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1962 (12) TMI 38
Issues:
1. Validity of the proviso to rule 39(1) of the Sales Tax Rules and legality of assessment based on it.
2. Validity of assessment based on the business duration during the assessment year.
Analysis:
The judgment by the Allahabad High Court addressed a reference under section 11(1) of the U.P. Sales Tax Act, 1948, regarding the validity of the proviso to rule 39(1) of the Sales Tax Rules and the legality of an assessment made on its basis. The respondent, a dealer in kirana and medicines, commenced business on November 6, 1953, in Baraut. The Sales Tax Officer assessed the respondent for the years 1953-54 and 1954-55, with the latter assessment being challenged through appeal and revision. The judge (Revisions) set aside the assessment order, stating that as the respondent did not elect under rule 39(1) to submit returns of the assessment year, the assessment could only be based on the previous year's turnover. The proviso to rule 39(1) was deemed ultra vires as it conflicted with the dealer's right to choose the basis of taxation between the previous and assessment years.
The Court analyzed the statutory provisions, emphasizing that section 3(1) charges a dealer to sales tax on the previous year's turnover, with an option under section 3(2) to pay tax on the assessment year's turnover. Rule 39(1) allows a dealer to elect the assessment year's turnover but mandates that a dealer not conducting business throughout the previous year must submit returns of the assessment year. The proviso, although inartistic, was deemed necessary to address cases where business commenced during an assessment year, with no entire previous year for assessment. The Court concluded that the proviso was not ultra vires, as it filled a gap in the statutory framework, ensuring a basis for assessment in unique situations.
Accordingly, the Court answered both questions affirmatively, upholding the validity of the proviso to rule 39(1) and the assessment based on it. The second question, concerning the assessment validity based on business duration, was also answered in the affirmative. The judgment directed the dissemination of the decision to relevant tax authorities without awarding costs to any party, resolving the reference comprehensively and decisively.
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1962 (12) TMI 37
Issues Involved:
1. Validity of the Amending Act No. IX of 1958.
2. Competence of the State Legislature to levy sales tax on potatoes.
3. Requirement of the President's prior sanction for the Amending Bill.
4. Alleged contravention of Article 301 of the Constitution.
5. Authority of the Magistrate to issue a warrant for recovery of tax.
Issue-wise Detailed Analysis:
1. Validity of the Amending Act No. IX of 1958:
The petitioner contended that the Amending Act No. IX of 1958, which amended section 5 of the Mysore Sales Tax Act, 1957, was unconstitutional as it was introduced without the prior sanction of the President, as required by the proviso to Article 304(b) of the Constitution. The State argued that the levy of sales tax was not a direct and immediate restriction on the freedom of trade and thus did not require the President's sanction. The court noted that the Mysore Sales Tax Act, 1957, had received the President's assent, and the amendment merely reduced the tax rate from 2% to 1% on potatoes, thus not imposing any new restriction.
2. Competence of the State Legislature to levy sales tax on potatoes:
The petitioner argued that the State Legislature was not competent to levy sales tax on potatoes under Entry 33(b) of List III, which deals with trade and commerce in foodstuffs. The court rejected this argument, stating that Entry 54 of List II, which pertains to taxes on the sale or purchase of goods, including potatoes, was applicable. The court clarified that Entry 33 of List III relates to general legislation on trade and commerce in foodstuffs, while Entry 54 of List II specifically pertains to taxation on the sale of goods.
3. Requirement of the President's prior sanction for the Amending Bill:
The petitioner asserted that the Amending Bill required the President's prior sanction under the proviso to Article 304(b) of the Constitution. The court examined the scope of Article 304(b) and concluded that the amendment did not impose any direct or immediate restriction on the freedom of trade, commerce, or intercourse. The court cited various Supreme Court decisions to support its view that only restrictions that directly and immediately impede trade fall under Article 304(b). Since the amendment reduced the tax rate, it did not require the President's prior sanction.
