judgement:
Appeal No. 486 of 1962.
Appeal by special leave from the judgment and decree dated September 24, 1959, of the Patna High Court in Miscellaneous judicial Case No. 318 of 1957.
A.V. Viswanatha Sastri and P. K. Chatterjee, for the appellants.
K. N. Rajagopal Sastri and R. N. Sachthey, for the respondent.
March 27.
The judgment of the Court was delivered by HIDAYATULLAH J.
This is an assessee 's appeal by special leave of this Court against an order of the High Court of Patna, answering in favour of the Department the question "whether in the circumstances of the case the amount of Rs. 51,000 being the value of high denomination notes encashed by the assessee, has been validly taxed as profits from some undisclosed business".
The original assessee, Rai Bahadur H. P. Banerjee, is dead.
His son, who was substituted in his place, also died during the pendency of the proceedings in the High Court.
The present appeal has been filed by the widow of the son and other legal representatives.
Banerjee was the owner of several collieries in the Jharia Coal fields in the State of Bihar and 555 was also a contractor for raising coal.
This matter relates to the assessment year 1946 47.
For that year, Banerjee was assessed on an income of Rs. 1,28,738.
The assessment was then re opened under section 34 of the Indian Income Tax Act, and was enhanced, but subsequently on appeal, it was reduced to a sum a little below the original assessment.
The present assessment was made on a second re opening of the case under section 34 in the following circumstances.
On January 22, 1946, Banerjee encashed high denomination notes of the value of Rs. 51,000/ .
In his application under the Ordinance which demonetized high denomination notes, Banerjee gave the reason for the possession of the notes as follows: "I am engaged in business as colliery proprie tor, contractor under Messrs. Kilburn & Co. in the name and style of H.P. Banerjee & Son and also under the State Rly.
Bokaro, Swang, Hazaribagh district in the name of Jharia Dhanbad Coal & Mica Mining Co. . .
For conducting the business and payment to labour, I have to pay every week between 30/40 thousand as I did not get payment for work done every week.
I had to keep large sum of money to meet emergency. . . .
It is neither profit nor part of profit it is very floating capital for purpose of conducing business.
It is not an excess of profit".
He stated that he had accounts with (1) Imperial Bank of India, (2) Nath Bank Ltd., jharia, and (3) Central Bank of India Ltd., Bhowanipore Branch, but added that he did not remember exactly from which Bank the notes came into his possession, as his transanctions were frequent.
The notice which was issued to him under section 34 of the Income Tax Act, was not questioned on any of the grounds which are usual in such cases.
Banerjee 's explanation 556 was not accepted.
The Income Tax Officer pointed out that although his business was large and the withdrawals from the various banks were large and frequent, he had not maintained a central account showing withdrawals from the banks and remittances made to his various businesses, and that none of the books maintained by the assessee and produced by him, contained a bank account.
The Income Tax Officer found a discrepancy of nearly Rs. 50,000 in the statements filed by the assessee.
He, accordingly, treated the high denomination notes as profits from some undisclosed source and assessed them as assessable income.
Banerjee appealed to the Appellate Assistant Commissioner and further to the Tribunal.
Both the authorities upheld the order of the Income Tax Officer.
The assessee demanded a case which was refused, but the High Court directed a statement of the case on the question already quoted.
The High Court decided the question against the assessee, and hence this appeal.
The connection of the appellants is that since the Department had issued a notice under section 34 of the Income Tax Act, it was incumbent on the department to establish that the amount in question was income which had escaped assessment.
The appellants also contend that even if the assessee was required to prove the source of the high denomination notes, he had sufficiently proved it by showing that he had large amounts on hand, which were held for convenience in high denomination notes.
The appellants thus submit that the burden, if any, upon the assessee was discharged in the case, and the evidence being unrebutted, the additional assessment could not be made.
The appellant rely upon Kanpur Steel Co., Ltd. vs C. 1.
T. (1) where, according to the appellants, the Allahabad High Court explained the nature of burden of proof in the way contended for by the appellants.
They (1) 557 claim that the Allahabad case applies to the facts here and point out that the said ruling was considered and approved by this Court in Lalchand Bhagat Ambica, Ram vs Commissioner of Income Tax, Bihar and Orissa (1).
Other cases have been cited on behalf of the department.
The cases involving the encashment of high denomination notes are quite numerous.
In some of them the explanation tendered by the tax payer has been accepted and in some it has been rejected.
The manner in which evidence brought on behalf of the tax payer should be viewed, has of course, depended on the facts of each case.
In these cases in which the assessee proved that he had on the relevant date a large sum of money sufficient to cover the number of notes encashed, this Court and the High Courts, in the absence of something which showed that the explanation was inherently improbable, accepted the explanation that the assessee held the amount or a part of it in high denomination notes.
In other words, in such cases, the assessee was held prima facie to have discharged the burden which was upon him.
Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source.
The case which is strongly relied upon by the assessee is Kanpur Steel Co., Ltd. vs C. I. T.(2).
In that case, 32 notes of Rs. 1,000 were encashed.
It was claimed that they were part of the cash balance of the company which amounted to Rs. 34,000 odd.
The Income Tax Officer examined the entries regarding sales preceding the encashment of the notes and (1) (2) 568 found that those sales brought in sums under Rs. 1,000 and could not have resulted in the accumulation of so many high denomination notes.
The Tribunal then came to the conclusion that Rs. 7,000 only could have been held in high denomination notes.
On a reference, the Allahabad High Court held that the burden lay upon the Department to prove that Rs. 32,000 was suppressed income and there was no burden on the assessee to show whence he got the notes, because until demonetization, there was no idea that possession of high denomination notes would have to be explained.
The High Court also found that the explanation was fairly satisfactory, because big notes might have been received even in small transactions and change taken, and that the High Court could not make a conjecture how many notes could or could not have accumulated.
It is contended before us that the burden in such cases lies as stated by the Allahabad High Court.
On the other hand, in Manindranath Das vs Commissioner of Income Tax, Bihar & Orissa (1), the tax payer had encashed Notes of the value of Rs. 28,600, which he contended were his accumulated savings.
His explanation was accepted in respect of Rs. 15,000, because 15 notes could be traced to a bank, but was rejected in respect of the balance.
The Patna High Court pointed out that if an assessee received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax payer in the case had failed to prove this fact in respect of the remaining notes.
The Patna case finds support in A. Govindaraju Mudaliar vs Commissioner of Income Tax Hyderabad; (2), where it is laid down by this Court that if an assessee fails to prove satisfactorily the source and nature of an amount received by him during the accounting year, the Income Tax Officer is entitled to draw the inference that the (1) (2) [1958] 94 I.T.R .8.70 559 receipts are of an assessable nature.
In that case, the explanation of the assessee in respect of the amounts shown as credits for him in the account books of a firm of which he was a partner, was rejected as un true.
It was held that it was open to the Income Tax Officer and the Appellate Tribunal to hold that the amounts represented the concealed income of the assessee.
From the last two cases, it is plain that if there is receipt of an amount in the accounting year, it is incumbent in the first instance upon the assessee to show that it does not bear the character of income.
If be fails to do this, the Income Tax Officer may hold that it represents income of the assessee either from the sources he has disclosed or from some undisclosed source.
In applying this principle to the cases of encashment of high denomination notes, there is some difficulty when the assessee has books of account which are accepted and in which there is a cash balance sufficient to cover the amount of high denomination notes.
Each case must depend upon its own peculiar facts.
A few illustrative cases may be noticed, because they show some differences in the approach to the problem.
In Chunilal Ticamchand Coal Co., Ltd., vs Commissioner of Income Tax, Bihar and Orissa (1), high denomination notes of the value of Rs. 68,000 were encashed.
Evidence showed that the assessee was in the habit of keeping large sums which he kept intact for emergencies and meeting the current needs from withdrawals from the banks.
This explanation was supported by receipts and disbursement in the books of account.
The explanation was rejected as to a part because the accounts did not mention the high denomination notes and further because such notes were hardly needed to pay wages to labourers.
The Tribunal, however, held that the explanation might be true as to a part (1) 560 and accepted it in respect of Rs. 35,000, rejecting it in respect of Rs 33,000.
The Patna High Court held that the explanation which was held to be reasonable as to a part must be good for the whole, because there was no material on which it could be held that the balance constituted income from some undisclosed source to distinguish the case about the part rejected from the part accepted.
In Mehta Parikh & Co. vs Commsioner of Income Tax, Bombay, (1) high denomination notes of the value of Rs.61,000 were encashed.
The explanation was that they were part of the cash balance on hand.
The accounts disclosed that in order to sustain the explanation, it would have to be presumed that the entire balance on January 1, 1946, was held in 18 notes of Rs. 1,000 each and that all receipts up to. ' January 18,1946, when the notes were encashed, were also in High denomination notes.
The affidavits of persons who stated that they had paid amounts in Rs.1,000 notes were not accepted.
The Tribunal accepted the explanation as to Rs.31,000 only.
This Court held that if the account books were accepted and the deponents were not crossexamined on their affidavits, the rejection of the explanation as to a part proceeded only on surmise and the finding that Rs.30,000 were income from some undisclosed source was based on no evidence.
It may be pointed out that Venkatarama Ayyar J., in that case, chose to rest his decision on the second ground only, treating the decision as involving an error of law.
But in Sovachand Baid vs Commissioner of Income Tax, (2) high denomination notes of the value of Rs.2,28,000 were encashed.
The assessee stated that he had inherited that amount from his father in 1942, and produced account books from 1926 to 1942.
He did not produce earlier account books.
