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• 1962 (5) TMI 18
  
  Issues Involved:
  1. Validity of the resolution altering clause 3(T) of the memorandum under section 5 of the Companies Act, 1948.
  2. Requirement of notice to holders of debenture stock.
  3. Validity of the resolution under section 23 of the Companies Act, 1948.
  4. Defectiveness of the circular issued.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of the Resolution under Section 5:
  The first issue addressed whether the resolution altering clause 3(T) of the memorandum falls within the ambit of section 5 of the Companies Act, 1948. The court examined whether the resolution to promote a default beneficiary to the status of a primary beneficiary could be considered as "restricting or abandoning any of the objects specified in the memorandum." The court concluded that this alteration did not fit within the meaning of section 5(e) because it involved promoting a default beneficiary rather than restricting or abandoning an existing object. The court illustrated this point by comparing it to a hypothetical scenario involving hospitals, concluding that the resolution did not comply with section 5.
  
  2. Requirement of Notice to Debenture Stockholders:
  The second issue was whether notice of the meeting should have been given to the holders of the company's debenture stock. The court analyzed the statutory provisions and historical legislative context, concluding that the term "debenture" in section 5(5) includes "debenture stock." It was determined that notice should have been given to the holders of the debenture stock, not just the trustees of the trust deed. The court referenced earlier statutes, including the Companies (Memorandum of Association) Act, 1890, and the Companies (Consolidation) Act, 1908, which unequivocally required notice to debenture stockholders. The omission of the words "or debenture stock" in later acts was seen as a drafting alteration, not a substantive change. Consequently, the court found that the special resolution failed to comply with section 5 due to the lack of notice to debenture stockholders.
  
  3. Validity of the Resolution under Section 23:
  The third issue was whether the resolution could be saved by section 23 of the Act. The court examined whether the alteration of clause 3(T) represented the alteration of a condition that could lawfully have been contained in the company's articles instead of its memorandum. The court found that the provision in question was introduced by the words "The objects for which the company is established are," making it an object of the company. Under section 2 of the Act, such objects must be included in the memorandum. The court rejected the argument that the word "objects" only connotes functions exercised while the company is a going concern, stating that the company is precluded from contending that functions expressed in its memorandum as objects are not indeed objects. The court also noted that if the resolution was not for altering the objects, then the deferred shareholders were not entitled to receive notice, rendering the resolution invalid on that ground as well.
  
  4. Defectiveness of the Circular:
  Although the fourth issue regarding the defectiveness of the circular did not arise due to the court's conclusions on sections 5 and 23, the court still expressed its views. The court considered whether the National Trust could take the point on a defective circular, even though it was not affected by it. The court opined that, apart from exceptional circumstances, the holders of one class of shares could not invalidate a resolution based on insufficient information in a circular to another class of shares, none of whom had effectively complained. The court briefly addressed the principal objections to the circular and concluded that, had the resolutions been valid under sections 5 or 23, they would not have been invalidated by the defects in the circular.
  
  Conclusion:
  The court refused to confirm the resolutions under sections 5 and 23 of the Companies Act, 1948, due to the failure to comply with the statutory requirements regarding the alteration of objects and the notice to debenture stockholders.

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• 1962 (5) TMI 16
  
  Issues:
  1. Partnership agreement legality under Indian Companies Act.
  2. Dissolution of partnership based on conduct and financial losses.
  
  Analysis:
  
  1. Partnership Agreement Legality:
  The case involved a partnership agreement between Sri Murugan Oil Industries Private Ltd. and two individuals, formed without registration under the Indian Companies Act. The appellant contended that the partnership was illegal as it contravened section 4(2) of the Indian Companies Act, 1913, which corresponds to section 11(2) of the Companies Act, 1956. The appellant argued that since Murugan Oil Industries had more than 20 shareholders, the partnership agreement with two individuals was illegal. However, both trial and appellate courts rejected this argument, holding that the partnership agreement was valid. The courts emphasized that the partnership involved only three individuals, including the managing agent of Murugan Oil Industries, and not more than 20 persons as required by the law. The courts also highlighted that the company's managing agent joined the partnership as an individual, not as a representative of the corporate entity. The judgment discussed the distinction between a registered company and a partnership, emphasizing the legal personhood of a registered company separate from its shareholders.
  
  2. Dissolution of Partnership:
  The lower appellate court justified the dissolution of the partnership based on various grounds under section 44 of the Indian Partnership Act. The court found that the conduct of the partners, financial losses, and inability to carry on the business profitably warranted dissolution. The partners' serious misunderstandings and communication issues further supported the dissolution. The appellant's counsel did not contest these findings related to the dissolution grounds. The judgment highlighted that the partnership's operation at a loss and the partners' inability to cooperate justified dissolution under clauses (f) and (g) of section 44. The court emphasized the legal grounds for dissolving a partnership based on conduct, financial viability, and equity considerations.
  
  In conclusion, the High Court of Madras dismissed the second appeal, upholding the lower courts' decisions regarding the legality of the partnership agreement and the dissolution of the partnership based on conduct and financial losses. The judgment provided a detailed analysis of the legal principles governing partnerships under the Indian Companies Act and the Indian Partnership Act, emphasizing the distinction between registered companies and partnerships in determining legality and dissolution grounds.

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• 1962 (5) TMI 3
  

  Whether there are materials for the Tribunal to hold that the sum of ₹ 2,87,422 aforesaid represents a loss of capital ?

  Held that:- There was hardly any element of investment which contemplates more than payment of advance price. The resulting loss to the assessee company was just as much a loss on the revenue side as would have been, if it had paid for the ready crop which was not delivered. In our judgment, the decision of the High Court that the expenditure was not in the nature of a capital expenditure, and was deductible as a revenue expenditure is right. The appeal fails and is dismissed

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• 1962 (5) TMI 2
  

  Whether the sum of ₹ 60,000 was paid by Irani to the assessee company in view of the partnership getting the rights under the quota which the assessee company possessed and that therefore the sum represented a capital receipt and not a revenue receipt?

