a) of the Constitution.


judgement:
Criminal Appeal No. 122 of 1967.
Appeal by special leave from the judgment and order dated April 18, 1966 of the Allahabad High Court in Criminal Appeal No. 1642 of 1964.
R.K. Garg, S.C.Agarwal, Sumitra Chakravarty and Uma Dutt, for the appellant.
O.P. Rana, for respondent No. 2.
The Judgment of the Court was delivered by Hegde J.
Two contentions advanced in this appeal by special leave are (1) that the appeal filed by the Municipal Board, Saharanpur before the High Court of Allahabad under section 417(3) of the Criminal Procedure Code was not maintainable in law and (2) the accused could not have been convicted on the strength of the certificate of the Public Analyst annexed to the complaint.
The High Court rejected both these contentions.
The material facts relating to this appeal are these: The accused in this case is proprietor of Khalsa Tea Stall situated in Court Road, Saharanpur.
Among other things, he was selling coloured sweets.
On suspicion that the sweets sold by him were adulterated, the Food Inspector, Municipal Board, Saharanpur purchased from the accused for examination some coloured sweets under a Yaddasht on May 31, 1963 and sent a portion if the same to the Public Analyst of the Government of U.P. for examination.
The Public Analyst submitted his report on June 24, 1963.
It reads: "See Rule 7 ( 3 ) REPORT BY THE PUBLIC ANALYST Report No. 11652.
I hereby certify that I, Dr. R.S. Srivastava, Public Analyst for Uttar Pradesh, duly appointed under the provisions of the , received on the 4th day of June 1963 from the 738 Food Inspector c/o Medical Officer of Health, Municipal Board, Saharanpur, a sample of coloured sweet (Patisa) prepared in Vanaspati No. 264 for analysis, properly sealed and fastened and that I found the seal intact and unbroken.
I further certify that I have caused to be analysed the aforementioned sample, and declare the result of the analysis to be as follows: Test for the presence of coal tar dye : Positive.
Coal tar dye identified : Metanil yellow.
(colour Index No. 138) ANALYTICAL DATA IN RESPECT OF FAT OR OIL USED IN THE PREPARATION OF THE SAMPLE.
Butyro refractometer reading at 40 dgree C : 50.5.
Melting point : 33.80C. 3.
Baudouin 's test for the presence of Til oil :Positive.
Tintometer reading on Lovibond Scale 4.0 Red Units plus 0.1 yellow unit coloured with a coal tar dye namely, Metanil Yellow (Colour Index No. 138) which is not one of the coal tar dyes permitted for use in foodstuffs under rule No. 28 of the Prevention of Food Adulteration Rules, 1955.
No chance had taken place in the constitutents of the sample which would have interfered with analysis.
Signed this 24th day of June 1963.
The sample belongs to : section DHIAN SINGH S/O JIWAN SINGH R.S. Srivastava M.Sc., LL.B. Ph.D. (Lond.) P.R.L.C. Public Analyst to Govt.
of U.P. Sendor 's address: Public Analyst, Uttar Pradesh, Lucknow The Food Inspector, c/o.
Medical Officer of Health, Municipal Board, Saharanpur.
" 739 On the basis of that certificate, a complaint was filed in the court of City Magistrate, Saharanpur under section 7 read with section 16 of the .
It is purported to have been filed by the Municipal Board, Saharanpur but it was signed by its Food Inspector.
The accused pleaded not guilty.
Various contentions were taken by the accused in support of his defence.
The trial court acquitted him taking the view that as the report of the analyst did not contain any data, no conviction could be rounded on its basis and as the Yaddasht relating to the sale had not been attested as required by law, the seizure in question must be held to be invalid.
As against that decision, the Municipal Board of Saharanpur went up in appeal to the High Court under section 417(3), Cr.
P.C. the High Court allowed the appeal disagreeing with the trial court on both the questions of law referred to earlier.
It came to the conclusion that the analyst had given the necessary data hence his report afforded sufficient basis for conviction.
It further opined that the fact that the Yaddasht had not been attested by the witnesses of the locality, did not vitiate the seizure made.
At the hearing of the appeal, no objection about the maintainability of the appeal was taken.
The judgment of the High Court was rendered on April 18, 1966.
The High Court convicted the appellant and sentenced him to undergo rigorous imprisonment for two months.
and to pay a fine of Rs. 100/ , in default to undergo further imprisonment for a period of one, month.
On April 28, 1966, the accused field an application for certificate under article 134 of the Constitution.
On May 4, 1966, when the application filed under article 134 of the Constitution for certificate was still pending, the accused moved the High Court under section 561 (A), Cr.
P.C. for reviewing its judgment dated April 18, 1966 principally on the ground that the appeal filed by the Municipal Board was not maintainable under section 417(3), Cr.
P.C. as the complaint had been instituted by the ' Food Inspector and no.t by the Municipal Board.
The application under section 561(A) was dismissed by the High Court as per its order of March 16, 1967 repelling the contention of the accused that the complaint had not been instituted by the Municipal Board.
It further came to the conclusion that it had no power to review its own judgment.
The certificate prayed for under article 134 of the Constitution was also refused by a separate order of the same date.
Thereafter this appeal was brought after obtaining special leave.
Mr. Garg, learned Counsel for the appellant strenuously contended that the appeal filed by the Municipal Board of Saharanpur before the High Court under section 417(3), Cr.
P.C. was not maintainable as the complaint from which that appeal had arisen had been instituted by the Food Inspector.
Section 417(3) of the Criminal Procedure Code provides that if an order of acquittal 740 is passed in any case instituted upon complaint, the High Court may grant to the complainant special leave to appeal against the order of acquittal.
It is clear from that section that special leave under that provision can only be granted to the complainant and to no one else.
It may be noted that in this case no appeal against acquittal had been filed by the State.
Hence the essential question for consideration is whether the complainant before the Magistrate was the Municipal Board of Saharanpur ? The complainant shown in the complaint is the Municipal Board of Saharanpur but the complaint was signed by the Food Inspector.
Section 20 of the prescribes that no prosecution for an offence under that Act should be instituted except by, or with the written consent of, the Central Government or the State Government or a local authority or a person authorised in this behalf, by general or special order, by the Central Government or the State Government or a local authority.