The Tribunal found that the books were such as could be written at any time and did not contain full dealings even between 1926 and (1) (2) , 561 1942, and there were no entries showing that any amount as such was received from business.
The Tribunal, however, held that Rs.1,28,000 only was income from some undisclosed source.
The assessee 's appeal in this Court was dismissed, because the rejection of the account books was held to be reasonable in the circumstances of the case.
This Court observed that the partial rejection of the explanation by the Tribunal must be treated as a concession rather than a reasoned conclusion.
We now come to Lalchand Bhagat 's case which is strongly relied upon, particulary, as it has cited the Allahabad case, so it is said, with omplete approval.
It is therefore, necessary to examine it closely to see if there is such an approval.
In that case, 291 high denomination notes of the value of Rs.2,91,000 were encashed.
The assessee was maintaining for a long time past two accounts: one was known as "Almirah Account", and other, "Rokar Account".
On the date the notes were encashed there was a balance of Rs.2,81,397 in the almirah account and Rs.29,284 in the rokar account.
These two amounts between them were sufficient to cover the encashed notes.
The explanation was that for the purposes of the business which was distributed in many branches, a large amount of ready cash was always kept at the head office, so that any emergency might be met.
The business of the assessee was admittedly extensive and the almirah account had also existed for several years.
Except in the previous year in which the high denomination notes were encashed, even the numbers of the high denomination notes used to be shown in the almirah account.
The explanation was rejected on the ground that those were the days of emergency and the assessee, as a grain dealer, could have secretly made money by smuggling grain, and that he had once been prosecuted, though acquitted.
It was also said that the area where he did his business was 562 notorious for smuggling and also that he had speculated in the year and might easily have made profits, though he had returned a loss from speculation.
Emphasis was also laid upon the fact that in the year of account, the numbers of the high denomination notes were written subsequently.
The Tribunal accepted the two books of account as genuine and also that there was a balance of Rs.3,10,681 with the assessee.
Before the Tribunal it was explained that in the year of account the numbers of the high denomination notes were inserted in the almirah account out of nervousness owing to the demonetization of the notes.
The Tribunal accepted the explanation with regard to Rs. 1,50,000 and rejected it with regard to Rs.1,41,000.
No reasons were given for distinguishing the good part of the explanation from the bad.
This Court examined the reasons and held that except for the insertion of the numbers of notes in the book, none of the other reasons had any probative value and that they were mere conjectures and surmises.
This court pointed out that if the explanation for the interpolations was good for the acceptance of the explanation as to Rs.1,50,000, it must be held to be good also for the balance, because there was nothing to distinguish between the two parts.
This Court, therefore, pointed out that the main question about Rs.1,41,000 was whether there was any material to justify a different conclusion in respect of that amount and pointed to the following facts.
The assessee had established the need for keeping a large sum on hand and had proved the almirah account as a genuine account.
The almirah account contained the numbers of the high denomination notes in the years previous to the year relative to the assessment.
In that year, the numbers were inserted subsequently and this was the only substantial point against the assessee.
This Court also pointed out that there were statements of banks and accounts 563 of the branches and of beparis, showing that large amounts were received by the assessee, which made up the amount in the almirah account.
Between February 6, 1945 and January 11, 1946, when the notes were encashed, sum,, above Rs. 1,000 received by the assessee aggregated to as much as rupees five lakhs.
As the almirah account was not questioned by the Tribunal at all, and out of that amount, more than half was held to be in the shape of high denomination notes, this Court posed the following question: "Was there any material on record which would legitimately lead the Tribunal to come to the conclusion that the nature of the source from which the appellant derived the remaining 141 high denomination notes of Rs. 1000 remained unexplained".
The Court, therefore, concluded "If the entries in the books of account in regard to the balance in the Rokar and the balance in the Almirah were held to be genuine logically enough there was no escape from the conclusion that the appellant had offered reasonable explanation as to the source of the 291 high denomination notes of Rs. 1000 each which it had encashed on January 19, 1946".
The case of assessee was thus accepted in toto.
This Court did not hold that the assessee need not prove anything.
As we have said earlier, the burden of proof must depend on the facts of the case.
One such fact may be the existence of a large floating cash balance on hand, and taken with other facts, may be sufficient to show that the high denomination notes constituted the whole or part of that balance.
In the Allahabad case, such a balance was proved and was accepted as to a part by the 564 Tribunal.
The High Court held that the explanation was good for the whole of the amount of the notes.
No doubt, this Court, in referring to that case, summarised the reasons, but it pointed out that it was not open to the Tribunal to make a guess as to the number of high denomination notes which could be accepted, and cited the Allahabad case and some others in that connection.
It seems to us that the correct approach to questions of this kind is this.
If I here is an entry in the account books of the assessee which shows the receipt of a sum or conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income.
The Department is not at this stage required to prove anything.
It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation.
If the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject that explanation to hold that it was income.
If, however, the explanation is unconvincing and one which deserves to be rejected, the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source.
The Department does not then proceed on no evidence, because the fact that there was receipt of money, is itself evidence against the assessee.
There is thus prima facie evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature.
The very words "an undisclosed source" show that the disclosure must come from the assessee and not form the Department.
In cases of high denomination notes, 565 where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes.
Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession.
The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof.
It is within the range of these principles that such cases have to be decided.
We do not think that the Allahabad view puts no burden upon the assessee and throws the entire burden on the Department.
The case itself does not bear this out.
If it does, then, it is not the right view.
In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head office.
The Income Tax Officer found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong.
Indeed, the assessee himself corrected it before the Appellate Assistant Commissioner and stated there that the balance was Rs. 1,21,875.
Ordinarily, this would have prima facie proved that the assessee might have kept a portion of this balance in high denomination notes.
But the assessee failed to prove this balance, as books of the assessee did not contain entries in respect of banks.
Though cash used to be received from banks and sent to the various places where works were carried on and vice versa, no central account of such transfers was disclosed.
There was also no account of personal expenses of the assessee and he had failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried 566 on, there were banks with which he had accounts.
The Appellate Assistant Commissioner also went into the question and found that on the same day when the high denomination notes were encashed, a sum of Rs. 45,000 was drawn by cheque.
The next remittance immediately afterwards was of Rs. 16,000 to Bokaro, but Rs. 17,000 were withdrawn a few days before to meet this expense.
A withdrawal of Rs. 8,000 was made a day later and Rs. 20,000 were withdrawn ten days later to finance the business.
It appears that the money on hand (Rs. 45,000) was not touched at all, but on January 30, 1946, a further sum of Rs. 6,000 was withdrawn and not utilized, which made up the sum of Rs. 51,000 for which the high denomination notes were encashed.
On these facts, the Tribunal came to the conclusion that the high denomination notes represented not the cash balance but some other money which remained unexplained, and the Tribunal treatted it as income from some undisclosed source.
The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source.
In this conclusion, the High Court was justified, regard being had to the principles we have explained above.
The argument that as this was a case under section 34 of the Income Tax Act, it cast a special burden on the Department to show that this income had escaped earlier, need not detain us.
No doubt, proceedings under section 34 can only be commenced under the conditions prescribed in the section, but when the proceedings are validly commenced, there is no difference between an ordinary assessment and an additional assessment under section 34, and the same rule 567 as to burden of proof governs the additional assessment.
In our opinion, this appeal has no substance; it fails and is dismissed with costs.
Appeal dismissed.

summary/full:
The assessee had encashed 51 high denomination notes of Rs. 1,000/ each in january, 1946.
The assessee 's explanation in his application for encashment of the notes was that he was a colliery proprietor and contractor, that for conducting the business and for payment to labour which came to about Rs.30,0001 to 40,000/ every week he had to keep large sums of money to meet emergency and that the sum of Rs. 50,000/realised by encashment of the notes was neither profit nor part of profit but was floating capital for the purpose of,conducting business.
The Income tax Officer did not accept this explanation and treated this amount as profit from some undisclosed 553 source and assessed it as assessable income.
The assessee contended that the burden lay on the department to establish that the amount in question was income liable to tax and that the department had failed to establish this.
Held that the department was justified in holding that Rs. 51,000/ was assessable income of the assessee from some undisclosed source.
It was not correct that the assessce was not required to prove anything and that the burden was entirely upon the department to prove that the amount received from the encashment of high denomination notes was income.
The correct position is as follows.
If there is an entry in the account books of the assessee which shows the receipt of a sum or conversion of the notes by the assessee himself, it is necessary for the asscssee to establish, if asked, what the source of that money was and to prove that it did not bear the nature of income.
The department is not at this stage required to prove anything.
If tile business, the state of accounts and dealing of the assewsee show that be might have, for convenience, kept the whole or part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden.
If the assessee does this the department cannot act unreasonably and reject that explanation to hold that it was income.
If the explanation is unconvincing, the department can reject it and draw the inference that the amount represents income either from the source already disclosed by the assessee or from some undisclosed source.
Before the department rejects such evidence it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession.
The fact that there was receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the department can Proceed in absence of good explanation.
In the present case though cash used to be received from Banks and sent to the various places where works were carried on by the asscssee and vice versa, no central account of such transfers was disclosed.
There was also no account of personal expenses of the assessee and he failed to prove why such large sums were kept at hand in one place when at each of the places where work was carried on, there were Banks with which he had accounts.
Further though this large sum was kept on hand, further cheques were drawn to meet current needs and this amount remained untouched.