  Held that:- The High Court came to a correct conclusion that the sum of ₹ 60,000 was a revenue receipt and liable to tax. We accordingly dismiss the appeal with costs.

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• 1962 (5) TMI 1
  
  Issues Involved:
  1. Quasi-judicial nature of proceedings before the Collector of Central Excise and the right to cross-examine witnesses.
  2. Validity of the order passed by the Central Board of Revenue.
  
  Issue-wise Detailed Analysis:
  
  1. Quasi-judicial nature of proceedings before the Collector of Central Excise and the right to cross-examine witnesses:
  
  The petitioner, a tobacco merchant, contended that the proceedings before the Collector of Central Excise were quasi-judicial in nature and thus required adherence to the rules of natural justice, which include the right to cross-examine witnesses. The petitioner argued that the refusal to allow cross-examination of the Panchas who signed the Panchnamas violated these principles. The petitioner cited several precedents, including decisions from the Bombay High Court and the Madhya Pradesh High Court, which emphasized the necessity of cross-examination in quasi-judicial proceedings to ensure fairness.
  
  The respondents countered that the petitioner had signed the Panchnamas, thereby acknowledging the inspections. They argued that the petitioner had suppressed this fact and that the findings were based on warehouse records and the actual tobacco found during inspections. The Bombay High Court had previously dismissed a similar petition by the petitioner, noting the lack of good faith and the signing of Panchnamas by the petitioner.
  
  The court, while acknowledging the quasi-judicial nature of the proceedings, noted that the petitioner had signed most of the Panchnamas and had not demonstrated how the lack of cross-examination of the Panchas resulted in manifest injustice. The court concluded that there was insufficient material to prove that the refusal to allow cross-examination had prejudiced the petitioner's defense. Consequently, the court declined to interfere under Article 226 of the Constitution on this ground.
  
  2. Validity of the order passed by the Central Board of Revenue:
  
  The petitioner challenged the order of the Central Board of Revenue, arguing that it lacked detailed reasons and thus could not be regarded as a judicial order. The court examined the brevity of the Board's order, which merely reduced the duty amount without providing a detailed rationale. The petitioner cited several judgments, including those from the Allahabad High Court, Andhra Pradesh High Court, and the Supreme Court, which emphasized that judicial orders must disclose reasons to reflect proper application of mind to the facts and law.
  
  The court found merit in the petitioner's argument, noting that the order of the Central Board of Revenue did not provide sufficient reasons for its decision. The court referred to the Supreme Court's decision in Harinagar Sugar Mills, which held that appellate orders must contain reasons to be subject to judicial scrutiny under Article 136 of the Constitution.
  
  In conclusion, the court allowed the petition to the extent of quashing the order of the Central Board of Revenue. The court directed the Board to rehear and dispose of the appeal in accordance with the law, ensuring that proper reasons are provided for its decision. The court made no order as to costs.

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• 1962 (4) TMI 141
  
  ISSUES PRESENTED and CONSIDERED

  The primary legal issue considered in this case was whether the appellants had accepted payment of Rs. 20 lacs in full satisfaction of their claim against the respondent and thereby discharged all promissory notes, leading to an absolute release of the debt as alleged by the respondent. This issue involved examining the intention of the parties and the effect of the receipt executed contemporaneously with the payment of the second installment.

  ISSUE-WISE DETAILED ANALYSIS

  Relevant legal framework and precedents:

  The legal framework primarily involved Section 63 of the Indian Contract Act, 1872, which allows a promisee to remit the performance of a promise, either wholly or in part, or to accept any satisfaction he thinks fit. Section 41 of the Contract Act was also relevant, as it addresses the acceptance of performance from a third party. The court referred to English precedents such as Day v. Mc Lea and Hirachand Punamchand v. Temple to explore the concept of accord and satisfaction.

  Court's interpretation and reasoning:

  The Court focused on the evidence presented, particularly the testimonies of Putta Madhava Rao and Kapurchand Godha. The Court found that the appellants, despite initial protests, accepted the payment of Rs. 20 lacs in full satisfaction of their claim. The Court emphasized that the appellants had endorsed full satisfaction on the promissory notes, which indicated acceptance of the terms under which the payment was made.

  Key evidence and findings:

  The evidence included the oral testimonies of Madhava Rao and Kapurchand Godha, documentary evidence such as the receipt Ex. C, and the promissory notes with endorsements of full satisfaction. Madhava Rao's testimony revealed that the authorities made it clear that payment would only be made if full satisfaction was recorded, and Kapurchand Godha's testimony corroborated this by stating that he endorsed the promissory notes under protest but without any legal plea of coercion.

  Application of law to facts:

  The Court applied Section 63 of the Indian Contract Act, concluding that the appellants had accepted the payment in full satisfaction of their claim and thus could not pursue further recovery from the respondent. The Court also applied Section 41, noting that once the appellants accepted performance from a third party, they could not enforce the claim against the respondent.

  Treatment of competing arguments:

  The appellants argued that the acceptance of Rs. 20 lacs was not intended as full satisfaction, relying on the receipt Ex. C, which reserved their right to recover the balance. However, the Court found that the subsequent endorsement of full satisfaction on the promissory notes was decisive. The Court dismissed the appellants' reliance on English cases as inapplicable due to the clear statutory provisions in Indian law.

  Conclusions:

  The Court concluded that the appellants had accepted the payment in full satisfaction of their claim and had no legal basis to recover any additional amount from the respondent.

  SIGNIFICANT HOLDINGS

  The Court held that the appellants, by endorsing full satisfaction on the promissory notes, had accepted the payment of Rs. 20 lacs as complete discharge of their claim. The Court stated: "The appellants must have known that they could receive the second installment and retain the first installment by accepting the condition on which the sum of Rs. 20 lacs was offered to them, namely that they must record a full satisfaction of their claim."

  The core principle established was that acceptance of a payment in full satisfaction, with an endorsement of full satisfaction on relevant documents, constitutes a complete discharge of the debt under Section 63 of the Indian Contract Act. The Court also reinforced the principle that once a promisee accepts performance from a third party, they cannot enforce the claim against the original promisor, as per Section 41 of the Contract Act.