There is no dispute that the Municipal Board is a local authority.
Hence it was competent to file a complaint.
It was also competent for that board to authorise someone else to file complaints under the on its behalf.
As seen earlier, the complaint purports to have been filed by the Municipal Board.
That Board could have authorised its Food Inspector to file the complaint on its behalf.
Neither in the trial court, nor in the High Court at the stage of hearing of the appeal, any objection was taken by the accused as to the maintainability either of the complaint or of the appeal.
Both those courts and the parties before it proceeded on the basis that the Municipal Board, Saharanpur was the complainant and its Food Inspector had filed the complaint on its behalf.
It is only after the disposal of the appeal, the accused for the first time took up the contention that the Municipal Board was not the real complainant.
It is true that the complaint was signed by the Food Inspector.
As seen earlier it was competent for the Municipal Board to authorise him to file the Complaint.
The question whether he was authorised by the Municipal Board to file the complaint was never put into issue.
Both the parties to the complaint proceeded on the basis that it was a validly instituted complaint.
If the Municipal Board had not authorised him to file the complaint then the complaint itself was not maintainable.
If that is so, no question of the invalidity of the appeal arises for consideration.
It was never the case of the accused that the complaint was invalid.
In K.C. Aggarwal vs Delhi Administration(1), this Court has held that a complaint filed by one of the officers of a local authority ', at the instance of that authority is in law a complaint institut (1) Criminal Appeal No. 100 of 1966 decided on 27th May, 1969; 741 ed by that local authority.
Therefore if the Complaint with which we are concerned in this case had been filed by the Food Inspector on the authority of local board, the complaint must be held to have been instituted by the local board itself.
The question whether the Food Inspector had authority to file the complaint on behalf of the local board is a question of fact.
Official acts must be deemed to have been done according to law.
If the accused had challenged the authority of the Food Inspector to file the complaint, the trial court would have gone into that question.
The accused cannot be permitted to take up that contention for the first time after the disposal of the appeal.
This Court refused to entertain for the first time an objection as regards the validity of a sanction granted in Mangaldas Raghavji and Anr.
vs State of Maharashtra and Anr.
(1) Mr. Garg, learned Counsel for the accused urged that a permission under section 20 of the to file a complaint is a condition precedent for validly instituting a complaint under the provisions of that Act.
The fulfilment of that condition must be satisfactorily proved by the complainant before a court can entertain the complaint.
Without such a proof, the court will have no jurisdiction to try the case.
In support of that contention of his he sought to take assistance from the decision of the Judicial Committee in Gokulchand Dwarkadas Morarka vs The King(2) and Madan Mohan Singh vs The State of U.P.(3).
Both those decisions deal with the question of the validity of sanctions given for the institution of certain criminal proceedings.
The provisions under which sanction was sought in those cases required the sanctioning authority to apply its mind and find out whether there was any justification for instituting the prosecutions.
The Judicial Committee as well as this Court has laid down that in such cases, the court must be satisfied either from the order of sanction or from the other evidence that all the relevant facts had been placed before the sanctioning authority and that authority had granted the sanction after applying its mind to those facts.
The ratio of those decisions has no bearing on the facts of this case.
Under section 20 of the , no question of applying one 's mind to the facts of the case before the institution of the complaint arises as the authority to be conferred under that provision can be conferred long before a particular offence has taken place.
It is a conferment of an authority to institute a particular case or even a class of cases.
That section merely prescribes that persons or authorities designated in that section are alone competent to file complaints under the statute in question.
(1) ; (2) 75 I.A.p. 30.
(3) A.I.R. 1954 S.C. 736.
742 For the reasons mentioned above, we are unable to accept the contention of the accused that the Municipal Board of Saharanpur was not competent to file the appeal.
The only other question canvassed before us is that the report of the analyst could not have afforded a valid basis for rounding the conviction as the data on the basis of which the analyst had reached his conclusion is not found in that report or otherwise made available to the court.
We are unable to accept this contention 'as well.
It is not correct to.
say that the report does not contain the data on the basis of which the analyst came to his conclusion.
The relevant data is given in the report.
A report somewhat similar to the one before us was held by this Court to contain sufficient data in Mangaldas 's(1) case referred to earlier.
The correct view of the law on the subject is as stated in the decision of the Allahabad High Court in Nagar Mahapalika of Kanpur vs Sri Ram(2) wherein it is observed: "that the report of the public analyst under section 13 of the need not contain the mode or particulars of analysis nor the test applied but should contain the result of analysis namely, data from which it can be inferred whether the article of food was or was not adulterated as defined in section 2 (1 ) of the Act.
" In the result the appeal fails and the same is dismissed.
The appellant is on bail.
He should surrender to his bail and serve the sentence imposed on him.
Y.P. Appeal dismissed.
(1) ; (2) [1963] All.
L.J. 765.

summary/full:
On a report of the Public Analyst that the coloured sweets sold by the appellant were adulterated a complaint was filed before the Magistrate under section 7, read with section 16 of the Prevention of Food Adulteration Act.
The trial court acquitted the appellant.
In appeal by the Municipal Board under section 417(3), Code of Criminal Procedure, the High Court convicted the appellant.
The appellant did not raise any objection as to the maintainability of the complaint or of the appeal, either in the trial court or in the High Court before the appeal was disposed of, on the ground that the Municipal Board was shown as the complainant and the complaint was signed by its Food Inspector.
In appeal to this Court, it was contended that: (i) the appeal filed by the Municipal Board in the High Court was not maintainable in law as the complaint had been instituted by the Food Inspector and not by the Municipal Board; (ii) a permission under section 20 of the Act was a condition precedent for validly instituting a complaint and the fulfilment of that condition had to be satisfactorily proved before the Court could exercise jurisdiction to try the case; and (iii) the appellant could not have been convicted on the strength of the certificate of the Public Analyst.
HELD: Dismissing the appeal, (i) Under section 20 of the Prevention of Food Adulteration Act, it was competent for the Municipal Board to authorise the Food Inspector to file the complaint.
