TMI Blog1967 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the assessee was the owner of the property known as Nedous Hotel Pakistan in the relevant accounting year ? " If the answer to the first question is in the affirmative, " (2) Whether, on the facts and in the circumstances of the case, the assessee was entitled to claim the loss of Rs. 1,70,104 in respect of the ownership of the said property ? (3) Whether, on the facts and in the circumstances of the case, the assessee was entitled to the loss claimed by it by conversion of the purchase price from Pakistan currency to Indian currency in respect of the business carried on at Hoshiarpur with the purchases mentioned above? " The question referred in the other reference is : " Whether, on the facts and in the circumstances of the case, the assessee continued to be the owner of the property for the purposes of computation of income under section 9 of the Indian Income-tax Act, 1922 ? " Rai Bahadur Jodha Mal Kuthiala (hereafter referred to as the assessee) is a registered firm. The assessee purchased a property known as Nedous Hotel and the adjoining Mela Ram Buildings in Lahore in February, 1946, for Rs. 46,00,000, and for acquiring this property, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement with Raja Rana Digvijayachandra whereby the latter accepted half share in the said property in lieu of his father's investment and 1/3rd liability towards the Bharat Bank Limited, the interest allowable was apportioned by the Tribunal in the hands of the assessee and the Raja. But we are not concerned with that as the point that arises before us is with respect to the claim of the assessee for interest payable to the Bharat Bank Limited. The facts relevant to the third question in reference No. 3 of 1967 set out hereinbefore are that the assessee had an office at Hoshiarpur where it dealt in cotton seeds, gram, oil and salt imported from Pakistan. According to the assessee's books the transactions had resulted in a gross profit of Rs. 4,842 but the assessee claimed a loss of Rs. 1,09,870 on the ground that the price of the purchases made in Pakistan in terms of Indian rupee worked out to Rs. 3,75,422 as against the amount of Rs. 2,60,710 actually paid in Pakistan in Pakistan currency. The Income-tax Officer did not accept the assessee's books as, according to him, the prices of salt and oil cake were inflated and there was suppression of sales. He, therefore, disallowed the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's Laws of England, third edition, volume 15, pages 328 and 335, where it is said that the English court cannot take judicial notice of foreign law which requires proof like any other question of fact and " if the foreign law is contained in a code or written form, the question is not as to the language of the written law, but what the law is as shown by its expositions. interpretation and adjudication, and the English courts are not, in general, entitled to construe a foreign code themselves without expert assistance. " He also relied on Cheshire's Private International Law, 7th edition, page 115, for the proposition that foreign law must be proved, as facts are proved, by appropriate evidence, that is, by properly qualified witnesses. Mr. Veda Vyasa placed strong reliance on Buerger v. New York Life Assurance Co., wherein Atkin L. J., while dealing with Russian law, said : " Now this being the uncontradicted evidence of a Russian lawyer, and the Russian Department of Justice, as to what the law is in Russia today, the defendants, without calling any evidence, ask us to say that the lawyer and the department are mistaken; that the Russian law is something different and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n statute contained in a book issued under the authority of the foreign Government. Section 45 of the said Act makes the evidence of an expert on foreign law a relevant fact. It is always for the courts to judge the evidence of an expert and if an expert in foreign law says, the law in his country is this, and if that evidence is accepted by the court, that may be a finding of fact. If, on the other hand, the expert produces the foreign law and thus proves the contents thereof, his opinion as to the construction of that law will be subject to scrutiny by the court and is placed at par with the evidence of other experts. It is only where the matter enquired of lies within the range of the peculiar skill and experience of the witness and is one of which the ordinary knowledge and experience of mankind does not enable the courts to see what inferences should be drawn from the facts that the witness may supply opinion as their guide. The afore-mentioned basic difference in laws in the two countries calls for caution in applying English decisions. It follows, therefore, that when the contents of a foreign law in the language or translated into the language known to the courts in India a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent of suggesting that even if a person retain a husk of title and dominion over the physical object, he would be the owner thereof, that there may be any amount of charge, encumbrance or restricted covenant on a property, yet the owner will be the person entitled to the residue of its uses of however small dimensions ; and that such burdens may weigh down the rights of the owner for some time but, the moment they are determined, the ownership will again spring to its full stature and, consequently, the presence of such temporary encumbrance; will not prejudice the ownership rights. According to Mr. Veda Vyasa, owner is a person who comes after the possessor of the temporary rights and his permanent rights, which last so long as the physical object lasts. He relied on the following passage from Salmond's jurisprudence, 12th edition, page 414 : " The second class of restrictions upon an owner's right of use consists of those which flow from the existence of encumbrances vested in other persons. My land may be mortgaged, leased, charged, bound by restrictive covenants, and so on, yet I remain the owner of it none the less. For I am still entitled to the residue of its uses, and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar of such disturbances, on or after the first day of March, 1947, leaves or has left any place in the territories now comprising Pakistan for any place outside those territories, or (ii) acquires or has acquired, on or after the aforesaid date, in any manner, whatsoever, any right to or interest in or benefit from any property which is treated as evacuee property under any law for the time being in force in India, or in any area occupied by India, or (iii) is resident in any place in the territories now comprising India or in any area occupied by India and who for that reason is unable to occupy, supervise or manage in person his property in Pakistan or whose property in Pakistan has, whether wholly or partially, ceased to be occupied, supervised or managed by any person, or is being occupied, supervised or managed by an unauthorised person. " Under that definition, therefore, there are three classes of persons who are treated as evacuees--- (1) persons who leave the territories comprised in Pakistan on or after the 1st day of March, 1947, for specified reasons ; (2) persons who acquire, on or after the said date, any right or interest in or benefit from any property in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application