  Final determination on the issue was that the appeal was dismissed, and the appellate court's decision to dismiss the suit was upheld, with costs awarded to the respondent.

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• 1962 (4) TMI 140
  
  Issues:
  1. Conviction under sections 302 and 34 of the Indian Penal Code.
  2. Identification of the accused at the test identification parade.
  3. Admissibility of evidence under section 162 of the Criminal Procedure Code.
  
  Detailed Analysis:
  
  Issue 1: The judgment dealt with the conviction of the appellants under sections 302 and 34 of the Indian Penal Code. The prosecution's case revolved around the murder of a chowkidar, allegedly orchestrated due to the deceased's involvement in reporting the appellants' movements to the police. The court found that the evidence provided by witnesses, including the main witness P.W. 2, was credible and accepted by both the trial court and the High Court. The court concluded that the common intention to commit murder was established based on the appellants' actions and statements made during the incident, leading to the conviction under the relevant sections of the IPC.
  
  Issue 2: The identification of one of the appellants, Nepali Master, at the test identification parade was challenged. The defense argued that the identification was based on the testimony of only one witness, which they deemed insufficient. However, the court noted that Nepali Master was identified by two witnesses, including an elderly witness with weak eyesight. The court upheld the identification, emphasizing that the credibility of a witness is crucial in determining the validity of identification evidence.
  
  Issue 3: The admissibility of a document, Exhibit 6, was questioned under section 162 of the Criminal Procedure Code. The defense contended that the document was hit by the provision as it was received during the investigation. The court clarified that section 162 pertains to statements made to a police officer during the course of investigation and does not encompass all statements made during that period. The court held that Exhibit 6, which contained crucial information regarding the motive behind the crime, was admissible under section 21 of the Evidence Act, as it provided corroboration to the testimonies of key witnesses. The court ruled that the document was not barred by section 162 and upheld its admissibility in evidence.
  
  In conclusion, the Supreme Court dismissed the appeals, affirming the convictions of the appellants under the relevant sections of the Indian Penal Code. The judgment highlighted the importance of credible witness testimonies, valid identification procedures, and the admissibility of crucial evidence in ensuring a fair trial and upholding justice.

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• 1962 (4) TMI 139
  
  Issues Involved:
  
  1. Allegation of separation between Rameshwar Rai and defendant No. 1.
  2. Legality and validity of the document dated 24-8-1935.
  3. Entitlement of the plaintiffs to the reliefs claimed.
  4. Burden of proof regarding the allegations of fraud and execution of the document.
  
  Issue-wise Detailed Analysis:
  
  1. Allegation of Separation between Rameshwar Rai and Defendant No. 1:
  
  The plaintiff, widow of Rameshwar Rai, claimed that her husband and Jangbahadur (defendant No. 1) had partitioned the family property around 1924, and post-partition, her husband was in exclusive possession of his share until his death in 1930. The Munsif and Subordinate Judge found that Rameshwar Rai died in a state of separation from Jangbahadur. The High Court, however, set aside this finding, arguing that the burden of proof was wrongly placed on the defendant. The Supreme Court reaffirmed that the lower courts had correctly placed the burden of proof and found that there was sufficient evidence to support the claim of separation.
  
  2. Legality and Validity of the Document Dated 24-8-1935:
  
  The plaintiff alleged that the document executed on 24-8-1935, believed to be a power of attorney, was in fact a fraudulent maintenance deed with false recitals, not read or explained to her or her mother-in-law. The Munsif and Subordinate Judge concluded that the plaintiff and her mother-in-law, being pardhanashin ladies, did not understand the document's contents and executed it under the impression that it was a power of attorney. The High Court reversed this finding, but the Supreme Court held that the burden of proof was correctly placed on the defendant to prove the document's validity and that the High Court had no jurisdiction to interfere with the concurrent findings of fact by the lower courts.
  
  3. Entitlement of the Plaintiffs to the Reliefs Claimed:
  
  The plaintiff sought a declaration of her title to the suit property and a declaration that the maintenance deed was fraudulent and not binding. The Munsif and Subordinate Judge decreed the suit in favor of the plaintiff, finding that the document was not executed with an understanding of its contents. The High Court dismissed the suit, but the Supreme Court reinstated the lower courts' decrees, affirming the plaintiff's entitlement to the reliefs claimed.
  
  4. Burden of Proof Regarding the Allegations of Fraud and Execution of the Document:
  
  The Supreme Court emphasized that in cases involving pardhanashin ladies, the burden of proof lies on the person seeking to sustain the document to prove that it was executed with full understanding of its contents. The High Court erred in placing the burden on the plaintiff to prove fraud. The Supreme Court reiterated that the protection for pardhanashin ladies under Indian law requires the person relying on the document to show affirmatively that it was executed freely and with full understanding. The lower courts had correctly applied this principle, and their findings were based on substantial evidence, including the circumstances surrounding the execution of the document and the conduct of the parties.
  
  Conclusion:
  
  The Supreme Court allowed the appeal, set aside the High Court's decree, and reinstated the decrees of the Munsif and Subordinate Judge, thereby decreeing the suit in favor of the plaintiff with costs throughout. The judgment underscored the special protection afforded to pardhanashin ladies under Indian law and clarified the correct application of the burden of proof in such cases.

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• 1962 (4) TMI 138
  
  Issues:
  1. Whether certain sales by a company are outside sales within the Explanation to Article 286(1)(a) of the Constitution.
  2. Whether the sales are in the course of inter-state trade or commerce under Article 286(2).
  
  Analysis:
  1. The case involves sales by a cement company, where the sales turnover includes sales to private consumers and government departments outside the state. The key question is whether the goods were actually delivered outside the state to qualify for exemption under Article 286(1)(a) of the Constitution. The company contended that since the sales were F.O.R. the destination outside the state, and the goods eventually reached there, they should be exempt. However, it was held that actual delivery outside the state is crucial for the exemption, and the delivery to a common carrier within the state did not constitute delivery outside the state.
  
