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1953 (10) TMI 36
Issues Involved:
1. Whether the bhents (offerings) made by the followers of the Radhaswami faith of the Dayalbagh school to the deity vest in the Sabha under a legal obligation wholly for religious and charitable purposes within the meaning of Section 4(3)(i) of the Income-tax Act.
2. Whether the income derived by the respondent Sabha from bhents is also exempt from taxation under Section 4(3)(ii) as being solely applicable to charitable and religious purposes.
3. Whether the starting of industrial and commercial concerns by the Radha Swami Satsang Sabha of Dayalbagh, Agra, out of the funds can be held to be in furtherance of its objects of a religious and charitable nature as contemplated by the definition given in the explanation to Section 4(3) of the Income-tax Act.
4. Whether the income derived from the concerns mentioned above is income derived from property held under a legal obligation for religious and charitable purposes and as such exempt from taxation under Section 4(3)(i) of the Act.
5. Whether the income derived from the concerns mentioned above is income derived from business carried on by the Sabha as a charitable and religious body in the course of carrying out its primary purposes of a religious or charitable nature to be applied solely to those purposes and hence also exempt under Section 4(3)(ia) of the Income-tax Act.
6. Whether the income which was the subject matter of the assessments relating to the years 1939-40, 1940-41, 1941-42 was already exempt under Section 4(3)(i) and the addition of Section 4(3)(ia) was only made by the Legislature by way of an amplification of the scope of the exemption under Section 4(3)(i) and as such Section 4(3)(ia) could retrospectively apply to the assessments relating to the aforesaid years.
Issue-wise Detailed Analysis:
1. Bhents Vesting in the Sabha under Legal Obligation:
The court examined whether the bhents (offerings) made by the followers of the Radhaswami faith of the Dayalbagh school to the deity vest in the Sabha under a legal obligation wholly for religious and charitable purposes within the meaning of Section 4(3)(i) of the Income-tax Act. It was found that the bhents vest in the Sabha under a legal obligation wholly for religious or charitable purposes. The court concluded that the offerings were made to the deity Radhaswami Dayal through the Sabha, and the Sabha held these properties under a legal obligation to apply them to religious and charitable purposes.
2. Exemption of Bhents Income under Section 4(3)(ii):
The court addressed whether the income derived by the respondent Sabha from bhents is also exempt from taxation under Section 4(3)(ii) as being solely applicable to charitable and religious purposes. It was concluded that the bhents are voluntary contributions made to the Sabha, a religious and charitable body, to be applied solely to religious or charitable purposes. Therefore, the income derived from bhents is exempt from taxation under Section 4(3)(ii).
3. Industrial and Commercial Concerns in Furtherance of Religious and Charitable Objects:
The court examined whether the starting of industrial and commercial concerns by the Radha Swami Satsang Sabha of Dayalbagh, Agra, out of the funds can be held to be in furtherance of its objects of a religious and charitable nature. The court found that the various commercial and industrial activities undertaken by the Sabha were not undertaken with a motive of commercial or private gain but were undertaken in furtherance of its primary purpose to be applied to such purposes which were primarily religious and charitable. The activities were intended to ultimately ameliorate the condition and welfare of the Satsangis, a section of the public, and to improve their mental, educational, and economic conditions, thus qualifying as charitable purposes within the meaning of the Act.
4. Income from Concerns as Income from Property Held under Legal Obligation:
The court addressed whether the income derived from the concerns mentioned above is income derived from property held under a legal obligation for religious and charitable purposes and thus exempt from taxation under Section 4(3)(i) of the Act. The court concluded that the income derived from industrial and commercial concerns is the income from property held under trust wholly for religious or charitable purposes and is exempt from income-tax under Section 4(3)(i) of the Indian Income-tax Act.
5. Income from Business Carried on by the Sabha as Exempt under Section 4(3)(ia):
The court examined whether the income derived from the concerns mentioned above is income derived from business carried on by the Sabha as a charitable and religious body in the course of carrying out its primary purposes of a religious or charitable nature to be applied solely to those purposes and hence also exempt under Section 4(3)(ia) of the Income-tax Act. The court found that since the income derived from industrial and commercial undertakings of the Sabha is exempt from income-tax under Section 4(3)(i), it is not necessary to apply Section 4(3)(ia) to such income.
6. Retrospective Application of Section 4(3)(ia):
The court addressed whether the income which was the subject matter of the assessments relating to the years 1939-40, 1940-41, 1941-42 was already exempt under Section 4(3)(i) and whether the addition of Section 4(3)(ia) was only made by the Legislature by way of an amplification of the scope of the exemption under Section 4(3)(i) and as such Section 4(3)(ia) could retrospectively apply to the assessments relating to the aforesaid years. The court concluded that the income derived from industrial and commercial undertakings of the Sabha is exempt from income-tax under Section 4(3)(i) of the Act, and the rest of the question does not arise. However, Section 4(3)(ia) provides exemption to a different type of income which does not come under Section 4(3)(i).