is not rejected under sub-section (3), the custodian may confirm the creation or transfer either unconditionally or subject to such terms and conditions as he thinks fit to impose. " Section 19 empowers the custodian under certain circumstances to restore any evacuee property to the owner on such terms and conditions as he may think fit to impose. Under the proviso to sub-section (3) of section 19 any allotment made by the rehabilitation authorities is not prejudiced by restoration unless cancelled or determined by the rehabilitation authorities. Sub-section (4) of section 19 enjoins upon the custodian, on an application made to him by the person to whom the property is restored, to furnish a statement containing an abstract of the account of the income received and expenditure incurred in respect of the property restored. Section 20, inter alia, authorises the custodian to institute, defend or continue any legal proceeding in any civil or revenue court on behalf of the evacuee or refer any dispute between the evacuee and any other person to arbitration or compromise any claims, debts, or liabilities on behalf of the evacuee and to " sell any evacuee property, notw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaintiffs of ownership in it and vested the debt in the custodian and at the same time interfered with the obligation for performance by providing that payment to the custodian shall operate as a discharge of the obligation. " Mr. Awasthy contended that on this decision alone, and without more ado, we should hold for him. I shall examine the other decisions cited at the bar later but it is appropriate to consider at this stage the two English decisions, mentioned above, which turn on the provisions of laws dealing with enemy properties in times of war. Munster's case concerned the Trading with the Enemy Amendment Act, 1914, the preamble of which recited that " it is expedient to make further provision for preventing the payment of money to enemies and ' for preserving, with a view to arrangements to be made at the conclusion of peace, such money and certain other property belonging to enemies ' ". Under section 4, the High Court or a judge thereof could by order vest in the custodian any such real or personal property and confer on the custodian such powers of selling, managing and otherwise dealing with the property as to the court or judge may seem proper. Real estate in En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ankruptcy (Scotland) Act, 1913, and a trustee was appointed. It was held that during sequestration the income from the estate, which vested in the trustee, was not the income of the bankrupt. The respondent had contended that the radical right to the properties vested in the trustee was in the respondent all the time and the payment by the trustee, during sequestration, of income-tax on the full annual value of the properties was a payment on behalf of Fleming. He, therefore, claimed that there arose in each of the years in which the payment was made a right to deduct his " personal allowance " from the annual value of the properties and the right to the said abatement passed to him in virtue of the reinvestment in his estate which occurred upon his discharge on composition. It was observed by the Lord President : " . . . and accordingly everything depends upon the soundness of the proposition that the income consisting in the annual value of these properties was truly income of the respondent. I do not see how it can possibly be so described . It was part of the income arising from the sequestrated estates vested in the trustee for the respondent's creditors. Any income that di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emporary duration. Mr. Veda Vyasa contended that the word " owner " in section 9 must be interpreted in the jurisprudential sense and that the rights of the owner of a thing may be eaten up by the dominant rights of encumbrances and reduced to mere name rather than reality, yet he remains the owner of the thing. He relied for this proposition on Sohan Lal v. Mohanlal . When faced with the objection that all the abatements provided section 9 out of the annnal letting value indicate that the person can be termed as owner only if he has the control or dominion over the property from which he is in a position to earn, Mr. Veda Vyasa sought to overcome the difficulty by suggesting that, though under some of the provisions of the said Act it is the actual income in the Commercial sense that is taxed, yet under section 9 the potentiality to produce income is indifferent as the tax is on notional income. The distinction between the heads of income from business and that from property, subject to some special provisions is of course there and it may be said that the man who hides his talent in a napkin instead of lending it to the usurers pays no income-tax upon the usury he might have earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the context in which it is used. Broadly, an "owner" is one who has dominion over property which is the subject of ownership. It is well accepted that the term " owner " has no rigid meaning and its meaning may not be the same under all the circumstances. It is not a technical term, but rather one of wide application in various connections. It is a comprehensive and generic term and must be construed in the setting in which it is used. It may be used to convey a meaning, sometimes broad and sometimes quite restricted. In some statutes it may mean a person in whom the property is for the time being beneficially vested and who has the occupation or control or usufruct of it. It may also be used to describe a person not having a full title but only a bare legal title. Again, in a given context the term " owner " may signify any person having any estate or interest in the land no matter how slight. Mr. Veda Vyasa's argument that notwithstanding restrictions, howsoever extensive on the right of occupation and use of the property, the original owner must still be treated as the owner minus the restrictions must necessarily be judged in the light of the provisions of the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before, the only effect of vesting the property in the custodian is to give the custodian certain powers enumerated in the Ordinance for the purpose of managing and administering the evacuee property. The title of the evacuee remains, as it were in statutory suspense until it is determined by Parliament as to how that title is to be dealt with or disposed of. " That again shows that though the evacuee legislation may have contemplated return of properties ultimately to the evacuees, but their title remained in statutory suspense till it was restored. That statutory suspension takes away the right of the assessee to claim to be the owner of the property during that period. There are really two ways of approaching the problem : (1) that Harnam Singh's case is the only case in which their Lordships of the Supreme Court construed the Pakistan Ordinance and held that the evacuees were divested of their ownership rights; and (2) that evacuee legislation in India being pari materia with the evacuee legislation in Pakistan, the decision in Amar Singh's case equally governs the construction of Pakistan Ordinance. Whatever approach is resorted to, it is apparent that, in any event, till ..... X X X X Extracts X X X X X X X X Extracts X X X X
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