  2. The company also argued that the sales were in the course of inter-state trade, invoking Article 286(2) of the Constitution. For a sale to be inter-state, there must be a transport of goods from one state to another under the contract of sale. The court analyzed the terms of the contract and the responsibilities of the parties. It was found that there was no contract for delivery at a place other than the factory site, and once the goods were consigned to railway wagons, the sale was complete within the state. Therefore, the transactions did not qualify as inter-state trade or commerce under Article 286(2).
  
  3. The judgment emphasized that the liability of the seller ceased upon delivery to the carrier at the factory site, and any claims for loss or damage during transit were to be made against the carrier, not the seller. The terms of the contract and the course of dealings between the parties were crucial in determining the location of the sale and the applicability of constitutional provisions regarding sales tax. Ultimately, the court dismissed the Revision case, holding that the transactions did not meet the criteria for exemption or inter-state trade, and costs were awarded to the respondents.

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• 1962 (4) TMI 137
  
  Issues Involved:
  1. Interpretation of the expression "the High Court" in the context of eligibility for the post of District Munsif.
  2. Validity of the rule requiring practice as an Advocate of the Andhra High Court under Articles 14 and 16(1) of the Constitution.
  
  Detailed Analysis:
  
  1. Interpretation of the Expression "the High Court":
  The primary issue is the interpretation of the term "the High Court" in the rule requiring that an applicant must be practicing as an Advocate of "the High Court." The petitioner argued that "the High Court" should be interpreted as any High Court in India. However, the court held that in the context of the rules for appointment of subordinate judicial officers, "the High Court" refers specifically to the Andhra High Court. The court emphasized that the definite pronoun "the" indicates a particular High Court, which in this case is the Andhra High Court. The notification's scheme, which requires applications to be submitted through the Andhra High Court, further supports this interpretation.
  
  2. Validity of the Rule Under Articles 14 and 16(1) of the Constitution:
  The petitioner contended that if "the High Court" means the Andhra High Court, the rule is ultra vires as it contravenes Articles 14 and 16(1) of the Constitution, which guarantee equality before the law and equality of opportunity in matters of public employment. The court examined whether the rule's classification was based on an intelligible differentia and whether this differentia had a reasonable relation to the object sought to be achieved by the rule.
  
  The court acknowledged that while Article 14 forbids class legislation, it allows reasonable classification for legislative purposes. The object of the rule is to recruit suitable persons for the Judicial Service in Andhra Pradesh, ensuring fair and efficient administration of justice. The respondents argued that the rule aimed to ensure that applicants possess knowledge of local laws, which could be achieved by requiring practice in the Andhra High Court.
  
  However, the court found that the rule did not effectively ensure knowledge of local laws. The proper method to achieve this would be to prescribe a suitable examination or other effective means. Furthermore, the rule allowed advocates from other High Courts to practice in the Andhra High Court under certain conditions, undermining the argument that the rule ensured knowledge of local laws.
  
  The court also rejected the argument that attachment to the Andhra High Court or its disciplinary jurisdiction provided a rational basis for the rule. Loyalty and dedication to judicial administration are not confined to advocates of a particular High Court. The classification between advocates of the Andhra High Court and those of other High Courts was deemed irrational, as it lacked a nexus with the object intended to be achieved.
  
  Conclusion:
  The court concluded that the rule requiring practice as an Advocate of the Andhra High Court introduced an irrational classification and violated Articles 14 and 16(1) of the Constitution. Consequently, the impugned rule and the corresponding portion of the notification were declared ultra vires and unconstitutional. The court directed the respondent to entertain the applications of the petitioners and consider them on their merits, without rejecting them on the preliminary ground of not practicing as Advocates in the Andhra High Court. The petitions were allowed with costs.

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• 1962 (4) TMI 136
  
  Issues:
  1. Validity of assessment made under section 34(1)(a) of the Income-tax Act.
  
  Analysis:
  The case involved a reference under section 66(1) of the Income-tax Act regarding the validity of an assessment made under section 34(1)(a). The assessee, a Hindu undivided family, had certain cash credits included in its total income for the assessment year 1947-48. The Appellate Assistant Commissioner initially allowed the appeal, stating that the nature and source of the cash credits remained unexplained. Subsequently, the Income-tax Officer issued a notice under section 34, subjecting the amount to tax under section 34(1)(a) along with additional amounts. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal had differing opinions on the applicability of section 34(1)(a) to the case.
  
  The Tribunal held that the mere presence of entries in the account books did not constitute disclosure of the information contained in those entries to the Income-tax Officer. Therefore, there was a failure on the part of the assessee to disclose all material facts necessary for the assessment. The Tribunal concluded that the provisions of section 34(1)(a) were applicable. Additionally, the Tribunal determined that the assessment was within the prescribed limitation period of eight years from the end of the assessment year.
  
  Alternatively, the case was considered under section 28(1)(c), where reassessment could be completed within eight years. This provision justified the reassessment as an assessment under section 23. Ultimately, the court held that the proceedings under section 34(1)(a) were legally justified, and the assessment was completed within the specified time limit.
  
  The court answered the reference in the affirmative, affirming the validity of the assessment under section 34(1)(a). The department was awarded costs of Rs. 200.

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• 1962 (4) TMI 135
  
  Issues:
  1. Allowability of payments of salaries and bonuses made to employees during their jail custody as deductions under section 10(2)(xv).
  
  Analysis:
  The judgment by the Allahabad High Court, delivered by V. Bhargava C.J., and S. C. Manchanda J., addressed the issue of whether payments of salaries and bonuses made to two employees, who were in jail custody as under-trial prisoners, are allowable as deductions under section 10(2)(xv). The employees, accused of murder, were acquitted later. The Tribunal found that the company continued to pay their full salaries and bonuses during their jail term, despite not performing their duties. The Tribunal held that the payments were not made out of commercial expediency. The company argued that the payments were necessary to prevent the disclosure of company secrets and that the employees provided advice while in jail. However, the Tribunal found no satisfactory proof of these claims and concluded that the payments were made due to extra-commercial considerations related to the directors.
  