If the complaint had been filed by the Food Inspector on the authority of the Board the complaint must be held to have been instituted by the Board itself.
The question whether the Food Inspector was so authorised is a question of fact.
This was never put into issue and both the courts below and the parties before them proceeded on the basis that the Municipal Board was the complainant and the Food Inspector filed the complaint on its behalf.
The appellant could not, therefore, be permitted to take up the contention for the first time after the appeal was disposed of in the High Court.
[741 A C] K.C. Aggarwal vs Delhi Administration, Cr. A. No. 100 of 1966, dt.
27 5 1969, referred to.
(ii) There is no analogy between the section and those provisions requiring sanction for the institution of certain criminal proceedings.
Under the section, no question of applying one 's mind to the facts of the case before the institution of complaint arises as the authority under the section can be conferred long before a particular offence has taken place.
It is a conferment of an authority to institute a particular case or even a class of cases.
[741 G] 737 Gokal Chand Dwarkadas vs The King, 75 I.A. 30 and Madan Mohan Singh vs State of U.P.A.I.R. , held inapplicable.
(iii) It is not necessary that the report of the Public Analyst should contain the mode or particulars of analysis or the test applied.
But it should contain the result of analysis, namely, data from which it can be inferred whether the article of food was of was not adulterated.
In the present case.
the report of analyst did contain the data on the basis of which the analyst came to his conclusion.
[742 C E]


judgement:
vil Appeals Nos.
893 to 892 and 1381 to 1386 of 1966.
Appeals from the judgment and order dated December 7, 1962 of the Andhra Pradesh High Court in Case Referred No. 24 of 1956.
D. Narsaraju, P. Ramrao, K.R. Chaudhuri and K. Rajendra Chaudhuri, for the appellants (in C.As.
Nos. 893 to.
898 of 1966) and the respondents (in C.As.
1281 to 1386 of 1966).
Jagdish Swarup, Solicitor General, S.K. Aiyar and R.N. Sachthey, for the respondent (in C.As.
Nos. 893 to 898 of 1966) and ' the appellant (in C.As.
1381 to 1386 of 1966).
The Judgment of the Court was delivered by Ramaswami, J.
The assessee who Is the Kartha of a Hindu Undivided Family was assessed in that status for the relevant assessment years, 1944 45, 1945 46, 1946 47 not only to incometax but also to excess profits tax.
On February 1, 1941 he purchased from Randhi Appalaswamy (hereinafter referred to as the vendor) a spinning mill known.
as Sri Satyanarayana Spinning 728 Mills, Rajahmundry for a sum of Rs. 54,731.
The purchase was made at a period when there was litigation between the sons of the vendor and the vendor in respect of the spinning mill and other properties.
The sons had filed a suit against the father, the vendor, claiming the schedule properties including the mill as joint family properties and for partition of the same.
The vendor claimed that the properties were his self acquired properties.
The District Judge, Rajahmundry held that the properties were the self acquired properties of the vendor and dismissed the suit of the plaintiffs.
Against the judgment of the District Judge an appeal was filed in the Madras High Court, being A.S. No. 175 of 1938.
While the appeal was pending, on February 1, 1941 the assessee purchased the mill from the vendor who purported to sell the same as the sole owner.
In A.S. No. 175 of 1938 the Madras High Court held that the properties of the vendor were not his self acquired properties but were joint family properties in which the plaintiffs had a two thirds share.
Against this judgment the vendor preferred an appeal to the Privy Council.
While that appeal was pending the assessee had submitted returns for the relevant assessment years.
However, before the assessments were taken up the assessee entered into a compromise with the plaintiffs on September 7, 194S by virtue of which he got a release of the interest of the vendor 's sons on payment of Rs. 1,15,000.
While the appeal was pending before the Privy Council the plaintiffs had applied to the High Court for recovery of their share of the profits.
The High Court appointed the assessee as the Receiver directing him to deposit the profits in the High Court.
The assessee deposited a sum of Rs. 1,09,613 for the year 1944 45, Rs. 31,087 for the year 1945 46 and Rs. 4,775 for the year 1946 47.
Under the compromise the assessee was entitled to withdraw these amounts on payment of Rs. 1,15,000.
The Privy Council decided the appeal on July 2, 1947 reversing the order of the High Court and restoring that of the District Judge holding that Appalaswamy was the absolute owner of the mill and the sons had no right, title or interest therein.
On receipt of the Privy Council 's decision which finally determined the rights of the parties and the ownership of the assessee in the mill, the Income tax Officer issued on March 2, 1948 a notice under section 34 of the Income tax Act in respect of Rs. 1,09,613 received by the assessee as lease income of the mill.
It was contended for the assessee (1 ) that the proceedings initiated under section 34 of the Act for the year 1944 45 assessment were invalid in law as there was no new information leading to the discovery that income had escaped assessment, (2 ') that in any event the assessee was entitled to set off the sum of Rs. 1,15,000 paid to the sons of Appalaswamy under the compromise approved by the High Court for releasing their rights.
if any, in the mill against the assessee 's income from the mill.
The 729 Income tax Officer rejected these contentions and treated the whole amount of Rs. 1,15,000 as paid toward capital expenditure in acquiring an asset.
The Appellate Assistant Commissioner rejected the appeal of the assessee.
The Tribunal affirmed the order of the Appellate Assistant Commissioner.
It held in the first place that the assessee had not disclosed the impugned source of income from the mill in his original assessment, that the matter as to the assessee 's ownership of the mill was sub judice and that the decision of the Privy Council constituted information not only of law but also as to the factum of the ownership of the Mill and the income therefrom.
The Tribunal expressed the view that the sum of Rs. 1,15,000 could not be allowed to be set off against the assessee 's income from the mill as it was an ex gratia payment to the sons of Appalaswamy who had no right, title or interest in the mill and it was paid in order to perfect a supposed defective title and as such was of capital nature.