Conclusion:
The court upheld the Tribunal's decision that the Sabha was entitled to exemption under certain provisions of Section 4(3) of the Indian Income-tax Act and provided detailed answers to the questions referred for decision, affirming the religious and charitable nature of the Sabha's activities and the exemption of its income from taxation.
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1953 (10) TMI 35
Issues Involved:
1. Nature of properties bequeathed under a will.
2. Determination of ancestral vs. self-acquired properties.
3. Rights of sons in self-acquired properties of the father.
4. Interpretation of Mitakshara law regarding property disposition.
5. Judicial opinions on property classification.
Detailed Analysis:
1. Nature of Properties Bequeathed Under a Will:
The primary issue was whether the properties obtained by the defendant No. 1 under his father's will should be considered ancestral or self-acquired. The plaintiff claimed a one-third share in the properties, asserting they were joint family properties. The defendant No. 1 argued that the properties were self-acquired, given to him by his father through a will, and thus not subject to partition among his sons.
2. Determination of Ancestral vs. Self-Acquired Properties:
The court examined the Mitakshara law to determine the nature of the properties. According to Mitakshara, a father's self-acquired property can be disposed of without the sons' consent, and such property, when gifted or bequeathed, does not automatically become ancestral in the hands of the recipient. The court concluded that the properties bequeathed to defendant No. 1 by his father should be considered self-acquired, as the will explicitly vested absolute rights in the sons, including powers of alienation.
3. Rights of Sons in Self-Acquired Properties of the Father:
The court emphasized that under Mitakshara law, a father has full and uncontrolled powers of disposition over his self-acquired property. The sons cannot interfere with these rights. The court cited precedents where it was held that a father could sell, gift, or distribute his self-acquired property unequally among his heirs. The court rejected the notion that such properties automatically become ancestral in the hands of the donee.
4. Interpretation of Mitakshara Law Regarding Property Disposition:
The court analyzed various texts from Mitakshara to clarify the father's rights over self-acquired property. It noted that while the father's self-acquired property could be gifted without the sons' consent, such gifts do not necessarily become ancestral property. The court also referred to judicial precedents, including decisions from the Privy Council, which supported the view that a father's self-acquired property remains self-acquired in the hands of the donee unless explicitly stated otherwise in the gift or will.
5. Judicial Opinions on Property Classification:
The court acknowledged the conflicting judicial opinions from different High Courts on whether gifted property should be considered ancestral or self-acquired. It cited decisions from the Calcutta, Madras, Patna, Bombay, Allahabad, and Lahore High Courts, highlighting the diversity of views. Ultimately, the court favored the interpretation that a father's gift remains self-acquired unless there is a clear intention to make it ancestral.
Conclusion:
The court concluded that the properties bequeathed to defendant No. 1 by his father were self-acquired and not ancestral. The will explicitly granted absolute rights to the sons, including powers of alienation, indicating the testator's intention for the properties to be self-acquired. Consequently, the plaintiff's claim for partition was dismissed. The appeal was allowed, and the judgments and decrees of the lower courts were set aside. Each party was directed to bear their own costs due to the importance and complexity of the legal issue involved.
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1953 (10) TMI 34
Issues:
1. Sales tax levy legality and exemption
2. Jurisdiction of Civil Court
3. Limitation under Section 18 of Madras General Sales Tax Act
4. Suit maintainability for unregistered firm
5. Relief entitlement
Sales Tax Levy Legality and Exemption:
The plaintiffs appealed against the judgment and decree of the Principal Subordinate Judge, Vizagapatam, claiming that the sales tax levied on them for the years 1944-45 and 1945-46 was illegal and ultra vires as they were commission agents not liable for sales tax under Section 8 of the Act. The Subordinate Judge framed issues, including whether the business was a commission agency exempted under the license terms. The Judge dismissed the suit based on the limitation under Section 18 of the Madras General Sales Tax Act, stating that the suit was filed after the prescribed six-month period from the assessment orders. However, the High Court found that a previous ruling established a three-year limitation period for suits to recover amounts collected illegally as sales tax, not governed by Section 18, leading to the setting aside of the lower court's judgment.
Jurisdiction of Civil Court:
The plaintiffs contended that they had the right to file the suit in the Civil Court, which was one of the issues framed by the Subordinate Judge. However, the lower court did not provide any findings on this issue before dismissing the suit based on limitation grounds. The High Court remanded the case for a fresh hearing on this issue along with others, indicating that the jurisdiction of the Civil Court needed to be examined and determined during the new proceedings.
Limitation under Section 18 of Madras General Sales Tax Act:
The Subordinate Judge considered the limitation under Section 18 of the Madras General Sales Tax Act and held that the suit was time-barred as it was filed beyond the six-month period from the assessment orders. However, the High Court, relying on a previous ruling, clarified that suits for recovering amounts collected illegally as sales tax had a three-year limitation period, not governed by Section 18. Consequently, the High Court set aside the lower court's judgment based on the incorrect application of the limitation provision.