Kanpur Steel Co. Ltd. vs C. I. T. , Lalchand Bhagat Ambica Ram vs Commissioner of Income tax, Bihar and Orissa, ; Mahindranath vs
Commissioner of Income tax, Bihar and Orissa, [1955] 554 27 , A. Govindarajulu Mudaliar vs Commissioner of Income tax, Hyderabad, [1958] 34 , Chunilal Ticamchand Coal Co. Ltd. vs Commissioner` of Income tax, Bihar and Orissa,[1955] , Mehta Parikh & Co. vs Commissioner of Income tax, Bombay [1956] 30 and Soyachand Baid vs Commissioner of Income tax, [1958] 34 1.
T. R. 650, referred to.


judgement:
Appeal No. 59 of 1950.
Appeal from a Judgment of the High Court of Judicature at Calcutta (Harries C.J. and Chatterjea J.) dated 9th September, 1949, in a reference under section 66 (2) of the Indian Income tax Act, 1922.
(Reference No. 8 of 1949).
M.C. Setalvad, Attorney General for India (G. N. Joshi, with him) for the appellant.
section Mitra (B. Banerjee, with him) for the respondents.
December 21.
The Judgment of the Court was deliv ered by KANIA C.J.
This is an appeal from the judgment of the High Court at Calcutta (Harries C.J. and Chatterjea J.) pronounced on a reference made to it by the Income tax Tribunal under section 66 (2) of the Indian Income tax Act.
The relevant facts are these.
The respondents are a private limited company which was brought into existence to float various companies including cotton mills.
In November, 1932, the Basanti Cotton Mills Ltd. was incorporated and the respondents were appointed their managing agents.
Their remuneration was fixed at a month ly allowance of Rs. 500 and a commission of 3 per cent.
on all gross sales of goods manufactured by the Mills Company.
The fixed monthly allowance was liable to be increased in the event of the capital of the company being increased.
The details are immaterial.
It ap pears that certain hundis were drawn by one of the direc tors of the respondent company, acting in the capacity of the managing agents of the Mill Company, in the name of the Mill Company and the same were negotiated to others.
The Nath Bank Ltd. claimed payment of these hundis.
The Mill Company repudiated its liability as it appeared from the books of the Mill Company that they had not the use of the sum of Rs. 1 80,000 claimed by the Nath Bank Ltd. under the hundis.
The Nath Bank Ltd. instituted four suits 1011 against the Mill Company, in two of which the respondent company were party defendants.
The Mill Company was advised to settle the suits and the respondent company entered into an agreement with the Mill Company, the material part of the terms of which runs as follows : "Memorandum of Agreement made between the Calcutta Agency Limited of the one part and Basanti Cotton Mills Ltd. of the other part.
WHEREAS the Nath Bank Limited demanded from the Mills the payment of the sum of Rs. 1,80,000 and interest thereon AND WHEREAS the said Mills repudiated their liability in respect thereof as it appeared from the books of the said Mills that the said Mills did not have the use of the said sum of Rs. 1,80000 or any part thereof AND WHEREAS the said Nath Bank Ltd. thereupon instituted four suits in High Court being suit Nos.
1683, 1720, 1735 and 1757 of 1939 for the said aggregate sum of Rs. 1,80,000 and the interest thereon AND WHEREAS the said Mills have been advised to settle the said suits amicably AND WHEREAS the Calcutta Agency Limited by its Directors, S.N. Mitter or S.C. Mitter, having been and being still the Managing Agents of the said Mills have undertaken to reimburse the said Mills in respect of the decrees to be made in the said four suits in the manner hereinafter appearing NOW THESE PRESENTS WITNESS AND IT IS HEREBY AGREED AND DECLARED (i) That out of the commission of 3% payable by the said Mills to the said Agency under Regulation 131 of the Arti cles of Association of the Company, the Company shall have paramount lien on and deduct and set off a moiety thereof against any payment which the said Mills may make in respect of the decrees or any of them and/or costs of the said suits.
(ii) The said moiety shall be one half of the commis sion so payable less such sum as the Directors of the Mills may from time to time allow to be deducted.
" Under the said agreement, the respondent company paid to the Mill Company Rs. 22,500made up of 1012 Rs. 18,107 as principal and Rs. 4,393 as interest in the accounting year.
The assessee company claimed this before the Income tax Appellate Tribunal as a deduction permitted under section 10 (2) (xv) of the Indian Income tax Act.
The relevant part of that section runs as follows : "10.
(1) "The tax shall be payable by an assessee under the head 'Profits and gains of business, profession or vocation ' in respect of the profits or gains of any busi ness, profession or vocation carried on by him ' (2) Such profits or gains shall be computed after making the following allowances, namely : (xv) any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of such business, profession or vocation.
In the statement of the case submitted by the Tribunal after reciting the fact of the incorporation of the company and the terms of the compromise mentioned above, the argu ments urged on behalf of the assessee company have been recapitulated.
The first argument was that under the first proviso to section 7 of the Indian Income tax Act, this payment was liable to be exempted.
The Tribunal rejected that argument.
On the reference, the High Court also reject ed the same and it was not presented before us.
The next argument of the respondents was that in respect of Rs. 22,500 it was entitled to exemption under section 10(2) (xv) of the Income tax Act on the ground that the payment was an expenditure which was not in the nature of a capital expend iture or personal expenses of the applicant company but was an expenditure laid out wholly and exclusively for the purpose of its business.
They urged that if the applicant company did not agree to pay this amount, Basanti Cotton Mills Ltd. could have brought a suit against the company to realise this amount due on the hundis which would 1013 have exposed the applicant company to the public and in order to save themselves from the scandal and maintain the managing agency they agreed to 'the deduction of of certain amounts from the managing agency commission due to it and thereby brought it within the principles of the decision of Mitchell vs
B.W. Noble Ltd.(1) The Tribunal found as facts: (1) 'I?hat the applicant company agreed to pay off the decretal amount from the remuneration which they are enti tled to get from the Basanti Cotton Mills.
(2) The decree was passed against the applicant company evidently for certain misfeasance committed by its directors and the applicant company agreed to pay it off from its remunera tion.
(3) The books of account of Basanti Cotton Mills Ltd. would show that they were paying the applicant company in full its remuneration and the books of the applicant company also show that it was entitled to its remuneration in full.
(4) In the circumstances the Tribunal held that the expendi ture was not laid out wholly and exclusively for the purpose of carrying on the business.
(5) Besides, the Tribunal was of the opinion that in this case it was not a revenue ex penditure at all.
As the payment had to be made towards liquidation of the decretal amount the Tribunal held, in the circumstances of this case, that it was a capital payment.
On behalf of the respondent it was argued in the further alternative that the Privy Council decision in Raja Bijoy Singh Dudhuria 's case(2) would cover the present case.
That contention was rejected by the Tribunal.
This statement of the case prepared by the Incometax Tribunal and submitted to the High Court for its opinion was perused by the parties and they had no suggestions to make in respect of the same.
The statement of the case was thus settled with the knowledge and approval of the parties.
When the matter came before the High Court, Mr. Mitra, who argued the case for the present respondents, as shown by the judgment of the High Court, urged as follows: " If the applicant company had not agreed to pay the amount mentioned ; 1014 in the aforesaid agreement, then the Basanti Cotton Mills Ltd. would have sued the company for the realisation of the amounts due on the hundis and it seems that there would have been no defence to the action.
This would have subjected the applicant company to the danger of public exposure and in order to save itself from the scandal and in order to main tain the managing agency, the applicant company agreed to deduct certain amounts from the managing agency commission and therefore such expenditure came within section 10(2)(xv) of the Act." The High Court thereafter noticed several cases including Mitchell 's case(1) and towards the close of the judgment delivered by Chatterjea J. observed as follows: "In this case it is clear that the agreement was entered into with a view to avoid the publicity of an action against the managing agents and consequent exposure and scandal andin order to maintain the managing agency so that the company could carry on its business as before.
The payment in question did not bring in any new assets into existence nor in my opinion can it properly be said that it brought into existence an advantage for the enduring benefit of the company 's trade.
The Appellate Tribunal observed that the decree was evidently passed against the appellant compa ny forcertain misfeasance by its directors and the appellant company agreed to pay it off from its remuneration .
The object of the agreement was to enable the company to remove a defect in carrying on the business of the company and to earn profits in its business.
Therefore this case is covered by the judgment of the Court of Appeal in Mitchell ' scase(1) . "Applying this line of reasoning the High Court differed from the conclusion of the Tribunal and allowed the deduction to the respondent company under sec tion 10(2) (xv) of the Income tax Act, as claimed by the respondents.
The Commissioner of Income tax, West Bengal, has come in appeal to us.
Now it is clear that this being a claim for exemption of an amount, contended to be an expenditure falling under section 10(2)(xv), the burden of proving the (1) ; 1015 necessary facts in that connection was on the assessee, it being common ground that the commission was due and had become payable and was therefore the business income of the assessee company liable to be taxed in the assessment year.
The jurisdiction of the High Court in the matter of income tax references is an advisory jurisdiction and under the Act the decision of the Tribunal on facts is final, unless it can be successfully assailed on the ground that there was no evidence for the conclusions on facts recorded by the Tribu nal.
It is therefore the duty of the High Court to start by looking at the facts found by the Tribunal and answer the questions of law on that footing.
Any departure from this rule of law will convert the High Court into a fact finding authority, which it is not under the advisory jurisdiction.
The statement of the case under the rules framed under the Income tax Act is prepared with the knowledge of the parties concerned and they have a full opportunity to apply for any addition or deletion from that statement of the case.
If they approved of that statement that is the agreed statement of facts by the parties on which the High Court has to pronounce its judgment.