Thereafter the Income tax Appellate Tribunal stated a case to the High Court under section 66(2) of the Indian Income tax Act, 1922 on the following questions of law: "R. A. NO. 779 which relates to the assessment year 1944 45: (1) Whether on the facts and in the circumstances of the case, in respect of the assessment year 1944 45, the assessment made on the assessee in the status of a Hindu undivided family in respect of income received by him as Receiver could be justified notwithstanding the provisions of section 41 of the Act ? (2) Whether, on the facts and in the circumstances of the case, the assessment of the entire income of Rs. 1,09,613 in the hands of the assessee is valid in the face of the compromise memo, dated 7 9 1945 approved by the Court? (3) Whether, on the facts and in the circumstances of the case, the assessee is not entitled to set off Rs. 1,15,000 being the amount paid to the minors for releasing their fights in the property from out of the amount received from the mill ? R.A. No. 780 which relates to assessment year 1945 46: (1) Whether on the facts and in the circumstances of the case, the assessment made under section 34 of the Act is valid in law ? (2) Whether on the facts and in the circumstances of the case, in respect of the assessment year 1945 46, 730 the assessment on the assessee in the status of a Hindu undivided family in respect of the income received by him as Receiver could be justified notwithstanding the provisions of Section 41 of the Act ? (3) Whether, on the facts and in the circumstances of the case, the assessment of the entire income of Rs. 31,087 in the hands of the assessee is valid in the face of the compromise memo, dated 7 9 1945 approved by the Court ? (4) Whether, on the facts and in the circumstances of the case, the assessee is not entitled to set off Rs. 1,15,000 being the amount paid to the minors for releasing their rights in the property from out of the amount received from the mill ? R.A. No. 781 which relates to assessment year 1946 47: (1) Whether, on the facts and in the circumstances of the case, in respect of the assessment year 1946 47 the assessment on the assessee in the status of a Hindu undivided family in respect of income received by him as Receiver could be justified, notwithstanding the provisions of section 41 of the Act ? (2) Whether, on the facts and in the circumstances of the case, the assessment of the entire income of Rs. 4,775 in the hands of the assessee is valid in the face of the compromise memo, dated 7 9 1945 approved by the Court ? (3) Whether on the facts and in the circumstances of the case, the assessee is not entitled to set off Rs. 1,15,000 being the amount paid to the minors for releasing their right in the property from out of the amount received from the Mill ?; ' The Appellate Tribunal pointed out in the statement of the case that question No. 1 in R.A. No. 780 for the assessment year 1945 46 pertained to the earlier assessment year 1944 45 in R.A. No. 779 and also that question No. 2 in R.A. No. 780 and R.A. No. 779 for the assessment year 1945 46 and the corresponding excess profits tax assessment did not arise in that year but pertained to the earlier assessment year 1944 45 in R.A. No. 779 and the corresponding excess profits tax assessment in R.A. No. 782.
The High Court answered question Nos. 1 and 2 in R.A. No. 779 and question No. 1 in R.A. No. 780 in the affirmative.
731 The High Court held that re assessment proceedings have been validly initiated under section 34 of the Act.
The High Court found that the assessment on the assessee in the status of Hindu Undivided Family in respect of income received by him as Receiver was proper.
The High Court thought that the basis of the compromise in the Madras High Court entered into between the assessee and the minor sons of the vendor Appalaswamy wherein the assessee paid Rs. 1,15,000 to the minor sons cannot be ignored.
The High Court negatived the contention of the Income tax Department that the sum of Rs. 1,15,000 was paid to cure a supposed defect in the title and that it was a capital payment.
Upon the interpretation of the terms of the compromise the High Court took the view that the amount of Rs. 1,15,000 was paid partly towards acquisition of capital asset and partly towards the discharge of the claim towards profits and hence it should be apportioned towards capital and income in the proportion of 90/85.
1381 to 1386 of 1966 are brought by certificate from the judgment of the High Court on behalf of the Commissioner of Income tax and C.A. Nos. 893 to 898 of 1966 were brought by special leave from the same judgment to this Court on behalf of the assessee.
After the Amending Act of 1939 and before the Amending Act of 1948 Section 34 stood as follows: "(1) If in consequence of definite information which has come into his possession the Income tax Officer, discovers that income, profits or gains chargeable to income tax have escaped assessment in any year, or have been under assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act the Income tax Officer may in any ease in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income profits or gains or in the case of a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section (2) of section 22, and may proceed to assess or re assess such income, profit or gains, and the provisions of this Act, shall.
so far as tony be, apply accordingly as if the notice were a notice issued under that sub section.
. . . . . (2) No order of assessment under section 23 or of assessment or re assessment under sub section (1) of this 732 section shall be made after the expiry, in any case to which clause (c) of sub section (1) of section 28 applies, of eight years, and in any other case, of four years from the end of the year, in which the income, profits or gains were first assessable.
The first question arising in this case is whether the proceeding under section 34 is legally valid.
It was contended by Mr. Narasaraju that the decision of the Privy Council could not be said to be definite information within the meaning of the section.
It was said that the Income tax Officer was fully aware of the circumstances of the case and the assessee had placed all the relevant facts before him namely that under the High ' Court 's judgment the vendor was only entitled to one third share of the income pending the decision of the appeal before the Privy Council.
In our opinion there is no justification for tiffs argument.
It is not true to say that the assessee brought all the relevant facts before the Income tax Officer.
On the Contrary he deliberately suppressed the fact that there was a compromise between himself and the plaintiffs under which he was entitled to the whole of the income from the mill.
At any rate the Privy Council 's decision which determined the rights of the parties irrespective of the compromise did constitute definite information within the meaning of section 34 of the Income tax Act.
This view is borne out by the decision of this Court in Maharaja Kumar Kamal Singh vs Commissioner of Income tax.
(1) In that case the Income tax Officer had, following the decision of the High Court in Kamakhya Narain Singh 's case(" ') omitted to bring to assessment for the year 1945 46 the sum of Rs. 93,604 representing interest on arrears of rent due to the assessee in respect of agricultural land on the ground that the amount was agricultural income.
Subsequently the Privy Council, on appeal from that decision held that interest on arrears of rent payable in respect of agricultural land was not agricultural income.
As a result of this decision the Income tax Officer initiated re assessment proceedings under section 34(1)(d) of the Income tax Act and brought the amount of Rs. 93,604 to tax.