Suit Maintainability for Unregistered Firm:
Another issue framed by the Subordinate Judge was whether the plaintiffs, being partners of an unregistered firm, could maintain the suit. However, the lower court did not address this issue before dismissing the suit on limitation grounds. The High Court remanded the case for a fresh hearing on this issue, along with others, indicating that the maintainability of the suit concerning the firm's registration status needed further examination.
Relief Entitlement:
The plaintiffs sought a declaration that the sales tax levied on them was illegal and the recovery of the amount collected, along with interest and costs. The lower court did not address the relief entitlement issue before dismissing the suit based on limitation. The High Court remanded the case for a fresh hearing on this issue, along with others, indicating that the determination of the relief entitlement needed to be considered during the new proceedings.
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1953 (10) TMI 33
Issues:
Petition for restoration of company's name under section 247(6) of the Indian Companies Act based on alleged fraudulent removal by directors and pending civil suit against the company.
Analysis:
The petitioner filed a petition under section 247(6) of the Indian Companies Act seeking the restoration of the name of a company to the register of companies. The petitioner, a creditor of the company, claimed to have obtained a decree against the company a day before the publication of a notification for the removal of the company's name from the register. The petition impleaded the Registrar and the directors of the company as respondents. Allegations were made that the directors fraudulently maneuvered to have the company's name struck off the register, and the petitioner was unaware of these actions. It was also revealed that the entire share capital of the company was not called, which could satisfy the petitioner's decree.
In response, one of the directors contended that the petitioner should have been aware of the gazette publications and that the company was defunct at the time of the decree. Reference was made to section 247(5) which maintains directors' liability despite the company's removal from the register. The petitioner's counsel argued that the company should be deemed to be in operation as it was contesting a suit before the Civil Judge when information was sought by the Registrar. Additionally, it was contended that even if the company was not in operation, it was just to restore its name to the register as it had not fulfilled all obligations and the share capital was not fully called.
The court considered the provisions of section 247(6) which allow for restoration if the company was carrying on business or if it is deemed just to do so. It was noted that the company's operations, including defending a lawsuit, indicated it was in operation. The court also found it just to restore the company's name to the register as the petitioner had filed a suit for recovery, and the company had not taken steps to settle its liabilities. The conduct of the directors in not disclosing the pending suit to the Registrar was deemed questionable. Relying on legal precedents, the court concluded that restoration was warranted in this case. The court directed the Registrar to restore the company's name to the register and awarded costs to the petitioner.
In conclusion, the court ordered the restoration of the company's name to the register of companies under section 247(6) of the Indian Companies Act based on the company's operations and the petitioner's pending suit, finding it just to do so.
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1953 (10) TMI 32
Issues:
1. Application under section 235 of the Indian Companies Act dismissed as barred by limitation.
2. Interpretation of sections 9 and 10 of the General Clauses Act in relation to the computation of time for filing the application.
3. Comparison of section 9 of the Provincial Insolvency Act with section 235 of the Indian Companies Act regarding the treatment of prescribed periods.
Detailed Analysis:
1. The judgment involves an appeal by the official liquidator of a bank against the dismissal of an application under section 235 of the Indian Companies Act by the District Judge, South Malabar, on the grounds of being time-barred. The application was filed on 20th June, 1942, which was beyond three years from the date of the liquidator's appointment. The central issue was whether the application was within the prescribed time limit as per the statute.
2. The court analyzed the application of sections 9 and 10 of the General Clauses Act to determine the computation of time for filing the application. The appellant's counsel argued that the first day, i.e., the day of the liquidator's appointment, should be excluded from the calculation. The court agreed with this interpretation, emphasizing that the word "from" in the statute allows for the exclusion of the first day, as per the principle recognized in legal interpretations. The court rejected the argument that the word "within" precluded the application of section 9, stating that it was used to denote the period for taking action, not for computing time.
3. The judgment also compared section 9 of the Provincial Insolvency Act with section 235 of the Indian Companies Act regarding prescribed periods. It highlighted that the two statutes were not in pari materia, as the Insolvency Act required an act of insolvency within a specific period, unlike the Companies Act which only mandated the initiation of proceedings within three years. The court cited previous cases and interpretations to support its view that the application under section 235 was not subject to an antecedent requirement within a specific time period, allowing for the filing of the application on the next working day if the last day fell on a non-working day.
4. Additionally, the court referenced a case where the period of limitation under section 235 of the Companies Act was compared to the Limitation Act. It was concluded that the period prescribed in section 235 prevailed over the general period of limitation for suits under the Limitation Act. The court also affirmed the applicability of section 10 of the General Clauses Act in allowing the filing of the application on the next working day if the last day for filing fell on a non-working day.
In conclusion, the court allowed the appeal, set aside the District Judge's order, and remanded the application for further proceedings in accordance with the law.