In the present case the parties perused the statement of case and as disclosed by the note made at the end of it had no suggestions to make in respect thereof.
It is therefore clear that it was the duty of the High Court to start with that statement of the case as the final statement of facts.
Surprisingly, we find that the High Court, in its judgment, has taken the argument of Mr. Mitra as if they were facts and have based their conclusion solely on that argument.
Nowhere in the statement of the case prepared by the Tribunal and filed in the High Court, the Tribunal had come to the conclusion that the payment was made by the assessee company to avoid any danger of public exposure or to save itself from scandal or in order to maintain the managing agency of the appellant company.
The whole conclusion of the High Court is based on this unwar ranted assumption of facts which are taken only from the argument of counsel for the present respondents before 1016 the High Court.
The danger of failing to recognise that the jurisdiction of the High Court in these matters is only advisory and the conclusions of the Tribunal on facts are the conclusions on which the High Court is to exercise such advisory jurisdiction is illustrated by this case.
It seems that unfortunately counsel for the respondents caught hold of Mitchell 's case(1) and basing his argument on the circum stances under which a payment could be described as a busi ness expenditure falling within the terms of section 10 (2) (xv), argued that the facts in the present case were the same.
Instead of first ascertaining what were the facts found by the Tribunal in the present case, the process was reversed and the procedure adopted was to take Mitchell 's case(1) as the law and argue that the facts in the present case covered the situation.
1n our opinion this is an entirely wrong approach and should not have been permitted by the High Court.
The High Court fell into a grave error in omitting first to ascertain what were the facts found in the case stated by the Tribunal.
The High Court overlooked that in Mitchell 's case(1) the whole discussion started with a quotation from the case stated by the Commissioners as the facts of the case.
A scrutiny of the record in the present case shows that before the Income tax Officer the assessees claimed only a deduction of the interest of Rs. 5,582 as a permissible deduction under section 10 (2) (iii) of the Income tax Act.
That claim was rejected by the Income tax Officer.
When the matter went to the Assistant Income tax Commissioner it was argued that the Income tax Officer was in error in not allowing the deduction of interest and was also wrong in not allowing the entire sum of Rs. 22,500 as a deduction on the ground that portion of the income (viz., Rs. 22,500) should be treated as not earned or deemed to be earned by the assessees at all, having regard to the decision of the Privy Council in Raja Bijoy Singh Dudhuria 's case(2) The first paragraph of the order of the Appellate Assistant Commis sioner contains the following 1017 statement : " In disallowing this (interest) c]aim the Income tax Officer was following the decision of my prede cessor in his order dated the 18th March 1942 in Appeal No. 1 C 11 of 1941 42.
My predecessor observed: "Nothing is in evidence to show that the managing agency company had sur plus money and such money was invested or that there was any need to borrow.
Thus the need to borrow is not established.
There is no doubt that money was borrowed but unless it can to proved that the borrowing is for the purpose of the business and the loan was used in the business, the interest cannot be allowed under section 10(2)(iii).
" The second objection raised before the Appellate Assist ant Commissioner was in these terms : " That the Income tax Officer should have allowed the said sum of Rs. 22,500 as allowable expenditure being allocation of a sum out of the revenue receipt before it became income in the hands of the assessee.
" The wording of the objection and the argument noticed in the order of the Appellate Assistant Commissioner show that the contention was that this sum should be treated as not having become the income of the assessee at all because it was deducted at the source by the Mill company.
Reliance was placed for this contention on Raja Bijoy Singh Dudhuria 's case(1).
The contention was rejected.
At the third stage, when the assessee urged his contentions before the Income Tax Appellate Tribunal, he thought of urging as an argument that this was a permissible deduction under section 10 (2)(xv) because of the principles laid down in Mitchell 's case(2).
No evidence, it appears, was led before the Income Tax Tribunal, nor has the Tribunal recorded any findings of fact on which the principles laid down in Mitch ell 's case(2) could be applied.
The Tribunal 's conclusions of facts were only as summarized in the earlier part of the judgment.
It is therefore clear that the necessary facts required to be established before the principles laid down in MiZchell 's case( '2) could be applied, have not been found as facts in the present case at any stage of the proceedings and the High Court was in error (1) (2) ; 130 1018 in applying the principles of Mitchell 's case(1) on the assumption of facts which were not proved.
The High Court was carried away, it seems, by the argument of the coun sel and through error accepted the argument as facts.
Indeed, if it had noticed the contention urged before the Income tax Officer it would have seen at once that the argument was in a measure conflicting with that contention which was based on the footing of Rs. 1,80,000 being a loan to the assessee on which it had to pay interest, which was sought to be deducted under section 10 (2) (iii) of the Income tax Act.
In our opinion, therefore, this appeal should be allowed on the simple ground that the facts neces sary to be established by the respondents to support their claim for exemption under section 10(2)(xv)of the Indian Income tax Act have not been established at any stage of the proceedings and therefore they are not entitled to the deduction claimed.
The appeal is therefore allowed with costs here and before the High Court.

dataset_name: IN-Abs

summary/full:
The jurisdiction of the High Court in the matter of mooroetax references is an advisory jurisdiction and under the Incometax Act the decision of the Appellate Tribunal on facts is final unless it can be successfully assailed on the ground that thoro was 1009 no evidence for the conclusions on facts recorded by the Tribunal.
It is therefore the duty of the High Court to start by looking at the facts found by the Tribunal and answer the questions of law on that footing.
It is not proper to depart from this rule of law as it will convert the High Court into a fact finding authority, which it is not, under the advisory jurisdiction.
As the statement of tile Case prepared by the Appellate Tribunal in accodance with the rules framed under the In come tax Act is prepared with the knowledge of the parties concerned and they have full opportunity to apply for any addition or deletion from that statement, if they have approved of the statement made by the Tribunal, it is the agreed statement of facts by the parties on which the High Court has to pronounce its judgment. ' The High Court would be acting improperly if it takes the arguments one of the counsel for the assessee as if they were facts and bases its conclusion on those arguments.
One of the directors of the assessee company, acting in the capaci ty of managing agents of certain ,Mills, had drawn some hundis in the name of the Mills, and as the Mills repudiated liability, suits were filed on the hundis against the Mills and the assessees.
The assessees thereupon agreed to reim burse the Mills by permitting the latter.
to deduct a moiety of the commission payable to them under the agreement of managing agency, against payments which the Mills may have to make under the decrees.
In their assessment to income tax the assessees claimed that the amounts so deducted should be excluded from their assessable income as business expendi ture under section 10 (2,) (xv) of the incometax Act.
The Appel late Tribunal found that the assessees had agreed to pay off the decree amount from the remuneration due to them, that the decree was passed against them evidently for some mis feasance committed by their directors, that the books of both companies showed that the assesssea were paid their remuneration in full, and that the expenditure was not therefore laid out for the purpose of carrying on the busi ness, and also that, as the payment was made for the liqui dation of a debt, it was not a revenue expenditure.
In the High Court the assessees ' counsel argued, relying on the case of Mitchell vs B. W. Noble Ltd.(1), that the payments were matie by the assessees to avoid the publicity of an action against them and the consequent exposure and less of reputation as a managing agency company, and as such the payments were deductible as business expenditure.
The High Court accepted this argument and reversed the decision of the Tribunel.
Held, that the High Court acted wrongly in accepting the arguments of the assessees ' counsel as if they were proved facts and basing its decision on them; and, as the facts necessary to support the claim for exemption under section 10 (2) (xv) had not been established at any stage of the case, the assessees were not entitlecl to the deduction claimed.
(1) ; 129 1010 Judgment of the Calcutta High Court reversed.


judgement:
iminal Appeal No. 92 of 1952.
Appeal under articles 132(1) and 134(1) (c) of the Constitution of India from the Judgment and Order dated the 29th August, 1952, of the High Court of Judicature At Madras (Rajamannar C.J. and Venkatarama Ayyar J.) in Criminal Appeal No. 129 of 1952 arising out of the order dated the 25th February, 1952, of the Court of the VII Presidency Magistrate, Egmore, Madras, in C. T. No. 1358 of the Calendar for 1950.
B. Somayya (C. B. Pattabhi Baman, with him) for theappellant.
V. K. T. Chari, Advocate General of Madras (V. V. Rahavan and Alladi Kuppuswami with him) for the respondent.
M. C. Setalvad, Attorney General for India (G. N. Joshi and P. A. Mehta, with him) for the Union of India.
B. K. P. Sinha for the State of Bihar.
section M. Sikri, Advocate General of Punjab (M. L, Sethi, with him) for the State of Punjab.
679 A. R. Somanatha Iyer, Advocate General of Mysore (R. Ganapathy lyer, with him) for the State of, Mysore.
K. B. Asthana for the State of Uttar Pradesh.
T. N. Subramanya Iyer, Advocate General of Travancore Cochin (M. B. Krishna Pillai and Balakrishna Iyer, with him) for the State of Travancore Cochin.
V. N. Sethi for the State of Madhya Pradesh.
Hajarnavis for Husain Kasam Dada (India) Ltd. (Intervener No. 8).
March 30.
The Judgment of the Court was delivered by MUKHERJEA J.
This appeal, which has come before us on a certificate granted by the Madras High Court under articles 134(1) (e) and 132(1) of the Constitution, is directed against an appellate judgment of a Division Bench of the High Court of Madras, passed in Criminal Appeal No. 129 of 1952, by which the learned Judges affirmed an order of the Seventh Presidency Magistrate, Madras, dated February 25, 1952, convicting the appellant of an offence punishable under section 15 of the Madras General Sales Tax Act and sentencing him to pay a fine of Rs. 1,000; in default to suffer imprisonment for a period of 3 months.