  The Tribunal also considered an alternative claim that part of the salaries, representing leave salary entitlement, should be considered as expenditure for business purposes. The Appellate Assistant Commissioner disallowed this claim as well, stating that the payments were not made based on business considerations. The High Court disagreed with this decision, highlighting that the employees were entitled to full pay during their leave periods. Therefore, the salary paid for these leave periods should be considered as expenditure incurred wholly and exclusively for the purpose of the business, as it was a right earned by the employees through their work.
  
  Conclusively, the High Court answered the question in the negative, except regarding the payment of leave salaries for specific periods. The Court held that the amount representing leave salaries for those periods should be allowed as deductions under section 10(2)(xv). The costs were ordered to be paid by the assessee due to the judgment mainly favoring the department. The fee of counsel was fixed at Rs. 200.

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• 1962 (4) TMI 134
  
  Issues Involved:
  1. Whether the proceedings under the Patiala Recovery of State Dues Act were illegal as the Act had ceased to be in force on the material dates.
  2. Whether the Act and the rules made thereunder became void on the coming into force of the Constitution as they are repugnant to Articles 14 and 19(1)(f) and (g).
  3. Whether the certificate issued under Section 7 is in accordance with the rules framed under the Act.
  4. Whether the Act discriminates against the debtors of the Patiala State Bank compared to other banks, violating Article 14.
  
  Issue-Wise Detailed Analysis:
  
  1. Legality of Proceedings Under the Act:
  The appellants argued that the proceedings under the Act were illegal as the Act had ceased to be in force on the material dates. The court examined the Covenant entered into by the Rulers of several States to form the Patiala and East Punjab States Union (Pepsu) and the subsequent Ordinances promulgated by the Raj Pramukh. The court concluded that the Supplementary Covenant, which extended the validity of the Act, was void as the Rulers had surrendered all their sovereign powers to the new State. However, the court held that even if the Ordinances ceased to be in operation, the laws of the erstwhile State of Patiala continued to be in force proprio vigore. Therefore, the appellants' contention was rejected.
  
  2. Constitutionality of the Act and Rules:
  The appellants contended that the Act and the rules were void under the Constitution as they were repugnant to Articles 14 and 19(1)(f) and (g). The court examined whether the Act violated Article 14 by discriminating between the Patiala State Bank and other banks. It was held that the Patiala State Bank formed a category in itself, and the special procedure prescribed for it was based on a reasonable classification related to the object of the legislation. The court also found that the Act did not contravene Article 19(1)(f) or (g) as it did not directly or indirectly affect the appellants' right to carry on trade or business. The court concluded that the Act and the rules were reasonable and did not violate any rules of natural justice.
  
  3. Validity of the Certificate Issued Under Section 7:
  The appellants argued that the certificates issued by the Managing Director under Section 7 were defective as they were not countersigned by the Minister or Secretary as required by the proviso to Section 6(1). The court found that the Forms prescribed under the Act directed the countersignature provision to be struck out when the certificate was sent by the Managing Director. Therefore, the contention was rejected.
  
  4. Discrimination Against Debtors of the Patiala State Bank:
  Justice K. Subba Rao, in his dissenting judgment, held that the Act discriminated against the debtors of the Patiala State Bank compared to other banks, violating Article 14. He argued that the procedure under the Act allowed the creditor to determine its own claim and realize the amounts through a coercive process, which was against the principles of natural justice. He concluded that there were no real differences between the Patiala State Bank and other banks that could reasonably justify the special treatment under the Act.
  
  Conclusion:
  The majority judgment upheld the validity of the Patiala Recovery of State Dues Act and the proceedings taken thereunder, rejecting all the contentions raised by the appellants. However, Justice K. Subba Rao dissented, holding that the Act violated Article 14 of the Constitution due to its discriminatory provisions. The appeals and writ petitions were dismissed with costs.

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• 1962 (4) TMI 133
  
  Issues Involved:
  
  1. Applicability of Article 226 of the Constitution.
  2. Validity of suspension order and revocation of leave preparatory to retirement.
  3. Applicability of 1941 Rules vs. 1959 Rules.
  4. Authority of the Punjab Government under Rule 3.26(d).
  5. Timing and service of suspension order.
  6. Grounds for quashing the Government's order.
  7. Allegations of mala fide action by the Chief Minister.
  8. Justiciability of service rules.
  9. Power to suspend a Government servant.
  10. Retention in service beyond the age of superannuation.
  11. Recall from leave preparatory to retirement.
  12. Violation of Fundamental Rights under Articles 13, 14, 19, and 23 of the Constitution.
  13. Validity of departmental enquiry vs. criminal prosecution.
  
  Issue-wise Detailed Analysis:
  
  1. Applicability of Article 226 of the Constitution:
  The petitioner sought relief under Article 226 of the Constitution to quash the suspension order, revocation of leave preparatory to retirement, and the impending enquiry against him.
  
  2. Validity of Suspension Order and Revocation of Leave Preparatory to Retirement:
  The petitioner argued that the suspension order and revocation of leave preparatory to retirement were illegal as they were served after his retirement date. The court found that the orders were published in the Gazette on June 10, 1961, and the petitioner had knowledge of them before his retirement date on June 15, 1961. The court held that the orders were valid and effective from the date of publication.
  
  3. Applicability of 1941 Rules vs. 1959 Rules:
  The petitioner contended that he was governed by the 1941 Rules and not the 1959 Rules. The court held that the 1959 Rules, made under Article 309 of the Constitution, applied to the petitioner as the 1941 Rules were abrogated. The court also noted that the petitioner entered service under the condition that rules could be altered, and he would be governed by the altered or new rules.
  
  4. Authority of the Punjab Government under Rule 3.26(d):
  The petitioner argued that Rule 3.26(d) did not apply to him and could not be invoked after he went on leave preparatory to retirement. The court held that Rule 3.26(d) applied to the petitioner and could be invoked at any time before the date of compulsory retirement.
  