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1953 (10) TMI 31
Issues Involved:
1. Validity of the charge created in favor of Andhra Bank Ltd. by Godavari Sugars and Refineries Ltd. after the commencement of winding up proceedings.
2. Whether the transactions were bona fide and in the ordinary course of the company's current trade.
3. The effect of the provisional liquidator's appointment on the validity of the transactions.
4. The principle of pari passu distribution among creditors.
5. The impact of the managing agents' (Aidco Ltd.) authority and any changes in their constitution on the validity of the transactions.
Issue-Wise Detailed Analysis:
1. Validity of the Charge Created in Favor of Andhra Bank Ltd.:
The application was filed by Andhra Bank Ltd. to validate the charge created by Godavari Sugars and Refineries Ltd. in respect of 224 bags of sugar and 21 bales of gunnies on April 24, 1952. The winding-up petition was filed on March 14, 1952, and a provisional liquidator was appointed on April 18, 1952. According to Section 227(2) of the Companies Act, every disposition of the company's property made after the commencement of the winding-up shall be void unless the court orders otherwise. Since the charge was created after the winding-up commenced, it is void unless validated by the court.
2. Bona Fide Transactions and Ordinary Course of Business:
The court examined whether the transactions were bona fide and in the ordinary course of the company's current trade. According to established principles, transactions made in the ordinary course of business and honestly are usually validated to prevent the paralysis of the company's trade. In this case, the court found no evidence of fraud or collusion by Andhra Bank. However, the company's counsel had stated on April 18, 1952, that the company could not oppose the winding-up, indicating the company was not operating in the ordinary course of business. The loans were not for preserving the business as a going concern, as the sugar-crushing season had ended, and the company had sufficient funds to meet its obligations.
3. Effect of the Provisional Liquidator's Appointment:
The appointment of a provisional liquidator on April 18, 1952, indicated that the company was no longer capable of continuing its business. The court noted that the borrowings by the managing director after the appointment of the provisional liquidator were a violation of company law. The loans taken on April 25 and 26, 1952, were not for any bona fide purpose that would justify the court in upholding them.
4. Principle of Pari Passu Distribution:
The court emphasized the fundamental principle that the assets of the company should be distributed pari passu among the creditors, and no creditor should obtain an advantage over others. The court found that the transactions in question did not meet the criteria for exceptions to this principle, such as being necessary for keeping the company going or for salvage purposes.
5. Authority of Managing Agents and Changes in Constitution:
There was a contention that changes in the constitution of the managing agents (Aidco Ltd.) had not been recognized under Section 87-BB, rendering them incompetent to borrow on behalf of the company. Although the court did not have sufficient evidence on this issue, it noted that the same result would follow from the appointment of the provisional liquidator. The court left this question open for the official liquidator to examine if Andhra Bank chooses to prefer a claim as an ordinary creditor.
Conclusion:
The court dismissed the application by Andhra Bank Ltd. to validate the charge, with costs to the official liquidator and the contesting creditor, Messrs. Soundararajan & Co. The transactions were not validated as they were not made in the ordinary course of business or for preserving the company as a going concern. The principle of pari passu distribution among creditors was upheld.
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1953 (10) TMI 30
Issues:
Compulsory winding up of a company, maintainability of a winding-up petition in a different court while a similar petition is pending in another court.
Comprehensive Analysis:
The judgment involves a Letters Patent appeal concerning the compulsory winding up of a company called the Karnal Distillery Company Limited. The dispute arose among the shareholders, leading to the removal of the appellant from the office of the chairman. The appellant filed a winding-up petition in the Lahore High Court, which was still pending. Subsequently, a similar petition was filed in the High Court at Punjab, leading to the current legal proceedings.
The main issue addressed in the judgment was the maintainability of the winding-up petition in the Punjab High Court while a similar petition was pending in the Lahore High Court. The learned Judge in the Punjab High Court dismissed the petition, citing that it was substantially identical to the pending Lahore petition and that the second petitioner was included merely to give semblance to the new petition. Furthermore, the Judge questioned the credibility of the creditor's claim and noted that an offer had been made to deposit the claimed amount in court.
The appellant argued that the present petition contained new allegations and events that occurred after the Lahore petition, justifying a winding-up order based on these facts. The appellant contended that the Lahore High Court's jurisdiction did not preclude the Punjab High Court from hearing a fresh petition on the same matter. The appellant highlighted that there was no legal bar to maintaining multiple identical suits in different courts of concurrent jurisdiction.
The judgment extensively analyzed the legal provisions under the High Courts (Punjab) Order, 1947, and concluded that the Lahore High Court's jurisdiction did not prevent the Punjab High Court from hearing a fresh winding-up petition. The judgment emphasized that the responsibility for deciding disputes concerning Indian companies rested with the Punjab High Court post-partition. It underscored that seeking relief in the Punjab High Court should not be denied without substantial grounds, especially when effective relief could only be obtained from that court.