The appellant is a partner of a firm of merchants called Indo Malayan Trading Company" which has its head office in the city of Madras and carries on the business of selling and purchasing groundnut oil, sago and kirana articles.
For the period April 1, 1947, to December 31, 1947 the company was assessed to sales tax under the Madras Act IX of 1939 for an amount of Rs. 37,771 annas odd on a total turnover of Rs. 37,75,257 and for failure to pay the same were instituted against him under the provision of section 15 of the Act which resulted in his conviction as mentioned above.
The course of business, which is usually followed by the company 680 and which was actually followed during the period for which assessment is made, is as follows: The company receives orders in its Madras office from ' Calcutta merchants for supply of certain articles.
These articles are purchased in the local markets and they are despatched to Calcutta by rail or steamer.
The railway receipts and bills of lading are taken in the name of the vendor company and so also are the insurance policies, and they are sent to the company 's bankers in Calcutta who deliver the same to the consignees on payment of prices and other charges.
The sole point that requires consideration is, whether in these circumstances the sale transactions were liable to be taxed under the General Sales Tax Act of Madras? Before the High Court both the parties seem to have accepted the position that if on the facts stated above, which were not disputed by either side, the sales could be hold to have taken place within the Province of Madras, the tax could legitimately be levied on them but not otherwise.
The parties differed, however? as regards the test to.
be applied, in determining whether the sales did take place within the Province of Madras or not.
On behalf of the appellant the contention raised was that the place of sale in regard to all the transactions was Calcutta, as the property in the goods sold admittedly passed to the purchasers in that city.
The contention of the respondent State on the other hand was that the true test for determining the locality of the sale was not where the property in the goods sold passed, but where the actual transaction was put through.
As the company had its head office in the city of Madras, its accounts were maintained there and the goods were delivered to the common carrier in that city, the sale, according to the respondent, must be deemed to have taken place in Madras even though the property in the goods sold passed outside the province.
The High Court accepted this contention of the respondent State.
In the opinion of the learned 681 Judges, the word "sale" has both a legal and a popular meaning.
In the legal sense, it imports passing of property in the goods and it is in this sense that the word is used in the Sale of Goods Act. 'In the popular sense, however, it signifies the transaction itself which results in the passing of property.
As the object of the Legislature in the Sales Tax Act is to impose a tax on the occasion of the sale, it is immaterial that the sale has been completed outside the province.
The place where the property passes is, it is said, a matter of no concern to the taxing author ity and in such context the popular meaning of the word is more appropriate and should be adopted.
The further contention raised on behalf of the appellant, that if this view was accepted, the sales tax would have to be regarded as being extra territorial, in its operation and as such ultra vires the Provincial Legislature, was repelled by the High Court on the authority of the well known decision of the Judicial Committee in Wallace Brothers etc., & Company vs Commissioner of Income tax, Bombay(1).
It is the propriety of this decision that has been challenged before us and the contentions raised by Mr. Somayya, who appeared in support of the appeal, are of a two fold character : The learned counsel has argued in the first place that the Provincial Legislature functioning under the Government of India Act, 1935, was constitutionally incompetent to enact a legislation of this character which according to the interpretation put upon it by the High Court is capable of operating on sale transactions concluded outside the province.
The other contention is that on a proper construction of the relevant provisions of the Madras Sales Tax Act the High Court ought to have held that they do not authorise the imposition of sale tax in respect of a transaction of sale where property in the goods sold passes outside the province.
The first contention appears to us to be unsustainable.
Section 100 (3) of the Government of India (1) (1948] F.C.R.
I (P.C.).
, upon which Mr.
Somayya relied and which corresponds to article246(3) of the Constitution runs as follows : ``Subject to the two preceding sub sections, the Provincial Legislature has and the Federal Legislature has not, power to make laws for a province or any part thereof with respect to any of the matters enumerated in List II in the Second Schedule.
" The entry in the Provincial List that is relevant for our purpose is Entry No. 48 and that speaks of " taxes on the sale of goods and on advertisements.
" The entry does not suggest that a legislation imposing tax on sale of goods can be made only in respect of sales taking place within the boundaries of the province ; and all that section 100(3) provides is that a law could be passed by a Provincial Legislature for purposes of the province itself.
It admits of no dispute that a Provincial Legislature could not pass a taxation statute which would be binding on any other part of India outside the limits of the province, but it would be quite competent to enact a legislation imposing taxes on transactions concluded outside the province, provided that there was sufficient and a real territorial nexus between such transactions and the taxing province.
This principle, which is based upon the decision of the Judicial Committee in Wallace Brothers etc.
& Company vs Commissioner of Income tax, Bombay(1) has been held by this court to be applicable to sale tax legislation, in its recent decision in the Bombay Sales Tax Act case (2) and its propriety is beyond question.
As a matter of fact, the legislative practice in regard to sale tax laws adopted by the Provincial Legislatures prior to the coming into force of the Constitution has been to authorise imposition of taxes on sales and purchases which were related in some manner with the taxing province by reason of some of the ingredients of the transaction having taken place within the province or by (1) [1948] F.C.R. I (P.C.).
(2) The State of Bombay d Another vs United Motors (India) Ltd. & Others Civil Appeal NO. 204 Of 1952.
683 reason of the production or location of goods within it at the time when the transaction took place.
If in the Madras Sales Tax Act the basis adopted for taxation is the location of the place of business or of the goods sold, within the Province of Madras, undoubtedly it would be a valid piece of legislation to which no objection on constitutional grounds could be taken.
The controversy, therefore, narrows down to the short point as to what exactly has been adopted as the basis of the levy of sale tax by the Madras Legislature.
This leads us to the question of interpretation of the statute which is involved in the second point raised by Mr. Somayya.
It is a settled rule of construction that to ascertain the legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself.
The title of the Madras Sales Tax Act describes it to be an Act, the object of which is to provide for the levy of a general tax on the sale of goods in the Province of Madras and the very same words are repeated in the preamble which follows.
The title and preamble, whatever their value might be as aids to the construction of a statute, undoubtedly throw light on the intent and design of the Legislature and indicate the scope and purpose of the legislation itself.
The title and preamble of the Madras Sales Tax Act clearly show that its object is to impose taxes on sales that take place within the province, though these words do not necessarily mean that the property in the goods sold must pass within the province.
The expression "sale of goods " is a composite expression consisting of various ingredients or elements.
Thus, there are the elements of a bargain or contract of sale, the payment or promise of payment of price, the delivery of goods and the actual passing of title, and each one of them is essential to a transaction of sale though the sale is not completed or concluded unless the purchaser becomes the owner of the property.
The question is what element or elements have been accepted 684 by the Madras Legislature as constituting a sale in the province upon which it is the object of the statute to levy tax.
Section 2(h) gives the definition 'of "sale" and it is defined as meaning, every, transfer of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge.
" Unmistakably the stress is laid in this definition on the element of transfer of property in a sale and no other.
The language gives no indication of the popular meaning of sale in which according to the High Court, the word was used.
It is to be noticed that there was no provision by way of explanation of this definition, in operation, at the material time to indicate in what cases a sale would be regarded as taking place within the Province of Madras, although the property in the goods sold did pass outside the boundaries of the province.
Such explanations were added by the Madras Act XXV of 1947 and one of these explanations, namely explanation 2, provides as follows : " Notwithstanding anything to the contrary in the Indian , the sale or purchase of any goods shall be deemed, for the purposes of this Act, to have taken place in this Province, wherever the contract of sale or purchase might have been made (a) if the goods were actually in this Province, at the time when the contract of sale or purchase in respect thereof was made, or (b) in case the contract was for the sale or purchase of future goods by description, then, if the goods are actually produced in this Province at any time after the contract of sale or purchase in respect thereof was made.
" It would be clear from this that these transactions were not considered by the Legislature to constitute sales within the Province of Madras under the definition itself, but by resort to a legal fiction they were 685 declared to be so, notwithstanding any provision in the to the contrary which it was assumed, would otherwise be applicable,.
The explanation further shows that in defining "sale" in section 2(h), the Legislature had in mind a sale in the Province of Madras and as these words occur in the title and preamble of the Act it was not deemed necessary to repeat them in the definition or the charging sections.
Section 3 is the charging section in the Act and it provides for the levy of a tax on the total turnover of a dealer for a particular year.
A "turnover" is defined to be the aggregate amount for which goods are either bought or sold.
The charging section purports to levy a tax on the sale of goods and the tax is on the sale of goods in the Province of Madras as defined in section 2(h) of the Act read in the light of its title and preamble.
In our opinion, the mere fact that the contract for sale was entered into within the Province of Madras does not make the transaction, which was completed admittedly within another province, where the property in the goods passed, a sale within the Province of Madras according to the provisions of the Madras Sales Tax Act and no tax could be levied upon such a transaction under the provisions of the Act.
A contract of sale becomes a sale under the only when the property in the goods is transferred to the buyer under the terms of the contract itself.
The presence of the goods within the province at the time of the contract would undoubtedly make the sale, if subsequently completed, a sale within the province by reason of the explanation added by Act XXV of 1947 ; but as this explanation was not in operation during the relevant period with which we are concerned, the assessment of sale tax, in our opinion, on the transactions during this period is illegal and not warranted by the provisions of the Act.
It is worthwhile to mention in this connection that except for the period in question no tax was attempted to be levied on similar transactions of the appellant by the taxing authorities in any of the 89 686 previous years,though the Act came into operation as early as the year 1939.