In these circumstances it was held by this Court firstly that the word information in section 34(1)(b) included information as to the true and correct state of the law, and so would cover information as to relevant judicial decisions, secondly that 'escape ' in section 34(1) was not confined to cases where no return had been submitted by the assessee or where income had not been assessed owing to inadvertence or oversight or other lacuna attributable to the assessing authorities.
But even in a case where a return had been (1) (2) 733 submitted, if the Income tax Officer had erroneously failed to tax a part of the assessable income, it was a case where that part of the income had escaped assessment.
The decision of the Privy Council, therefore, was held to be information within the meaning of section 34( 1 ) (b) and the proceedings for re assessment were validly initiated.
In our opinion the principle of this decision governs the present case and it must be held that the proceedings initiated under section 34 for the assessment year 1944 45were legally valid.
It was stated on behalf of the appellant that in any case the income tax Officer could have legitimately assessed one third share of the income which was due to the assessee according to the judgment of the Madras High Court and there was escape only to the extent of two third share of the income.
This argument is not of much avail to the appellant because once proceedings under s.34 are taken to be validly initiated with regard to two third share of the income, the jurisdiction of the Income tax Officer cannot be confined only to that portion of the income.
Section 34 in terms states that once the Income tax Officer decides to reopen the assessment he could do so within the period prescribed ' by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or re assess such income, profits or gains.
It is, therefore, manifest that once assessment is reopened by issuing a notice under sub section
(2) of section 22 the previous under assessment is set aside.
and the whole assessment proceedings start afresh.
When once valid proceedings are started under section 34(1)(b) the Income tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year.
The second question involved in this case is whether the High Court was right in holding that any portion of the amount of Rs. 1,15,000 was liable to be treated as business expenditure.
It is well established that where money is paid to perfect a title or as consideration for getting rid of a defect in the title or a threat of litigation the payment would be capital payment and not revenue payment.
What is essential to be seen is whether the amount of Rs. 1,15,000 was paid for bringing into existence a right or asset of an enduring nature.
In other words if the asset which is acquired is in its character a capital asset, then any sum paid to acquire it must surely be capital outlay.
Money paid in consideration of the acquisition of a source of profit or ' income is capital expenditure both on principle and authority.
In Atherton vs British Insulated and Helsby Cables Ltd.(1) Viscount Cave said: "But where an expenditure is made, not only once for all, but with a view to bringing into existence an (1) , 213.
734 asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circumstances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue but to capital.
" In Commissioner of Taxes vs Nchanga Consolidated Copper Mines Ltd.(1) Lord Radcliffe observed at p. 960: "Courts have stressed the importance of observing a demarcation between the cost of creating, acquiring or enlarging the permanent (which does not mean perpetual) structure of which the income is to be the produce or fruit and the cost of earning that income itself or performing the income earning operations.
Probably this is as illuminating a line of distinction as the law by itself is likely to achieve.
" It is, however, contended on behalf of the assessee that the amount of Rs. 1,15,000 was paid partly for the acquisition of capital asset and partly to discharge the claim towards profits and hence there should be an apportionment of , '.he amount.
It is not possible to accept this contention.
It appears from the order of the High Court that the value of the mill was fixed at Rs. 1,15,000 after taking into consideration the fact that the mill was built on a leasehold premises.
The value of the machinery was fixed at Rs. 1,36,000 and the leasehold interest was fixed at Rs. 14,000.
On this basis the share of the minors was taken to be Rs. 90,000.
In respect of the profits the claim of the plaintiffs was taken to be Rs. 85,000.
The total claim was therefore Rs. 1,75,000 so that the offer of Rs. 1,15,000 for the release of the claim of the plaintiffs in the mill was held to be .fair.
The High Court.
therefore, certified the compromise to be for the benefit of the minor plaintiffs.
In the course of its order, dated September 7, 1945 the High Court observed: "There are, however, numerous risks which the continuance of the litigation would necessarily involve.
The Privy Council might hold that the null was the selfacquired property of the father, in which case the plaintiffs would get nothing and would incur a liability for costs.
It might also be held that, though the property was the family property, the father was entitled as the natural guardian to sell the interests of minor sons in discharge of a binding family obligation.
There is the further possibility that by the time the litigation ends the property will have deteriorated and its value will have (1) 735 been materially reduced.
by the termination of the lease of the land.
Taking all these contingencies into consideration we are of opinion that the offer made by the purchaser of Rs. 1,15,000 for the release of the claim, if any, of the two sons in the mill sold to him by their father is a fair offer, the acceptance of which would be beneficial to the minor second plaintiff.
" It is true that the High Court took into consideration the income from the mill in testing whether the offer made by the purchaser of Rs. 1,15,000 for the release of the Claim of the plaintiffs was a fair offer.
But that does not mean that the sons of Appalaswamy were given as a result of the compromise a share in the profits of the assessee.
It is clear from the circumstances of this case that the payment of Rs. 1,15,000 was made by the assessee in order to perfect his title to capital asset and the assessee is not entitled to set off any portion of the amount as attributable to the lease money.
It was a lump sum payment for acquisition of a capital asset and the claim of the plaintiffs for the lease money from the property was merely ancillary or incidental to the claim to the capital asset.
In our opinion the High Court was in error in holding that the amount should be apportioned between capital and income.
In the result so far as questions 3 and 4 in R.A. 779, questions 1 and 2 in R.A. 780 and questions 2 and 3 in R.A. 781 are concerned the answer is that the entire amount of Rs. 1,15,000 should be treated as capital payment and the assessee is not entiled to exclude from the income sought to be assessed in his hands any portion of that amount.
We accordingly allow C.A. Nos. 1381 to 1386 of 1966 to the extent indicated above.
C.A. Nos. 893 to 898 of 1966 are dismissed.
There will be no order as to costs in either of two sets of appeals.
C.A. Nos. 1381 to 1386/66 allowed.
C.A. Nos. 893 to 898/66 dismissed.

summary/full:
The assessee purchased a spinning mill in 1941 from a vendor claiming to be its sole proprietor.
In a suit filed by the vendor 's sons the trial court had held that the suit property including the aforesaid spinning mill was the vendor 's self acquired property.