The judgment referenced English cases to support the argument that the mere existence of a pending petition in another court does not automatically bar a fresh petition on the same matter. It highlighted that each petition should be considered on its own merits, and there was no established rule limiting the number of petitions for winding up a company. The judgment concluded that the appellant's petition was maintainable in the Punjab High Court, overturning the previous dismissal by the single Judge.
In conclusion, the appeal was allowed, setting aside the previous order of dismissal. The judgment emphasized the importance of providing effective relief to parties seeking redressal and clarified that the existence of a pending petition in another court did not preclude the appellant from filing a fresh petition in the Punjab High Court.
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1953 (10) TMI 9
Whether the first three items are receipts from business carried on by the company?
Whether those three items are receipts by a trade or professional or similar association performing specific services for its members for remuneration definitely related to those services?
Held that:- All the items of receipts from members referred to in the questions were received by the company from business with its members within the meaning of Section 10(1) and that none of them was received by the company as a trade, professional or similar association within the meaning of Section 10(6). In our judgment the High Court should have answered question No. 1 in the affirmative and question No. 2 in the negative. The appeal is allowed
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1953 (10) TMI 8
Addition - Indian State, Managing Agent - Commission - whether this whole amount was assessable and secondly whether the firm was entitled to exemption of the sum of Rs. 81,023 - Upon the first question both the learned Judges agreed that the sum of Rs. 2,20,702 was rightly assessed to tax, in that there was nothing to prevent the firm from drawing the amount from the company which stood credited in their favor It is contended that this commission accrued in what are now called "B States", but it was not brought into British India and hence it was not income which had accrued in British India - The short answer to this argument is that the business of the company was carried on in British India, that the commission earned by the firm on the profits made by the company in the States arose out of one indivisible agreement to charge the reduced commission of 5 per cent. on the profits of the company and that the managing agents had been doing the business of the agency in British India and not in the States - Appeal is dismissed
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1953 (10) TMI 7
Whether there is any material for the Tribunal's finding that the appellants (respondents in this case) were being assessed on cash basis in the prior years ?
Whether on the facts and in the circamstances of the case the Appellate Tribunal's finding that the sum of ₹ 2,26,850 could not be assessed for the assessment year 1942-43 is correct in law ?
Held that:- The sum had irrevocably entered the debit side of the company's account as a disbursement of managing agency commission to the firm and had been appropriated to the firm's dues and the same sum could not again be entered in a suspense account at a later date. The sum, therefore, belonged to the firm and had to be included in the computation of the profits and gains that had accrued to it unless the firm had regularly kept its accounts on a cash basis, which is not the case here. Appeal allowed.
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1953 (10) TMI 6
Whether in the facts and circumstances of this case, the Income-tax Appellate Tribunal was right in disallowing ₹ 2,00,000 as a deduction under Section 10(2)(xv) of the Indian Income-tax Act?
Held that:- The High Court was right in the conclusion to which it came that there was uncertainty as regards the beneficiaries and there was an absence of any obligation to grant any pension with the result that no legal and effective trust could be said to have been created and further that the provision of ₹ 2,00,000 in the accounting year 1946-47 was not an expenditure or an expenditure for the purposes of the business within the meaning of Section 10(2)(xv)of the Indian Income-tax Act. Appeal dismissed.
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1953 (10) TMI 5
Whether in the circumstances of the case any income arose to the assessee as a result of the transfer of shares and silver bars to the trustees ?
Whether the method employed by the Appellate Assistant Commissioner and upheld by the Appellate Tribunal in computing the assessee's income from the transfer is the proper method for computing the income ?
Held that:- Our answer to the first question is that in the circumstances of this case no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees. In view of that, the second question does not arise. Appeal allowed.
The appeal is allowed
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1953 (10) TMI 4
Whether the amount of ₹ 5,08,637 is a part of the ' reserves ' of the assessee company as on 1st April, 1946, within the meaning of rule 2(1) of the Rules in Schedule II to the Business Profits Tax Act?
Whether the profits of the assessee company from 1st January to 1st April, 1946, should be included in the said reserves as on 1st April, 1946?
Held that:- The nature of the amount which was nothing more than the undistributed profits of the company, remained unaltered. Thus the profits lying unutilized and not specially set apart for any purpose on the crucial date did not constitute reserves within the meaning of Schedule II, rule 2(1).The balance sheet drawn up by the assessee as showing the profits was prepared in accordance with the provisions of the Indian Companies Act. These provisions also support the conclusion as to what is the true nature of a reserve shown in a balance sheet. We are of the opinion that the view taken by the Bombay High Court is erroneous and must be set aside. The appeal of the Commissioner of Income-tax is allowed
As regards the second question, Mr. Kolah, the learned counsel for the company, frankly conceded that the view taken by the High Court on this part of the case is not open to challenge and is correct. The High Court held that the profits for three months from the 1st January, 1946, to the 1st April, 1946, were not reserves which would attract the application of rule 2 of Schedule II. With this conclusion we agree. The assessee's appeal is, therefore, dismissed
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1953 (10) TMI 3
Whether on the facts and circumstances of this case there is a change in the persons carrying on the business within the meaning of Section 8(1) of the Excess Profits Tax Act, 1940, with effect from 14th April, 1943, when the business, which had previously been carried on in partnership between two Dayabhaga Hindu undivided families, was carried on by a partnership between the separated male members of the two families ?