It is not disputed also that the company is paying sale tax on its transactions with the Calcutta merchants since the explanation added by Act XXV of 1947 came into force. 'In our opinion, the appeal should be allowed and the conviction and sentence passed by the courts below should be set aside.
The fine and sale tax, if actually paid, should be refunded to the appellant.
Appeal allowed.
Agent for the respondent (the State of Madras), the Union of India, and the States of Punjab, Mysore, Madhya Pradesh and Travancore Cochin (Interveners): G. H. Rajadhyaksha.
Agent for the State of Bihar: B. C. Prasad.
Agent for the State of U. P. C. P. Lal.
Agent for Intervener No. 8: Bajinder Narain.

summary/full:
Under the Madras Sales Tax Act, 1939, as it stood before it was amended by the Madras Act XXV of 1947,the mere fact that the contract of sale was entered into within the Province of 88 678 Madras did not make a transaction which was completed in another province where the property in the goods passed, a sale within the Province of Madras and no tax could be legally levied upon such a transaction under the provisions of the Act.
Though a Provincial Legislature could not pass a taxation statute which would be binding on any other part of India it was quite competent for a province to enact a legislation imposing taxes on transactions concluded outside the province provided there was a sufficient and real territorial nexus between such transactions and the taxing province.
The title and preamble, whatever their value might be as aids to the construction of a statute, undoubtedly throw light on the intention and design of the Legislature and indicate the scope and purpose of the legislation itself.
It is a settled rule of construction that to ascertain the legislative intent all the constituent parts of a statute are to be taken together and each word phrase or sentence is to be considered in the light of the general purpose and object of the statute.
Judgment of the Madras High court reversed.


judgement:
vil Appeal No. 164 of 1961.
Appeal from the judgment and decree dated December 17, 1957, of the former Bombay High Court (Now Gujarat), in Civil First Appeals Nos.
14 and 24 of 1956 from Original Decree.
B.R.L. Iyengar, Atiqur Rehman, J.L. Doshi and K.L. Hathi, for the appellant.
Purshottam Tricumdas, J.B. Dadachanji, O.C. Mathur and Ravinder Narain, for the respondent.
March 29.
The Judgment, of the Court was delivered by SHAH J.
The appellant instituted Suit No. 250 of 1950 in the Court of the Civil judge (Senior Division), Junagadh for a decree for Rs. 72693/11/alleging that the appellant had a personal account with the respondent in respect of drafts, cheques, hundis and cash, and at the foot of that account Rs. 58,000/ as principal amount and Rs. 5,793/12/as interest remained due and payable by the respondent, that beside the amount due on the said 688 personal account an amount of Rs. 8,899/15/3 was due to him in respect of a transaction of sale of 1300 bags of groundnut sent by him between January 16 to January 28, 1950, and the price of gunny bags and groundnut oil cakes delivered to the respondent.
The appellant further alleged that forward contracts were prohibited with effect from November 19, 1949 by the Saurashtra Groundnut and Groundnut Products (forward Contracts Prohibition) order, and that the said contracts being illegal the appellant was not subject to any liability arising from adjustments of credits and debits or differences in rates relating to forward contracts and the respondent was not entitled nor authorised to make credit and debit entries in the appellant 's account and that nothing was due by him in respect thereof.
The respondent by his written statement contendedthat in the appellant 's personal account an amountof Rs. 1,58,000/ stood initially credited but at the foot of that account only a sum of Rs. 18,000/ was due and this sum was credited in the current account of the appellant in the name of Hemraj Keshavji Oil Mills and Ginning Factory and therefore nothing was due in the personal account, that the transaction effected by the appellant through the commission agency of the respondent in groundnut seed for December January (Samvat 2006) Settlement did not contravene the order dated November 19, 1949, of the United States of Saurashtra and that the respondent has not committed any breach of the order, that all the transactions for the December January Settlement were in ready goods of specific quality and that there was a condition relating to giving and taking of delivery on fixed dates and the same were all effected at the direction of the appellant and that the appellant was legally responsible for all payments made in respect of those transactions by the respondents as the appellant 's pucca adatia.
He then contended that in Samvat year 2006 the appellant had sold 689 9000 bags of groundnut through the agency of the respondent and had purchased 2300 bags through him, that the appellant thereafter gave delivery of only 2000 bags of groundnut and did not deliver the balance and on that account there resulted a loss of Rs. 9,221/7/9 which the appellant was bound to reimburse.
The respondent admitted that the appellanthad sent 1300 bags of groundnut but these bags were delivered towards the sale of 2000 bags of December .January settlement and the price thereof and of the balance of 700 bags was credited in the account of the appellant, and that the appellant was not entitled to a decree for any amount except the amount found due at the foot of the account.
The trial Court decreed the claim by awarding Rs. 30,589/3/ and interest.
Against the decree of the Trial Court the respondent as well as the appellant appealed to the High Court of the Saurashtra.
The appeals were transferred for trail under the States Reorganization Act to the High Court of judicature of Bombay at Rajkot.
The High Court allowed the appeal of the respondent and dismissed the appeal of the appellant.
The appellant has with certificate issued by the High Court, appealed to this Court against the decree passed by the High Court.
The appeal raises a dispute about the liability of the appellant for transactions in groundnut seed effected through the agency of the respondent after November 19, 1949, for December 1949, and January 1950, settlement.
The appellant says that these were forward transactions in groundnut and were prohibited under the Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949, and that these transactions gave rise to no liability which the appellant is obliged to discharge.
The respondent says that the transactions were ready delivery contracts which were not 690 prohibited by law and in respect of the losses suffered thereunder the appellant was bound to indemnify the respondent and that the losses suffered in those transactions were duly debited in the personal account of the appellant.
There is no dispute before us about the correctness of the entries in the personal account of the respondent.
If the respondent 's case is held proved that the transactions were ready delivery transactions, and not prohibited by the Saurashtra order the decree passed by the High Court must be maintained.
The Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949, was issued on November 19, 1949, and was extended to the whole of the United States of Saurashtra.
By cl. 2 (a) 'contract ' was defined as meaning "a contract made or to be performed in whole or in part in the United States of Saurashtra relating to the sale or purchase of groundnut whole, groundnut seeds, or groundnut oil." By cl. 3 forward contracts in groundnut and groundnut products were prohibited.
The clause provided " 'No person shall henceforth enter into any forward contract in groundnut whole, or groundnut seeds, or groundnut oil except under and in accordance with the permission granted by Government." By cl. 4 all outstanding forward contracts on the date of the publication of the order are to be closed immediately and at such rates and in such manner as may be fixed by the Association concerned under their respective bye laws or other regulations that may be applicable to such contracts.
The Trial Court held that out of the transactions which took place on or after November 19, 1949, only one transaction which was for delivery on January 25, 1950, was not hit by the order.
The remaining transactions, according to the Trial Court must be regarded as wagering transactions i. e. transactions in which it was intended by the parties that delivery of the goods contracted for could not 691 be demanded without breach of the understanding.
The Court did not consider whether the transactions were invalid as being in violation of the prohibition contained in the order.
The High Court held that according to the rules of the Association, by which the contracts were governed, delivery of the goods contracted for was invariably to be given at the godown of the purchaser and therefore delivery orders, railway receipts or bills of lading were not contemplated by the parties and the contracts being for specific quality or type of groundnut for specific delivery and for specific price in respect of ready delivery goods the transactions were not hit by the order.
By cl. 3 of the order all forward contracts in groundnut and groundnut products except those in accordance with the permission granted by the Government were prohibited.
It is not the case of the respondent that permission was obtained from the Government in respect of those transactions, but he contends that the transactions were not "forward contracts" and therefore not within the prohibition of the order.
The definition of the expression 'forward contract ' is somewhat obscure and the precise significance of the expression "against which contracts are not transferable to third parties" is difficult to guage.
A forward contract is in the first instance defined as meaning "a contract for delivery of groundnut whole, or groundnut seeds or groundnut oil at some future date.
" The contracts in dispute in the present case were indisputably contracts for delivery of groundnut at "some future date.
" But the definition expressly excludes certain contracts from its operation even if they are contracts for future delivery viz. contracts for specific qualities or types for specific delivery at specific price, delivery orders, railway receipts or bills of lading, against which contracts are not transferable to third parties.
Why the draftsman should in prescribing the condition of 692 non transferability of a contract against delivery orders, railway receipts or bills of ladnng, should have referred to "contracts" is difficult to appreciate.
The contracts in dispute were effected according to the rules and regulations of the Veraval Merchants Association.
A sample form of the contracts between the parties may be set out : "This Sauda is to be treated as subject to the rules and regulations of the Association.
No. 143 Ready Delivery Veraval, Dt.
21 11 49 Sheth Thaker Hemraj Keshavji at Malia.
Please accept Jay Gopal from Shab Haridas Jethabhai.
We have this day transacted the Sauda as under, on your behalf and as per your order.
Having made a note of it and having signed the slip below the counterpart, return it imme diately.
It is left to our choice whether on the deposit being exhausted to let the Sauda remain outstanding or not.
Sold Groundnut seeds small new crop. ready December january Bags 100, one hundred bags at Rs. 31 6.3 rupees thirty one annas six and pies three Standard filling 177 (1bs.) 2.
Sold Groundnut seeds small new crop, ready December January Dated 25th Bags 500, five hundred bags at Rs. 31 11 6 rupees thirty one annas eleven and pies six Standard filling 177 (lbs.) 3.