  5. Timing and Service of Suspension Order:
  The petitioner claimed that the suspension order was served on him after his retirement date, making it ineffective. The court found that the orders were published in the Gazette on June 10, 1961, and the petitioner had knowledge of them before his retirement date. The court held that the orders were valid and effective from the date of publication.
  
  6. Grounds for Quashing the Government's Order:
  The petitioner raised several grounds for quashing the Government's order, including that the order under Rule 3.26(d) was not applicable to him, the suspension order was served after his retirement date, and the order revoking leave was not authorized by any rule of law. The court rejected all these grounds and upheld the validity of the Government's order.
  
  7. Allegations of Mala Fide Action by the Chief Minister:
  The petitioner alleged that the actions against him were taken mala fide by the Chief Minister. The court found that the allegations of mala fide were disputed questions of fact and could not be established based on the evidence presented. The court held that the orders were made in the exercise of lawful powers vested in the Government.
  
  8. Justiciability of Service Rules:
  The petitioner argued that service rules were justiciable and that he had a vested right to retire at the age of 55 years under the 1941 Rules. The court held that the 1959 Rules applied to the petitioner, and he was bound by the altered or new rules as per the conditions of his service.
  
  9. Power to Suspend a Government Servant:
  The petitioner contended that the Government had no power to suspend him without first framing charges against him. The court held that the Government had inherent or implied power to suspend a Government servant on a charge of misconduct and that the charges existed before the suspension order was made.
  
  10. Retention in Service Beyond the Age of Superannuation:
  The petitioner argued that his retention in service beyond the age of superannuation was not authorized by Rule 3.26(d). The court held that Rule 3.26(d) applied to the petitioner and that he could be retained in service until the enquiry into the charges was concluded.
  
  11. Recall from Leave Preparatory to Retirement:
  The petitioner contended that his leave preparatory to retirement could not be revoked, and he could not be recalled for the purpose of suspension. The court held that leave preparatory to retirement could be revoked, and the petitioner could be recalled for the purpose of suspension under the relevant rules.
  
  12. Violation of Fundamental Rights under Articles 13, 14, 19, and 23 of the Constitution:
  The petitioner argued that the orders violated his fundamental rights under Articles 13, 14, 19, and 23 of the Constitution. The court held that the petitioner had no absolute right to retire at the age of 55 years and that the orders were made in accordance with the service rules. The court found no violation of fundamental rights.
  
  13. Validity of Departmental Enquiry vs. Criminal Prosecution:
  The petitioner contended that the charges against him were of a criminal nature and should be tried by a criminal court rather than a departmental enquiry. The court held that the Government had the right to hold a departmental enquiry as well as to prosecute the petitioner, and there was no arbitrary or discriminatory exercise of power in proceeding with the departmental enquiry first.
  
  Conclusion:
  The court dismissed the petition, holding that the petitioner failed on all grounds urged by him. The orders of suspension and revocation of leave preparatory to retirement were found to be valid, and the court upheld the Government's actions. The allegations of mala fide were not established, and the court found no violation of the petitioner's fundamental rights.

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• 1962 (4) TMI 132
  
  Issues:
  1. Interpretation of whether a payment made by a company is an expenditure in the nature of capital or revenue under section 10(2)(xv) of the Income-tax Act.
  
  Analysis:
  The judgment pertains to a reference under section 66(1) of the Income-tax Act, involving the question of whether a payment of a specific sum by a company should be considered an expenditure in the nature of capital and thus not admissible under section 10(2)(xv) of the Act. The facts of the case revolve around a private limited company that succeeded a partnership business, with the company incorporating on June 26, 1948, but virtually undertaking the business from July 1, 1947. The payment in question was a gratuity of &8377; 38,509 to the widow of a former general manager of the partnership business. The company claimed this payment as a deduction under section 10(2)(xv), which was denied by the income-tax authorities and the Tribunal, deeming it a capital expenditure made under an agreement transferring liabilities from the predecessor firm to the company.
  
  The primary argument raised by the company's counsel was that the payment was made by the company independently and not solely under the agreement, emphasizing the company's assumption of liabilities from July 1, 1947. However, the court rejected this argument on the grounds that it was not raised before the Tribunal and lacked evidentiary support. The court highlighted the distinction between a payment being part of salary or remuneration, making it a revenue expenditure, and being an ex gratia payment, which does not qualify as a business expense. The burden of proof regarding the nature of the payment lay with the company, which failed to provide evidence or advance this argument before the Tribunal.
  
  Drawing parallels with a Madras case affirmed by the Supreme Court, where a gratuity payment was disallowed as a deduction due to lack of evidence of a scheme or commercial expediency, the court concluded that the present case mirrored the Madras case. The judgment affirmed that if the payment was made under the agreement transferring liabilities, it would still be considered a capital payment, not deductible under section 10(2)(xv). Consequently, the court answered the question in the affirmative, upholding the department's decision and awarding costs to the department.
  
  In summary, the judgment underscores the importance of substantiating the nature of payments claimed as deductions under tax laws, emphasizing the distinction between revenue and capital expenditures and the necessity of providing evidence to support such claims.

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• 1962 (4) TMI 131
  
  The High Court of Allahabad held that the expenditure of Rs. 8,600 on fees for chartered accountants and lawyers was not a permissible deduction under section 10(2)(xv) of the Indian Income Tax Act. The Tribunal's decision was based on precedents that legal and accountancy expenses incurred to reduce an assessment are not considered to be wholly and exclusively for business purposes. The reference was returned to the Income Tax Appellate Tribunal with the answer that the deduction was not permissible. The department was awarded costs of Rs. 200.