Held that:- We agree with the High Court that if the case of the assessee was that even before 14th April, 1943, there was a partnership of eight persons and if that case was accepted by the Appellate Tribunal then no question of law could have arisen on those facts. It is only because the fact found was that prior to 13th April, 1943, the business was carried on by a partnership of two Hindu undivided families which prima facie means a partnership between two kartas representing two Hindu undivided families and that from 14th April, 1943, it became a business of eight individual members of two disrupted families that the question of law could arise. If, as we hold, the assessee is not entitled to go behind the facts so found by the Appellate Tribunal in the statement of the case and as is implicit in the question itself, then there can be no doubt that there had been a change in the persons carrying on the business within the meaning of Section 8 of the Excess Profits Tax Act and it has not been argued otherwise. In our opinion, therefore, the answer given by the High Court to the referred question was correct. Appeal dismissed.
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1953 (10) TMI 2
Whether in the circumstances of the case and on a true construction of Section 4(1)(b) and Section 14(2)(c) of the Indian Income-tax Act, the sum of ₹ 2,20,887 was in law assessable to tax ?
Held that:- On the finding of the Income-tax authorities that the 582 bars of silver lying at Bikaner had not been really sold but remained part of the unsold stock of the firm's business at the end of the accounting year, the whole of the profits of that year must be taken to have accrued or arisen at Calcutta where the business was carried on, no part of that business having admittedly been transacted at Bikaner.
We agree with the High Court that the question referred should be answered in the affirmative though on different grounds. Appeal dismissed.
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1953 (10) TMI 1
Whether in the facts and circumstances of these cases, the Income-tax Appellate Tribunal was right in holding that the directors of the respondent company had a controlling interest in it as contemplated by Section 2(21) of the Excess Profits Tax Act ?
Held that:- We accept this appeal and hold that the answer to the question referred by the Appellate Tribunal to the High Court should be in the negative
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1953 (9) TMI 38
Issues Involved:
1. Whether contempt of court is an offence within the meaning of Section 5(2), Criminal Procedure Code (CrPC).
2. Whether the procedure prescribed by CrPC for the investigation, inquiry, and trial of an offence must be followed in contempt proceedings.
3. Whether the alleged contemner is an accused person within the meaning of Section 5, Oaths Act, 1873.
4. Whether the alleged contemner is a person "accused of an offence" within the meaning of Article 20(3) of the Constitution and can be cross-examined on an affidavit voluntarily made.
Issue-wise Detailed Analysis:
1. Whether Contempt of Court is an Offence within the Meaning of Section 5(2), CrPC:
The court analyzed the definition of "offence" as per Section 4(o) of the CrPC, which states that an offence is "any act or omission made punishable by any law for the time being in force." It was argued that contempt of court is an act made punishable by the Contempt of Courts Act, 1926, and thus should be considered an offence. However, the court concluded that contempt of court is not an act made punishable by statute law but is punishable under the inherent and supervisory powers of the court. The court referred to historical context and legal precedents to emphasize that the jurisdiction to punish for contempt is inherent in courts of record and not conferred by any statute. Hence, contempt of court does not fall within the definition of "offence" under Section 5(2), CrPC.
2. Whether the Procedure Prescribed by CrPC for the Investigation, Inquiry, and Trial of an Offence Must be Followed in Contempt Proceedings:
Given the conclusion that contempt of court is not an offence within the meaning of Section 5(2), CrPC, the court held that the procedure prescribed by the CrPC for the investigation, inquiry, and trial of offences does not apply to contempt proceedings. The court reiterated that contempt proceedings are governed by the inherent powers of the courts of record and follow a special procedure established through judicial practice and precedents.
3. Whether the Alleged Contemner is an Accused Person within the Meaning of Section 5, Oaths Act, 1873:
Section 5 of the Oaths Act states that no oath shall be administered to an accused person in a criminal proceeding. The court held that a contemner is not an accused person within the meaning of the Oaths Act. The term "accused" refers to a person accused of an offence as defined in the CrPC. Since contempt of court is not considered an offence under the CrPC, a contemner does not fall within the scope of Section 5 of the Oaths Act.
4. Whether the Alleged Contemner is a Person "Accused of an Offence" within the Meaning of Article 20(3) of the Constitution and Can be Cross-Examined on an Affidavit Voluntarily Made:
Article 20(3) of the Constitution provides that no person accused of any offence shall be compelled to be a witness against himself. The court held that a contemner is not a person accused of an offence within the meaning of Article 20(3). The term "offence" in Article 20(3) must be interpreted in the same manner as in the CrPC and the General Clauses Act, which do not include contempt of court. Consequently, if a contemner voluntarily makes an affidavit, he can be cross-examined on it. The court emphasized that the privilege against self-incrimination is an option and can be waived if the contemner voluntarily chooses to provide testimony.