When the assessee purchased the mill an appeal against the trial court 's judgment was pending in the High Court 'the High Court decided that the property was not the self acquired property of the vendor but was coparcenary property in which the sons had two thirds interest.
The vendor filed an appeal before the Privy Council.
During its pendency the assessee entered into a compromise with the vendor 's sons whereby they agreed to release their two thirds interest in the mill and its profits for a sum of Rs. 1.15,000.
The compromise was certified by the High Court.
In 1947 the Privy Council decided that the property including the spinning mill was the self acquired property of the vendor.
On receipt of this decision which finally determined the rights of the parties and assessee 's ownership of the mill, the Income tax Officer issued a notice under section 34 of the Indian income tax Act, 1922 for the assessment year 1944 45 and assessed the income from the mill for that year and for the two subsequent assessment years in the hands of the assessee.
The assessee 's objection that the decision of the Privy Council was not 'definite information ' within the meaning of section 34 was rejected as also the assessee 's claim that the sum of Rs. 1,15,000 paid to the vendor 's sons in pursuance of the compromise should be set off as an expense against the income from the mill for the year in question.
The Appellate Assistant Commissioner and the Tribunal upheld the Income tax Officer 's order.
The High Court in reference held that the notice under section 34 was valid but that the payment of Rs. 1,15,000 was made partly towards acquisition of a capital asset and partly towards the discharge of the claim for profits and the part apportionable towards the profits was allowable as revenue expenditure.
The assessee as well as the Revenue appealed to this Court.
HELD: (i) In Maharaja Kumar Kamal Singh 's case this Court held that the word information section 34(1)(b) included information as to the true and correct state of the law, and so would cover information as to relevant judicial decisions.
It was further held that even in a case where a return had been submitted, if the Income tax Officer had erroneously failed to tax a part of the assessable income, it was a case when that part of the income had escaped assessment.
The decision of the Privy Council was therefore held to be information within the meaning of section 34(1)(b).
The principle laid down in Maharaja Kumar Kamal Singh 's case governed the present case and it must be held that the proceedings initiated under section 34 for the assessment year 1944 45 were legally valid.
[732 G 733 B] 727 Maharaja Kumar Kamal Singh vs Commissioner of Income tax, , followed and applied.
Kamakhya Narain Singh 's case, , referred to.
The contention that only two thirds of the income could be said to h,rye escaped assessment because the one third share of the vendor could have been validly assessed the Income tax Officer on the basis of the High Court 's judgment, could not be accepted.
When once valid proceedings are started under section 34(1)(b) read with section 22(2) the previous under assessment is set aside and the whole assessment proceedings start afresh.
The Income tax Officer then has not only the jurisdiction but the duty to levy tax on the entire income that has escaped assessment in that year.
[733 C E] It is well established that where money is paid to perfect a title or as consideration 'for getting rid of a defect in title or a threat of litigation the payment would be a capital payment and not a revenue payment.
Money paid in consideration of the acquisition of a source of profit or income is capital expenditure both on principle and authority.
[733 F G] Atherton vs British Insulated awl Helsby Cables Ltd. , 213 and Commissioner of Taxes vs Nchanga Consolidated Copper Mines Ltd. , referred to.
It was true that in the present case the High Court took into consideration income from the mill in testing whether the offer made by the purchaser of Rs. 1,15,000 for the release of the claim of the plaintiffs v, as a fair offer.
But that did not mean that the sons of the vendor were given as a result of the compromise a share in the profits of the assessee.
It was clear from the circumstances of the case that the payment was made by the assessee in order to perfect his title to a capital asset, and no portion of it could therefore could be set off against the profit.
[735 C]


judgement:
Civil Appeal No. 438 of 1967. 'Appeal from the judgment and order dated April 11, 1966 of the Rajasthan High Court in D.B. Civil Reference (Estate Duty Act) No. 16 of 1963.
M.C. Chagla, B.D. Sharma and M. D. Bhargava, for the appellant.
Jagdish Swarup, Solicitor General, T.A. Ramachandran, R.N. Sachthey and B.D. Sharma, for the respondent.
C.J. Purnabai widow of Sagarmal Mody held on April 1, 1953 three deposit receipts of the aggregate face value of Rs. 6,26,724 14 0 with the State Bank of Bikaner.
By her letter dated July 22, 1952 Purnabai informed the Bank that she intended to make a gift of the amounts of two out of the three receipts to Suryakant son of her adopted son Satyanarayana, and requested that the receipts be renewed for three months in the joint names of "Purnabai Sagarmal Mody and/or Surya Kant section Mody payable to either or survivor." and that the renewed fixed deposit receipts be sent to Satyanarayana at Bombay.
Pursuant to this letter two fresh receipts were issued on August 3, 1953 for Rs. 5,00,000 and Rs. 45,793/4/ .
It 'appears that a receipt for Rs. 80,931 / 10/ was previously obtained in the joint names of Purnabai and Suryakant on July 4, 1953.
714 On August 16, 1953 Puranabai executed a deed of gift in favour of Suryakant in respect of the three receipts containing the following recitals: "Out of natural love and affection I have towards the said Suryakant son of Satyanarayana I hand over to the said Satyanarayana as the father and natural guardian of the said Suryakant Fixed Deposit Receipts total for Rs. 6,26,724/14/ .
F.D.R.N. 222/ 8293 dated 3 8 53 for Rs. 45,793/4/ , F.D.R.N. 221/ 8292 dated 3 8 53 for Rs. 5,00,000/ of the Bank of Bikaner Ltd., Jaipur and F.D.R. No. 11446 dated 4 7 53 for Rs. 80,931/10/ of Bank of Bikaner Ltd., Jhunjhunu in the name of Purnabai Sagarmal and Suryakant Satyanarayana Mody payable to either or survivor as and by way of gift to the said Suryakant on the 15th day of August 1953 and that the said Satyanarayana for and on behalf of and as the.
natural guardian of the said Suryakant accepted the said gift of Rs. 6,26,724/ .
. . gifted by me as aforesaid.
" The gift deed contained a confirmation by Satyanarayana that he had accepted the gift for and on behalf of and as natural guardian of Suryakant "to the intent and effect that the said Suryakant shall be the absolute owner of the sum gifted.