Sold Groundnut seeds small new crop, ready December January Bags 100 one 693 hundred bags at Rs. 31 6 6 rupees thirty one, annas six and pies six Standard filling 177 (lbs.) Sd.
Chhaganlal for Shah Haridas jethabhai 1st Shukla Margashirsh, St. 2006, Monday.
" At the foot of the contract is the acknowledg ment as under : "Shah Haridas jethabhai, at Veraval.
We have received your Sauda nondh Chitti No. 143 and have noted accordingly.
2nd Shukla Margashirsh, St. 2006,Dt.
21 11 49 Sd.
Kalidas Bhagwanji for Sheth Hemraj Keshavji.
" The contract is described as a ready delivery contract and is made subject to the rules and regulations of the Association.
The price of the goods and the quality of the goods are specified and delivery at a specific price is also stipulated.
There is nothing in the contract indicating whether it was transferable to third parties.
But the appellant submits that where the contract is silent as to whether it is transferable against delivery orders, railway receipts or bills of lading, it must be deemed capable of being transferred to third parties and so for the purpose of the order, be deemed to be a forward contract.
The 694 argument in substance is that a contract for delivery of groundnut at a future date even for specific quality and for specific delivery at a specific price would not be excluded from the definition of forward contract, unless it is expressly recited in the contract that it is not transferable to third parties against delivery orders, railway receipts or bills of lading.
This, it is urged, is so because it was the object of the order to prohibit speculation in groundnut and groundnut products, and to achieve that purpose it sought to prohibit forward transactions which were transferable to third parties.
By insisting upon completion of the contract between 'the parties thereto, it is urged it was intended to prevent speculation in essential commodities.
Reliance in this behalf was sought to be placed upon several decisions of the Bombay, Madras and Andhra Pradesh High Courts dealing with the interpretation of clauses similar to the definition of forward contract in the Saurashtra order, in which it was held that exclusion from the prohibition against forward contracts can be regarded as effective only if the stipulation about non transferability is expressly mentioned in the contract, and silence of the contract imported transferability even in respect of contracts for specific quality for specific delivery at specific price.
The earliest decision of this clause was a decision of a single judge of the Bombay High Court in Firm Hansraj vs Vasanji (1).
In that case the contract was for spot delivery i.e. where no delivery order or railway receipt or bill of lading would ordinarily be issued.
But the learned judge held that such a contract in the absence of an express stipulation prohibiting transfer would not fall within the Notification granting exclusion from the prohibition of forward contracts, because the condition regarding non transferability would not be fulfilled.
It was observed by Mr. justice M. V. Desai : "The only classes of cases of forward contracts which were exempted were those which contained in them the guarantee against speculation by reason of a provision (1) (1948) 4 D.L.R, Bom.
695 that the Delivery Orders, Railway Receipts, or Bills of Lading (which were contemplated by the contracts and would be issued) should not be transferable to third parties. . . . and he recorded his conclusion as follows : " 'In my opinion, if Delivery Orders were con.
templated under these contracts, they were illegal, as the Delivery Orders were not made non transferable.
If Delivery Orders, Railway Receipts or Bills of Lading were not contemplated under the contracts, then the exemption (which deals with cases where Delivery Orders, Railway Receipts or Bills of Lading are issued) has no application.
" This decision was approved in Uma Satyanarayanamurty vs Kothamasu Sitaramayya & Co. (1), where in considering whether a disputed contract was a ,forward contract ' within the meaning of the Vegetable Oils and Oilcakes (Forward Con tract Prohibition) Order, 1944, Rajamannar, C. J., held that the intention underlying the notification being to grant exemption only to cases of forward contracts in respect of which there could be some guarantee that they would not be subject to speculation, exclusion from the prohibition imposed by the notification may be established only if one of the terms of the contract is that the delivery order or railway receipt or bill of lading relating thereto is not transferable.
It is not enough that such documents are not contemplated, because it cannot be said that they are prohibited.
This view was followed in Bodhu Seetharamaswami vs Bhagavathi Oil Company (2), Hussain Kasam Dada vs Vijayanagaram Commercial Association (3) and Vaddadi Venkataswami vs Hanura Noor Muhammad Beegum (4).
The phraseology of the notifications and the definitions of forward contract were not in terms identical, in each of these cases; but these cases lay down that before a contract (1) (3) (2) 1.
L R. A.I.R. (1956) Andhra 9. 696 for delivery of a commodity at a future date could be regarded as excluded from the definition of forward contract, even if the contract was for a specific price or specific quality, it must be stipulated that the contracts were not transferable to third parties by expressly prohibiting the transfer of delivery orders, railway receipts or bills of lading.
We are unable to hold that a contract for delivery of goods at a future date would fall within the exception in the definition of forward contract if other conditions are fulfilled only if there is an express stipulation recorded in the contract prohibiting the transfer of delivery orders, railway receipts or bills of lading against the contract thereof.
The order issued by the Saurashtra Government excluded from the definition of forward contract all contracts for specific qualities or types of groundnut whole or groundnut seeds or groundnut oil and for specific delivery at a specific price, delivery orders, railway receipts or bills of lading against which contracts, were not transferable to third parties.
But the Legislature did not impose the condition that the contracts for delivery of goods at some future date must recite that the contracts were not to be transferable, and there is no indication of such an implication.
Nor is the object of the order sufficient to justify an overriding reason for implying that condition.
In a recent case Khardah Company Ltd. vs Raymon it Company (India) Private Ltd. (1), this Court had to adjudicate upon the validity of a forward contract relating to jute.
By cl.
(2) of section 17 of the Forward Contracts Regulations Act 74 of 1952 forward contracts in contravention of the provisions of sub section
(1) of section 17 were declared illegal, but the Notification did not apply to non transferable specific delivery contracts for the sale or purchase of any goods.
In a dispute relating to non delivery of jute, which was one of the commodities to which the Act was made applicable, (1) ; 697 the Bengal Chamber of Commerce made an award.
In a petition to set aside the award it was urged that in the absence of a specific clause prohibiting transfer in the contract itself, the plea that the contract is not transferable is not open to the party supporting the contract and that evidence aliunde is not admissible to establish the condition, and in Support of that argument Seetharamaswani vs Bhagwathi Oil Co. (1), Hanumanthah vs U. Thimmaiah (2) and Hussain Kasam Dada vs Vijananagaram Commercial Association (3) were cited.
Venkatarama Aiyar, J, observed in dealing with this contention: "x x x that when a contract has been reduced to writing, we must look only to that writing for ascertaining the terms of the agreement between the parties, but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties.
If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term.
The terms of a contract can be express or implied from what has been expressed.
x x x x on the question whether there was an agreement between the parties that the contract was to be nontransferrable, the absence of a specific clause forbidding transfer is not conclusive.
What has to be seen is whether it could be held on a reasonable interpretation of the contract, aided by such considerations as can legitimately be taken into account that the agree.
ment of the parties was that it was not to be transferred.
When once a conclusion is reached that such was the understanding of the parties, (1) (1) A.I.R. (1954) Mad.
(3)A.I.R. 698 there is nothing in law which prevents effect from being given to it.
" In our view this principle applies to the interpretation of the Saurashtra Groundnut and Groundnut Products (Forward Contract Prohibition) Order, 1949.
From the absence of a clause expressly prohibiting transfer of the contract against delivery orders, railway receipts or bills of lading it cannot be inferred that the contract is transferable.
The question whether an impugned contract is transferable must depend upon the language of the contract interpreted in the light of surrounding circumstances, and silence of the contract cannot be regarded as an indication of transferability much less would it justify an inference that it is transferable.
We must then consider having regard to the surrounding circumstances if such a term can be implied.
The contracts are made subject to the rules and regulations of the Veraval Merchants ' Association.
These rules are designated " 'Rules and Regulations of groundnuts ready delivery".
Rule 5 provides that the buyer has to supply empty bags to the seller and he has to supply a Bardan Chitti within 48 hours from the receipt of the letter of the seller to the buyer asking for empty bags.
In the event of failure to supply a Bardan Chitti within 48 hours a penalty of Rs. 2/ per 100 bags is to be paid to the seller for every 24 hours.
Rule 6 deals with delivery.
The seller has to give delivery at the godown of the buyer and the seller is to unload the carts at his own cost.
The buyer has, on presentation of the receipt of the commodity at his godown to pay 90% of the invoice price, and 10% may be retained against defects or shortage discovered in weighment (Rule7).
Weighment has to be made at the godown of the buyer, at the earliest moment according, to the convenience of the seller and the buyer, after the commodity has reached the buyer 's godown.
A sample has to be preserved, if 699 the seller so chooses, at the buyer 's place.
At the con venience of both the buyer and the seller and at the earliest opportunity the sample should be analyzed at the buyer 's place but after weighment of the commodity, cleaning of sample should not take more than 6 days and if a person makes any delay he would be liable to pay a penalty of /8/ eight annas for every 24 hours per every lot of 100 bags.
Rule 9 deals with shortages and provides for reimbusement of loss to the buyer.
Rule 10 deals with payment of price.
On taking delivery of the commodity, the person receiving the commodity, having obtained a kutcha receipt,, is to make 90% payment to the person giving delivery immediately .
If the person giving delivery of a commodity so desires, the person 'taking delivery has to furnish surety for the value of commodity and acceptable to the Association.
After weighment and shortages are settled and on receiving the invoice, the buyer must pay in full the balance of 10% within 96 hours.
The buyer paying after 96 hours must pay interest at the rate of /12/ twelve annas per centum per mensem.