Conclusion:
The court concluded that:
1. Contempt of court is not an offence within the meaning of Section 5(2), CrPC.
2. The procedure prescribed by CrPC for the investigation, inquiry, and trial of offences does not apply to contempt proceedings.
3. The alleged contemner is not an accused person within the meaning of Section 5, Oaths Act, 1873.
4. An alleged contemner is not a person accused of an offence within the meaning of Article 20(3) of the Constitution and can be cross-examined on an affidavit voluntarily made.
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1953 (9) TMI 37
Issues Involved:
1. Res Judicata
2. Limitation Period for Filing Appeals
3. Application of Section 12 of the Indian Limitation Act
4. Application of Section 5 of the Indian Limitation Act
5. Order 17, Rule 2 and Rule 3 of the Code of Civil Procedure
Issue-wise Detailed Analysis:
1. Res Judicata:
The Plaintiff's suit was dismissed by the lower court, which held that the previous judgment operated as 'res judicata'. The Plaintiff contended that the previous decision was not 'res judicata'. The Defendant argued that the lower courts correctly held the previous judgment as 'res judicata'. The High Court upheld the lower courts' decision, confirming that the previous judgment did indeed operate as 'res judicata' and thus, the Plaintiff's current suit was not tenable.
2. Limitation Period for Filing Appeals:
The Plaintiff's appeal against the judgment dated 6th Ardibehisht 1354 F. was dismissed as time-barred. The Plaintiff argued that the period from the date of the judgment to the date of supplying the decree should be considered as 'time requisite' for obtaining the copies, which would make the appeal within the limitation period. The High Court, however, upheld the lower court's decision, stating that the appeal was indeed time-barred as the Plaintiff did not apply for the copies within the prescribed period.
3. Application of Section 12 of the Indian Limitation Act:
The Plaintiff relied on Section 12 of the Indian Limitation Act to argue that the period from the date of the judgment to the date of obtaining the decree should be excluded. The High Court examined various precedents and interpretations of Section 12, concluding that the 'time requisite' for obtaining copies does not begin until an application for copies has been made. Since the Plaintiff applied for the copies long after the expiration of the prescribed period, the High Court held that the Plaintiff was not entitled to exclude any period prior to the date of application under Section 12.
4. Application of Section 5 of the Indian Limitation Act:
The Plaintiff did not file a petition under Section 5 of the Indian Limitation Act to condone the delay. The High Court noted that even if such a petition had been filed, the Plaintiff would not be entitled to the benefit of Section 5 due to negligence and carelessness. Thus, the Plaintiff could not claim the exclusion of any period under Section 5.
5. Order 17, Rule 2 and Rule 3 of the Code of Civil Procedure:
The Plaintiff's suit was dismissed on 6th Ardibehisht 1354 F. due to the absence of the Plaintiff's pleader and lack of evidence. The Plaintiff argued that the order was not under Order 17, Rule 3, as no judgment on the merits was given. The High Court referred to a Full Bench decision, which held that for seeking a remedy, the party must consider the order passed by the Court, not its effect. The High Court concluded that the Plaintiff's argument did not hold, as the appeal against the order was dismissed as time-barred, and this judgment operated as 'res judicata'.
Conclusion:
Both appeals filed by the Plaintiff were dismissed. The High Court upheld the lower courts' decisions, confirming that the previous judgment operated as 'res judicata', and the Plaintiff's appeal was time-barred. The Plaintiff was not entitled to the exclusion of any period under Section 12 or Section 5 of the Indian Limitation Act. The High Court also clarified the application of Order 17, Rule 2 and Rule 3 of the Code of Civil Procedure, emphasizing that the remedy must be sought based on the order passed by the Court.
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1953 (9) TMI 36
Issues Involved:
1. Whether the assessment was made within the period of limitation prescribed under Section 34(2) of the Indian Income Tax Act.
Issue-Wise Detailed Analysis:
1. Period of Limitation for Assessment under Section 34(2):
The primary issue was whether the assessment was made within the four-year limitation period prescribed under Section 34(2) of the Indian Income Tax Act. The assessment year in question was 1942-43, with the accounting year ending on 12-4-1942. The assessment was completed on 24-3-1947, and the assessment order and demand notice were dispatched on 25-3-1947, received by the assessee on 2-4-1947. The assessee contended that the assessment was not "made" until 2-4-1947, when it was communicated to him, thus exceeding the four-year limit.
2. Interpretation of "Made" in the Context of Section 34(2):
The court examined the meaning of "made" within the context of Section 34(2). The assessee's counsel relied on precedents such as 'Swaminathan v. Lakshmanan' and 'Muthiah Chettiar v. Commr. of Income tax, Madras', which dealt with the statutory expression "making of the order" and the principle that limitation should not be computed from a date earlier than when the party aggrieved knew of the order. However, the court emphasized that the term "made" should be construed with reference to the context in which it is used in the statute.