" On August 17, 1953 Purnabai addressed a letter to the Manager of the Bank enclosing a copy of the declaration of gift and intimated that her grand son Suryakant was the sole owner of the amount of the two fixed deposit receipts and till Suryakant section Mody attained the age of majority the receipts should remain in the joint names as they then stood.
From time to time Purnabai presented the receipts for renewal when they matured and obtained fresh receipts in the joint names of herself ,and Suryakant.
On August, 25 1955 the receipt for Rs. S0,931/10/ was encashed and out ' of the amount of Rs. 86,732/ realized, Rs. 5,000/ were invested in the name of Suryakant in National Savings Certificates.
The balance was also deposited alone with a firm in Bombay also.
in the name of Suryakant alone.
The other two receipts were renewed in the joint names of Purnabai and Suryakant.
After the death of Purnabai on February 15, 1956, the two receipts were encashed by Suryakant.
The Assistant Controller of Estates duty in procedings for assessment of estate duty held inter alia that possession and enjoyment of the gifted property was not assumed by the donee to the entire exclusion of the 715 donor, and on that account the amount of the two receipts and interest thereon formed part of the estate of Purnabai and was, liable to estate duty.
Regarding the third receipt for Rs. 80,931/10/ the Assistant Controller observed that even though the earlier receipt was discharged on August 25, 1955 i.e. within two years of the death of Purnabai and the amount was invested in the name of Suryakant, by virtue of the provisions of the the amount held in the name of Suryakant alone, was for assessment of estate duty liable.
to be included in the estate.
of Purnabai.
In appeal the Central Board of Revenue confirmed the order.
The Board held that at all material times during the currency of the fixed deposit Purnabai had the right to receive the money from the Bank by giving discharge for the same and that whenever the Fixed Deposit Receipts matured during the lifetime of Purnabai, the receipts were, in fact, discharged by her alone and in the circumstances it could not be said that the property was held ' by the donee to the entire exclusion of the donor.
The Board of Revenue referred the following question the High Court of Rajasthan for opinion: "Whether on the 'facts and in the circumstances of the case the sum of Rs. 6,85,193/ was correctly included in the estate of the deceased as property deemed to pass on her death under section 10 of the ?" The High Court of Rajasthan answered the question in the affirmative.
With certificate granted by the High Court this appeal has been preferred.
The deposit receipts were renewed from time to time after August 16, 1953 in the joint names of Purnabai and Suryakant till August 25, 1955 under their terms the receipts could be encashed by either or the survivor.
Even after Purnabai made a gift of the amount represented by the three receipts, she continued to obtain the receipts in the joint names, presumably with the object of not parting with control over those receipts.
Counsel for the appellant however contended that the fixed deposit receipts were held by Purnabai in her name as benamidar for Suryakant.
Counsel placed strong reliance upon the letters dated July 22, 1953, August 17, 1953 and the terms of the deed of gift dated August 16, 1953.
By the letter dated July 22, 1953 the Manager of the Bank was informed that in respect of two out of the three receipts Purnabai intended to make a gift and the . 716 Manager was requested that the receipts be made in the joint .names of Purnabai and Suryakant.
It was expressly recited in the letter: "I intend to gift the entire amount of the receipts to my grandson Mr. Suryakant section Mody hence you are requested to prepare the receipts in joint names as under: "Purnabai Sagarmall Mody and/or Suryakant section Mody payable to either or survivor.
" The deed of gift also recites that Purnabai had made a gift of the amount of Rs. 6,26,724/14/ represented by the previous receipts in favour of Suryakant, and that the gift was accepted by Satyanarayana on behalf of Suryakant.
The letter dated August 17, 1953 recites that a copy of the deed of declaration of gift.
was sent to the Bank for record and information and proceeds to state: "Further I would like to state that now Suryakant section Mody is the sole owner of the above Fixed Deposit Receipts in question till Suryakant section Mody attains majority the receipts should remain in joint names as it stands now.
" is clear that Purnabai desired to make a gift of the amount represented by the previous deposit receipts and did in fact execute a deed of gift.
The Bank had notice of the gift deed.
Counsel for the appellant contends that Purnabai did everything possible to divest herself of her interest in the money held by her, in deposit with the Bank, and retained no interest therein and that in obtaining renewal of the receipts in the joint names of herself and of Suryakant, she was merely a benamidar 'and in any event was acting on behalf of Suryakant.
Counsel further contends that the Bank having notice of the gift could not have parted with the money except only for the benefit of the minor and by obtaining renewal of the receipt in favour of the minor Suryakant and Purnabai, the latter retained no possession or enjoyment of the money represented by the receipts.
Counsel invited our attention to a decision of the Madras High Court in Imperial Bank of India, Madras vs section Krishnamurthi and another(1) in which Beasely, C.J. speaking for the Court observed that when a Bank having notice that the administrators of the estate of the depositor intended to commit a breach of trust by seeking to invest monies contrary to express directions of the will paid out the money, the Bank was liable to make good to the beneficiary (1) A.I.R. 1933 Madras, 628.
717 the money deposited by the testator.
In that case one Naidu had deposited a sum of money with the Imperial Bank of India in fixed deposits.
Naidu died having bequeathed by his will the amount deposited to Iris son Krishnamurthi who was then a minor.
Naidu had appointed by his will two persons to be guardians of Krishnamurthi with authority to receive the amount in fixed deposit with the Imperial Bank and to apply the same for the maintenance and education of Krishnamurthi.
The guardians obtained from the High Court of Madras grant of letters of administration with copy of the will annexed.
After the death of one of the guardians the surviving guardian withdrew the money from the Bank on the pretext that he wanted to invest it on more advantageous terms in house property or some other form of in vestment and misappropriated it.
On attaining the age of majority Krishnamurthi sued the Bank.
It was held by the High Court that the Bank knowing of the trust created by the will had parted with and delivered the amount deposited to the administrator who intended to commit a breach of the trust.