Rule II provides for "survey of disputes" arising between the members at the time of delivery of " 'weighed commodity.
" The application may be made both by the buyer and the seller.
Rule 15 provides for steps to be taken if the seller or the buyer be "unable to meet amount" found due at the settlement regarding the commodity.
The Managing Committee, after hearing the seller and buyer, may grant extension of time on receipt of an application to the Association from such buyer or seller, or the Association may determine and fix a reasonable rate after considering the rates as well as circumstances in the local as well as other centres of Saurashtra between seller and the buyer and that the transactions between the buyer and the seller have to be settled at the rate so fixed.
The transactions for purchase and sale are to be carried through between two members of the 700 Association and under the rules and regulations of the Association.
Delivery has to be given at the warehouse of the purchaser and detailed rules about sampling, surveying, payment of price etc., are made.
Prima facie, these rules apply to the persons named as the seller and the buyer in the transactions of sale and purchase.
But Mr. Ayyanger appearing on behalf of the appellant contended that the expression ,buyer ' would include a purchaser from the buyer because under the general law of contracts the benefit of a contract to purchase goods can be assigned and therefore the rights of the buyer would be enforceable by the transferee of the buyer.
But the scheme of the rules indicates that the entire transaction has to be carried through between the parties to the transaction and not between the seller and a transferee of the rights of the buyer.
In carrying out the transactions under the rules, diverse obligations are imposed upon the buyers, and it is settled law that without the consent of the seller, the burden of a contract cannot be assigned.
The rules provide, as we have already pointed out, that the empty bags are to be supplied by the buyer.
Such an obligation cannot be transferred by the buyer.
Again diverse rules provide liability for payment of penalty.
If a buyer connot transfer the Obligations under a contract which is made subject to the rules and regulations of the Association, ail the obligations prescribed by the rules being made part of the contract, a very curious result would ensue in that whereas an assignee of the buyer would be entitled to demand delivery at his own godown at the rate fixed, for his default the buyer would remain liable for the diverse obligations including liability to pay penalty for default of his assignee under the rules.
Again the seller by Rule 6 has to deliver the goods at the warehouse of the buyer, and if the benefit of the contract is transferable, it would imply an obligation to deliver at the warehouse of the buyer 's assignee, wherever the warehouse of the assignee may be.
The 701 warehouse of the assignee of the buyer may be in Veraval or at any other place, but the seller having entered into a contract at a rate which would include normal expenses for delivery at the buyer 's godown maybe required to undertake an intolerable burden of meeting all the charges for transporting the goods to the warehouse of the buyer 's assignee wherever such godown may be situate.
Such an obligation could never have been under contemplation of the rule making body.
Mr. Ayyanger contended that the assignee of the buyer contemplated by the rules would of necessity have to be a member of the Association and therefore resident in Veraval.
But the rules to which our attention has been invited do not, if the buyer is to include the assignee of the benefit of the contract, seem to impose any such restriction.
If the general law relating to assignment of benefit under a contract is to be superimposed upon the rules, notwithstanding the scheme which prima facie contemplates performance between the parties, there is no reason why any such reservation should be made.
It was alternatively urged by Mr. Ayyangar that the rules of the Association use two expressions buyer ' and 'Persons ' and wherever the expression Person ' is used it would include an assignee of the buyer.
This argument, in our judgment, is without force.
The rules have not been drawn up with any precision, and there is nothing to indicate that by using the expression 'person ' a larger category was intended.
for instance in rule 5, the obligation to supply empty bags is imposed upon the 'buyer ' and the penalty for failing to carry out that obligation is imposed upon the 'person. ' Similarly in rule 10 when delivery is taken by the 'buyer ' the 'person ' receiving the commodity has to make payment of 90% of the price to the person giving delivery.
There arc a large number of other rules which deal with the rights of the "buyers ' and the obligations 702 simultaneously imposed upon persons which in the context may mean only the buyers.
The use of the expression "Person ' does not, in our judgment, indicate that he was to be any one other than the buyer or his representative.
On a careful review of the rules we are of the view that under the rules and regulations of the Veraval Merchants ' Association pursuant to which the contracts are made, the contracts were not transferable.
The contracts were undoubtedly for delivery of groundnut at a future date, but they were contracts for specific quality for specific price, and for specific delivery under the rules of the Association under which they were made.
The contracts were, for reasons already mentioned, also not transferable to third parties, and could not be regarded as forward contracts within the meaning of the order.
It is unnecessary therefore to consider whether the respondent who claimed to have acted as Pucca Adatia and therefore as Commission Agent was entitled to claim reimbursement for any amount alleged to have been paid by him on behalf of the appellant for losses suffered in the transactions in dispute.
We are therefore of the view that the High Court was right in modifying the decree passed by the Trial Court and in dismissing the appellant 's suit.
The appeal is dismissed with costs.
Appeal dismissed.

summary/full:
The appellant entered into contracts with the respondent (for sale of groundnuts) which were described as ready delivery contracts and were subject to the rules and regulations.
of the Veraval Merchants Association.
The contracts specified the price and quality of the goods and stipulated delivery at a specific price.
But there was nothing in the contracts indicating whether they were transferable to third parties.
The respondent claimed certain amounts of money in respect of these transactions but the appellant resisted the claim on the ground that the contracts, being forward contracts, were prohibited by the Saurashtra Groundnut and Groundnut Products (Forward Contracts Prohibition) Order, 1949, and were illegal, The appellant contended that the contracts for the delivery of groundnuts at a future date, even though they were for specific quality and for specific delivery at a specific price, must be deemed to be forward contracts unless it was expressly recited that they were not transferable to third parties.
Held that the contracts were not forward contracts and were not hit by the Prohibition Order.
A contract for delivery of goods at a future date, even though for a specific price and specific quality, can be excluded from the definition of forward contracts only if the contract is non transferable.
But from the mere absence of an express stipulation as to non transferability in the contract, it cannot be deemed to be transferable and outside the exception.
It is not required either by the Order or by the object of the Order that the condition regarding non transferability should be mentioned in the contract itself before the contract can be excluded from the definition of forward contract.
Absence of a specific stipulation in this regard is not conclusive.
It has to be seen whether upon the 687 language of the contract interpreted in the light of surrounding circumstances it can be field that there was an agreement between the parties that the contract was not transferable.
The rules and regulations of the Association to which the contracts in dispute were subject clearly showed that the contracts were not transferable.
Khardah Company Ltd. vs Raymon & Co. (India) Private Ltd., ; , applied.
Firm Hansraj vs Vasanji (1948) 4 D.L.R. Bom.
7, Uma Satyanarayanamurty vs Kothamasu Sitaramayya & Co. Boddu Seetharamaswami vs Bhagavathi Oil Company, I.L.R. , Hussain Kasam Dada vs Vijayanagaram Commercial Association, and Vaddadi Venkataswami vs Hanura Noor Muhammad Beegum, A.I.R. (1956) Andhra 9, referred to.


judgement:
Petition No. 1398 of 1962.
Appeal against the order of the Deputy Registrar dated March 28, 1962 in Civil Appeals Nos.
41 to 49 of 1962.
A.Ranganadham Chetty, B.D. Dhawan, S.K. Mehta and K.L. Mehta, for the petitioner.
C. K. Daphtary, Attorney Generalfor India, R. Ganapathy Iyer and R. N. Sachthey, for the respondents.
April 5.
The Order of the court was delivered by SARKAR J.
This is an appeal against the order of the Deputy Registrar directing the present case to be registered as nine appeals and requiring the appellant to pay nine sets of court fees.
The Deputy Registrar had relied on two cases of this Court, namely, Lajwanti Sial 's case (Petition for Special Leave No. 673 of 1959) and Kishinchand Chellaram 's case (Civil Appeals No. 462 to 465 of 1960).
We do not think that these precedents cover the present case.
In Lajwanti 's Case there were a number of applications under section 66 (2) of the Income tax Act for reference of the same question.
There were in tact a number of separate references but they were 887 dealt with by one judgment from which the appeal to this Court arose.
That was really a case of five appeals for the common judgment must be taken to have been delivered in each of the different reference cases.
Kishinchand Chellaram '8 case is also not helpful because there four applications by four different assessees had been made for reference of three identical questions arising in each assessment case under section 66 (1) of the Income tax Act.
Though it appears that there was one order of reference to the High Court and the High Court treated the case as a single case of reference, it could be said that there were in fact a number of references.
The present case however originated out of one petition under article 226 of the Constitution challenging the validity of various assessment orders.
Obviously here, there was only one proceeding.
It could not be said that there were as many proceedings as there were assessment orders for the petitioner had by a single petition callenged them all together.
When an appeal is taken to this Court from the judgment of the High Court in such a petition, it is impossible to contend that there are more appeals than one.
Therefore, the appellant before us is liable only to pay one set of court fee and other charges as in a single appeal.
Action may be taken accordingly by the office, if necessary, by refunding the excess charges made.

summary/full:
This appeal was against the order of the Deputy Registrar directing the present case to be registered as nine appeals and requiring the appellant to pay nine sets of court fees.
The case originated out of one petition under article 226 of the Constition challenging the validity of various assessment orders.
The High Court passed one order on the petition and one appeal was filed in this Court.
886 Held that the appellant should pay only one set of court fee and other charges as in a single appeal.
It could not be said that there were as many proceedings as there were assessment orders as the appellant had by a single petition challenged them all together.
Lajwanti Sial 's case, Petition for special leave No. 673 of 1959 and Kishinchand Chellaram 's case, C.A. Nos.
462 to 465 of 1960, referred to.