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• 1962 (4) TMI 130
  
  Issues Involved:
  1. Infringement of trade mark
  2. Passing off
  3. Interpretation of agreement between parties
  4. Scope of registration under Indian Trade Marks Act
  5. Protection under Section 26 of the Indian Trade Marks Act
  
  Detailed Analysis:
  
  1. Infringement of Trade Mark:
  The appellants, Messrs Parry and Co. Ltd., claimed that the respondents' use of the trade mark "Perry's" for confectionery products infringed their registered trade mark "Parry's." The court noted that both parties used similar marks for goods in the same category, which could deceive or cause confusion among consumers. The court highlighted that the marks "Parry's" and "Perry's" closely resemble each other visually and phonetically, creating a real danger of deception or confusion if used for the same goods. The court cited several precedents, including *In re Magdalena Securities Ltd.*, *In Re Electrix Application Ltd.*, and *Corn Products Refining Co. v. Shangrila Food Products Ltd.*, to support the principle that phonetic and visual similarity between trade marks could lead to infringement.
  
  2. Passing Off:
  The appellants also argued that the respondents' use of the trade mark amounted to passing off their goods as those of the appellants. The court, however, did not delve deeply into this issue, as it found sufficient grounds to decide the case based on trade mark infringement.
  
  3. Interpretation of Agreement Between Parties:
  The court examined the agreement dated 4th May 1951 between the parties, which allowed the respondents to use the trade mark "Perry's" for biscuits but not for confectionery. The court noted that the agreement was based on the understanding that the respondents were manufacturing biscuits, not confectionery. The court rejected the respondents' contention that the agreement impliedly allowed them to use the trade mark for all goods they manufactured, including confectionery.
  
  4. Scope of Registration Under Indian Trade Marks Act:
  The court emphasized that registration of a trade mark under the Indian Trade Marks Act confers exclusive rights only in relation to the goods for which the mark is registered. The respondents had registered their trade mark "Perry's" for biscuits, not confectionery. The court clarified that the classification of goods under Rule 13 of the Trade Marks Rules and Schedule IV is primarily for administrative convenience and does not extend the protection of a trade mark to all goods within a class. The court cited *Kerly's Law of Trade Marks* and *The Upper Assam Tea Company v. Herbert and Co.* to support this interpretation.
  
  5. Protection Under Section 26 of the Indian Trade Marks Act:
  The respondents argued that their use of the trade mark "Perry's" was protected under Section 26 of the Indian Trade Marks Act, as it was a bona fide use of the name of one of their partners, Periaswami Nadar. The court rejected this contention, stating that Section 26 protects the use of the full name of an individual, not an abbreviated or expanded form. The court cited *Shorts Limited v. Short* to support this interpretation.
  
  Conclusion:
  The court concluded that the appellants were entitled to a decree restraining the respondents from using the trade mark "Perry's" for confectionery products, as it infringed the appellants' trade mark "Parry's." The court issued an injunction accordingly but allowed the respondents to use the trade mark for biscuits, including biscuits with a superficial coating of confectionery. The appeal was allowed with costs.

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• 1962 (4) TMI 129
  
  Issues Involved:
  1. Proper interpretation of the expression "net wealth" as defined in the Wealth Tax Act.
  2. Whether proposed dividends on preference and ordinary shares are deductible in computing the net wealth of the assessee company under Section 2(m) of the Act on the valuation date.
  3. Whether the provision for payment of dividends is deductible for arriving at the net wealth of the assessee for the assessment year.
  
  Detailed Analysis:
  
  1. Proper Interpretation of "Net Wealth" as Defined in the Wealth Tax Act:
  
  The primary issue in all four tax references was the interpretation of "net wealth" under the Wealth Tax Act, specifically whether proposed dividends should be deducted when computing net wealth. Section 3 of the Wealth Tax Act charges tax on the net wealth of a company on the valuation date. "Net wealth" is defined in Section 2(m) as the value of all assets minus the value of debts owed on the valuation date. The court emphasized that the Wealth Tax Officer has the discretion to make adjustments to the balance sheet, ensuring that only actual liabilities are deducted from the net wealth.
  
  2. Deductibility of Proposed Dividends on Preference and Ordinary Shares:
  
  T.C. No. 210 of 1959:
  
  The assessee company sought to deduct proposed dividends on preference and ordinary shares from its net wealth. The Income Tax Officer, Appellate Assistant Commissioner, and Tribunal all disallowed these deductions, stating that no debt is created in favor of a shareholder until a dividend is declared by the general body. The court agreed, stating that a mere recommendation by the directors does not create a liability. The balance sheet prepared by directors is provisional and does not create a debt until the general body approves the dividend.
  
  T.C. No. 94 of 1960, T.C. Nos. 100 and 104 of 1961:
  
  Similar issues arose in these cases, where the assessees sought to deduct proposed dividends from their net wealth. The court reiterated that the liability to pay dividends only arises after the general body declares the dividend. The court dismissed the argument that the preparation of accounts indicating proposed dividends creates a liability, emphasizing that the general body has the authority to approve or modify the recommendation.
  
  3. Provision for Payment of Dividends and its Deductibility:
  
  The court examined whether the provision for dividends in the balance sheet should be considered a liability. The court held that the Wealth Tax Officer is competent to examine the balance sheet and determine if any amounts shown as liabilities are not actual liabilities on the valuation date. The court rejected the argument that the balance sheet should be accepted as it is without such examination.
  
  Additional Considerations:
  
  The court also addressed the argument that preference shareholders have a different standing. It concluded that preference shareholders are entitled to preferential treatment only if and when dividends are declared by the general body. The court cited various legal authorities to support its position that no liability for dividends exists until a formal declaration by the general body.
  
  Conclusion:
  
  The court answered all the questions referred to it in the negative, holding that proposed dividends do not constitute debts owed by the company on the valuation date and thus cannot be deducted when computing net wealth. The assessees were ordered to pay the costs of the department.

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• 1962 (4) TMI 128
  
  Issues Involved:
  1. Basis of rent fixation under Section 16(3) of the West Bengal Premises Tenancy Act.
  2. Applicability of Section 8(1)(e) and its proviso in rent fixation.
  3. Methodology for determining fair rent for sub-tenants upgraded to direct tenants.
  4. Legal implications of deeming provisions in rent fixation.
  