3. Assessment Process under Section 23:
The court analyzed the assessment process under Section 23 of the Act. It highlighted that the assessment involves determining the income and the tax payable by the assessee, which must be done within the limitation period. The court noted that the assessment stage precedes the communication of the tax due under Section 29 of the Act. Therefore, the assessment is considered "made" when the Income Tax Officer completes the assessment and determines the tax payable, even if the terms of the order are not communicated to the assessee within the limitation period.
4. Distinction from Section 33-A:
The court distinguished the current case from the principles applied in Section 33-A of the Income Tax Act, which deals with the time limit for the exercise of revisional powers by the Commissioner. The court explained that the context and purpose of Section 34(2) differ from those of Section 33-A, and thus the same interpretation could not be applied.
5. Judicial Precedents and Statutory Interpretation:
The court referred to various judicial precedents and statutory interpretations, including 'Abdul Ali v. Mirza Khan', 'The Secretary of State v. Gopisetti Narayanaswami Naidu', and 'Barlow v. Vestry of St. Mary Abbotts, Kensington'. It concluded that the necessity to bring the terms of the order to the knowledge of the person affected turned on the expression "on" and not on the necessity to have the order in writing. The court emphasized that the time limit prescribed by Section 34(2) pertains to the completion of the assessment stage by the Income Tax Officer.
Conclusion:
The court held that the assessment was made within the meaning of Section 34(2) when the Income Tax Officer completed the assessment and determined the tax payable, which occurred on 24-3-1947. The communication of the assessment order to the assessee on 2-4-1947 was not relevant to the computation of the limitation period. Therefore, the court answered the question in the affirmative and against the assessee, concluding that the assessment was made within the prescribed period of limitation. The assessee was ordered to pay the costs of the Commissioner of Income Tax, fixed at Rs. 250.
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1953 (9) TMI 35
Issues Involved:
1. Negligence in opening a bank account.
2. Negligence in the collection and encashment of a cheque.
3. Applicability of Section 131 of the Negotiable Instruments Act.
4. Examination of endorsements on a bearer cheque.
Issue-wise Detailed Analysis:
1. Negligence in Opening a Bank Account:
The respondent, a firm of cloth merchants, filed a suit against the appellant bank for the recovery of a sum of Rs. 5225-12-9. The cheque in question was stolen and deposited by a person named Matha Prasad Gupta, who opened an account with the appellant bank on 6-12-1943 with a cash deposit of Rs. 250. The court found that the bank allowed the account to be opened without proper introduction and verification. The application for opening the account was recommended by a bank employee, Krishnaswami, who admitted in his deposition that he did not know Matha Prasad Gupta and introduced him merely to increase the bank's business. The court held that the bank acted negligently in opening the account without making proper enquiries, thus failing to meet the standard of care required.
2. Negligence in the Collection and Encashment of a Cheque:
The cheque was deposited into the newly opened account and encashed in the usual course of business. The court examined whether the bank acted "in good faith and without negligence" in the entire process, including the preliminary stages leading to the encashment of the cheque. The court emphasized that the protection under Section 131 of the Negotiable Instruments Act requires the bank to act without negligence throughout the entire transaction. The court found that the bank's failure to scrutinize the endorsements on the cheque and the suspicious circumstances surrounding the cheque's presentation indicated negligence.
3. Applicability of Section 131 of the Negotiable Instruments Act:
The appellant bank claimed protection under Section 131 of the Negotiable Instruments Act, which shields banks from liability if they act in good faith and without negligence while receiving payment for a cheque. The court held that this protection extends to all stages of the transaction, from the receipt of the cheque to its encashment. The court cited various precedents, including the English case "Morison v. London County and Westminster Bank Ltd." and "A.L. Underwood Ltd. v. Bank of Liverpool," to support the view that negligence at any stage of the transaction would preclude the bank from claiming protection under Section 131.
4. Examination of Endorsements on a Bearer Cheque:
The court found that the endorsements on the cheque were suspicious and should have put the bank on enquiry. The cheque was made payable to the respondent's firm at Benares but was presented for collection at Madras. The endorsements were in the same handwriting and contained a consistent spelling error, indicating forgery. The court rejected the appellant's argument that there was no need to examine endorsements on a bearer cheque, clarifying that while Section 85(2) of the Negotiable Instruments Act applies to paying banks, the collecting bank's duties are governed by Section 131. The court concluded that the bank's failure to scrutinize the endorsements constituted negligence.
Conclusion:
The court held that the appellant bank acted negligently at all stages, from opening the account to encashing the cheque, and thus could not claim protection under Section 131 of the Negotiable Instruments Act. The judgment of Mack J. was confirmed, and the appeal was dismissed with costs.
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