The learned Chief Justice quoted a passage from Hart 's Law of Banking (Edn. 3) at p. 159 that "A banker who receives into his possession moneys of which his customer to his knowledge became the owner in a fiduciary character, contracts the duty and to part with them at the mandate of his customer for purposes which are inconsistent with the customer 's fiduciary character and duty," and upheld the claim of Krishnamurthi.
It is unnecessary to consider whether.
in the present case the investment was made by renewal of fixed deposit receipts after August 16, 1953 for a purpose which the Bank knew was inconsistent with Purnabai 's fiduciary character and duty.
We are not concerned in this case to decide whether the Bank could have refused to pay the amount of the renewed deposit receipts if demanded by Purnabai.
Whether the amount of deposit receipts was liable to estate duty must be determined on the true effect of section 10 of the 34 of 1953.
Section 10 of that Act provides: "Property taken under any gift, whenever made, shall be deemed to pass on the donor 's death to the extent that bona fide possession and enjoyment of it was not immediately assumed by the donee and thenceforward retained to the entire exclusion of the donor or of any benefit to him by contract or otherwise: Provided that the property shall not be deemed to pass by reason only_ that it was not, as from the date of the gift, exclusively retained as aforesaid, if by means of the surrender of the reserved benefit or otherwise, it is subsequently enjoyed to the entire exclusion of the 718 donor or of any benefit to him for at least two years before the death.
Provided . . " The phraseology of the section is somewhat involved.
The purport of the section is however clear.
The section clearly means that if in respect of any property which is gifted, bona fide possession and enjoyment is not immediately assumed by the donee and thenceforward retained by him to the entire exclusion of the donor or of any benefit to him therein the property gifted shall not be excluded from the estate subject to estate duty.
The question which must be determined therefore is whether in the present case the donee Suryakant did under the deed of gift immediately assume bona fide possession and enjoyment of the fixed deposit receipts gifted to him, and thenceforward retained the same to the entire exclusion of Purnabai or of any benefit arising to her by contract or otherwise.
The conduct of Purnabai clearly indicates that she had no intention to part with control over the property; the deposit receipts were obtained in joint names, and Purnabai had authority to withdraw the amount from the Bank, without consulting the guardian of Suryakant.
The deposit receipts were renewed on several occasions even after the execution of the deed of gift in the joint.
names of Purnabai and Suryakant.
Purnabai alone presented the fixed deposit recepits for renewal.
She could under the terms of the receipts receive the moneys to the entire exclusion of Suryakant.
We are unable to hold, in the circumstances, that bona fide possession and enjoyment of the property gifted was immediately assumed by Suryakant and thenceforward retained by him to the entire exclusion of Purnabai.
The right retained by Purnabai to have the receipts made out in her name jointly with Suryakant and the power to recover the amount from the Bank without the concurrence of Suryakant clearly indicate that she was not excluded, but she had retained important benefits in herself in the fixed deposit receipts.
It is true that the third receipt was encashed during the life time of Purnabai, and the amount was invested in the name of Suryakant alone.
But the encashment and reinvestment were within two years of the death of Purnabai and the amounts so reinvested were liable to be included in the estate of Purnabai.
The argument that fixed deposit receipts had remained exclusively in the possession of Satyanarayana as guardian of Suryakant and they were obtained by him from Purnabai for the purpose of renewal is not supported by any evidence.
There is 719 also no evidence that in obtaining the receipts in the joint names Purnabai acted as a guardian of Suryakant nor that she was a benamidar of Suryakant.
We are of the view that the High Court was right in answering the question against the appellant.
The appeal fails and is dismissed with costs.
R.K.P.S. Appeal dismissed.

summary/full:
P held, on April 1, 1953, three deposit receipts with the State Bank of Bikaner.
At her instance the receipts were renewed in the joint names of herself and S (son of her adopted son) payable to either or survivor.
On August~16, 1953 P executed a deed of gift in favour of S in respect of the three receipts.
The gift deed contained a confirmation by S 'section father that he had accepted the gift for and on behalf of and as the natural guardian of S "to the effect that the said S shall be the absolute owner of the sum gifted".
P addressed a letter to the Bank enclosing a copy of the declaration of gift and intimated the Bank that S was the sole owner of the amount of the receipts and till S attained the age of majority the receipts should remain in the joint names.
From time to time P presented the receipts for renewal when they matured and obtained fresh receipts in the joint names of herself and section On August 25, 1955, the third receipt was encashed and out of the amount realised a part was invested in the name of S in National Savings Certificates and the balance was deposited ' in the name of S alone with a firm.
The other two receipts were renewed in the joint names of P and section After the death of P on February 15, 1956, the two receipts were encashed by section The Assistant Controller of Estate Duty held that possession and enjoyment of the gifted property was not assumed, by the donee to the entire exclusion of the donor and on that account under section 10 of the , the amount of the two receipts and interest thereon formed part of the estate of P and was liable to estate duty.
Regarding the third receipt it was held that even though the earlier receipt was discharged on August 25. 1955, i.e. within 2 years of the death of P and the amount was invested in the name of section by virtue of the provisions of the Act the amount held in the name of S alone was for assessment of Estate Duty liable to be included in the estate of P.
The Central Board of Revenue and the High Court confirmed this order.
In appeal to this Court it was contended that P did everything possible 10 divest herself of her interest in the money held by her in deposit with the Bank and retained no interest therein and that in obtaining renewal of the receipts in the joint names of herself and of S,P was merely a benamidar and in any event was acting on behalf of section HELD: Dismissing the appeal, (i) The question whether the amount of deposit receipts was liable to estate duty must be determined on the true effect of section 10 of the .
The section clearly means that if in respect of any 713 property which is gifted, bona fide possession and enjoyment is not immediately assumed by the donee and thenceforward retained by him to the entire exclusion of the donor of any benefit to him therein the property gifted shall not be excluded from the estate subject to estate duty.
[718 B] In the present case P retained important benefits in herself in the fixed deposit receipts.
There was also no evidence that in obtaining the receipts in the joint names P acted as a guardian of S nor that she was a benamidar of section [718 F] (ii) Though the third receipt was encashed during the life time of P, and the amount was invested in the name of S .alone, the encashment and reinvestment were within two years of the death of P and the amounts so reinvested were liable to be included in the estate of P. [718 G]