  Detailed Analysis:
  
  1. Basis of Rent Fixation under Section 16(3):
  
  The primary issue revolves around the proper basis for fixing the rent payable by the tenant and sub-tenants under Section 16(3) of the West Bengal Premises Tenancy Act. The court noted that the Controller's duty is to fix rents for each of the new premises created by the sub-letting. The rents so fixed are deemed to be fair rents for the purposes of the Act. The court emphasized that the Controller must fix rents in accordance with the principles embodied in the main part of Section 8(1)(e), which involves considering the situation, locality, condition, and amenities of the premises, as well as the rent payable for similar premises in the locality.
  
  2. Applicability of Section 8(1)(e) and its Proviso:
  
  The court analyzed whether the proviso to Section 8(1)(e), which limits rent increases to ten percent over the existing rent, applies to rent fixation under Section 16(3). It was held that the proviso to Section 8(1)(e) does not apply because the premises in question, created by the order under Section 16(3), have no existing rents. The court clarified that the Controller is not required to fix the rent of the premises originally let to the tenant but to fix the rents of the new premises independently.
  
  3. Methodology for Determining Fair Rent:
  
  The court rejected the contention that the Controller should first determine the fair rent for the entire premises and then apportion it among the tenant and sub-tenants. Instead, it held that the Controller's function is to fix the rents payable by the tenant and sub-tenants for the newly created tenancies. The court reaffirmed that the rent should be fixed based on the principles of reasonableness, considering the situation, locality, and condition of the premises and the amenities provided.
  
  4. Legal Implications of Deeming Provisions:
  
  The court elaborated on the legal implications of the deeming provision in Section 16(3), which states that the rents fixed by the Controller shall be deemed to be fair rents. It emphasized that a deeming provision postulates treating an imaginary state of affairs as real, and thus, the rents fixed under Section 16(3) are to be considered fair rents for all purposes under the Act, even if they do not strictly comply with the definition of fair rent under Section 8.
  
  Separate Judgments:
  
  Judgment by D.N. Sinha, J.:
  
  Sinha, J. provided a detailed factual background and discussed the methodology adopted by the Rent Controller in fixing the rents. He agreed with the Appellate Tribunal's decision to increase the rent payable by the tenant from Rs. 16 to Rs. 102.3 nP per month, emphasizing that the rent should be fixed based on the average rent paid by other tenants in the locality. He also noted that the proviso to Section 8(1)(e) does not apply to the new premises created under Section 16(3).
  
  Judgment by P.N. Mookerjee, J.:
  
  Mookerjee, J. concurred with the view that the proviso to Section 8(1)(e) does not apply to the new premises created under Section 16(3). He emphasized that the rent fixed under Section 16(3) is deemed to be fair rent and should be determined independently of Section 8(1). He agreed with the Appellate Tribunal's decision and affirmed the order fixing the rent at Rs. 102.3 nP per month for the tenant's retained portion.
  
  Conclusion:
  
  The court concluded that the rule should be discharged, and the Appellate Tribunal's order should be upheld. The rents fixed by the Controller under Section 16(3) are deemed to be fair rents for the purposes of the Act, and the proviso to Section 8(1)(e) does not apply to the new premises created by the sub-letting. The court's decision provides clarity on the methodology for rent fixation under Section 16(3) and the applicability of the deeming provision in the West Bengal Premises Tenancy Act.

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• 1962 (4) TMI 127
  
  Issues Involved:
  1. Validity of the Legal Remembrancer's decision-making process.
  2. Opportunity to lead evidence.
  3. Partial exclusion of private operators.
  4. Alleged discrimination in permit cancellations.
  5. Overlapping route permits.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of the Legal Remembrancer's Decision-Making Process:
  The appellants contended that the Legal Remembrancer erred by believing he could not reject the draft schemes in their entirety, based on an earlier Rajasthan High Court decision. This Court, however, clarified that the Legal Remembrancer had the discretion to reject the draft schemes or take evidence if necessary. Despite this, the High Court found that the Legal Remembrancer had considered objections in detail and only modified the schemes where necessary, indicating a thorough review process.
  
  2. Opportunity to Lead Evidence:
  The appellants argued they were denied a chance to present evidence to support their objections. However, it was noted that the appellants never formally requested to lead evidence before the Legal Remembrancer. The High Court determined that the Legal Remembrancer did not shut out evidence, and the objections raised did not necessitate evidence as they were of a general nature. The Supreme Court concurred, stating the appellants did not demonstrate a genuine desire to produce evidence and were merely leveraging the precedent set in Malik Ram's case.
  
  3. Partial Exclusion of Private Operators:
  The appellants challenged the legality of making permits ineffective for overlapping routes. The Court upheld this practice, stating it amounted to partial exclusion permissible under Section 68C of the Motor Vehicles Act. The Court emphasized that making permits ineffective for overlapping parts was justified and did not inherently violate any statutory provisions.
  
  4. Alleged Discrimination in Permit Cancellations:
  The appellants claimed discrimination between those whose permits were canceled and those made ineffective, arguing it resulted in unequal compensation. The Court dismissed this argument, noting that permit holders whose permits were made ineffective could still operate on overlapping routes, potentially benefiting them more than receiving compensation. Any perceived discrimination was due to oversight, which the State was prepared to rectify, negating claims of deliberate or conscious discrimination under Article 14 of the Constitution.
  
  5. Overlapping Route Permits:
  The appellants argued that some permits neither canceled nor made ineffective on overlapping routes indicated discrimination. The State admitted this was an oversight and expressed readiness to correct it post the stay order from the Court. The Court accepted this explanation, finding no evidence of deliberate favoritism. Additionally, the issue of permit cancellations on the Ajmer-Kotah route depended on the outcome of the Jaipur-Kotah scheme's re-hearing, thus no immediate relief was granted.
  
  Conclusion:
  The Supreme Court dismissed the appeals, affirming that the Legal Remembrancer's approval of the schemes was not vitiated by any procedural errors or discriminatory practices. The appellants' claims lacked substantive evidence, and the Court found no grounds to overturn the High Court's decision. The appeals were dismissed with costs.

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