4. Alleged contravention of Article 301 of the Constitution:
The petitioner claimed that the amendment violated Article 301, which guarantees the freedom of trade, commerce, and intercourse throughout India. The court referred to several Supreme Court judgments to interpret the scope of Article 301. It concluded that the amendment did not impose any direct or immediate restriction on trade but rather reduced the tax burden. Therefore, it did not contravene Article 301.
5. Authority of the Magistrate to issue a warrant for recovery of tax:
The petitioner argued that the Magistrate was not competent to issue a warrant for tax recovery as Article 265 prohibits the collection of any tax except by authority of law. The court noted that the Mysore Sales Tax Act, 1957, had validly enacted provisions for tax recovery, and the Magistrate acted within his authority under section 13(3)(b) of the Act. The court upheld the Magistrate's decision to issue warrants for the recovery of the tax arrears.
Conclusion:
The court dismissed the petitions, holding that:
1. The Amending Act No. IX of 1958 was valid.
2. The State Legislature was competent to levy sales tax on potatoes.
3. The Amending Bill did not require the President's prior sanction.
4. The amendment did not contravene Article 301 of the Constitution.
5. The Magistrate had the authority to issue warrants for tax recovery.
Petitions dismissed with costs.
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1962 (12) TMI 36
Issues:
1. Inclusion of sales made in London in the gross turnover for tax liability determination in U.P.
2. Assessability of sales under section 2(h), Explanation II(ii) based on manufacturing criteria.
Analysis:
Issue 1:
The judgment pertains to cases referred under the U.P. Sales Tax Act to determine if sales made in London should be included in the assessee's gross turnover for tax assessment in U.P. The court, in line with a previous judgment, affirmed that sales made in London by the assessee should indeed be included in the turnover for tax liability calculation.
Issue 2:
Regarding the applicability of section 2(h), Explanation II(ii), the key contention was whether the assessee qualifies as a manufacturer of the goods, specifically bristles. The court examined the process undertaken by the assessee, involving boiling, washing, sorting, and bundling bristles for export. It was established that these activities did not transform the bristles into a commercially distinct product. The court emphasized that the definition of "manufacturing" was crucial, highlighting that the process must impart new form, properties, or qualities to the goods. In this case, the actions performed by the assessee did not result in a substantial alteration of the bristles' nature. Drawing parallels with precedents concerning processing of agricultural produce, the court concluded that the bristles' processing did not amount to manufacturing under the specified tax provisions.
Conclusion:
The court ruled that the assessee's activities did not meet the criteria to be considered a manufacturer under the relevant tax provisions. Therefore, the sales of bristles were not to be included in the assessee's turnovers for the assessment years in question. The court directed the dissemination of the judgment to the concerned authorities as per statutory requirements and awarded costs to the Commissioner, Sales Tax, U.P. for the reference.
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1962 (12) TMI 35
Issues:
1. Inclusion of sales made in London in the gross turnover for tax liability determination in U.P.
2. Assessment of sales made by the assessee under section 2(h), Explanation II(ii).
Analysis:
The judgment by the Allahabad High Court pertains to cases referred under the U.P. Sales Tax Act regarding the inclusion of sales made in London in the assessee's gross turnover for tax liability determination in U.P. The first issue addressed was whether sales made at London should be considered in the U.P. sales turnover. The Court, based on a previous judgment, affirmed that sales made in London by the assessee should be included in the U.P. sales turnover for tax assessment purposes. The second issue revolved around the applicability of section 2(h), Explanation II(ii) concerning whether the assessee's activities amounted to manufacturing. The Court analyzed the process undertaken by the assessee with pig bristles, concluding that the activities did not transform the bristles into a commercially different article. The Court highlighted that the bristles remained unchanged in essence, similar to a previous case involving arecanuts, where processing did not alter the nature of the product. Therefore, the Court held that the assessee was not a manufacturer under the specified section. The judgment distinguished the present case from a previous decision where a process resulted in a commercially different article. Ultimately, the Court ruled that the sales of bristles were not to be included in the assessee's turnovers for the assessment years, answering the second question in the negative. The Court directed the dissemination of the judgment to the relevant authorities and awarded costs to the Commissioner, Sales Tax, assessing them at Rs. 100 to be borne by the assessee.
This detailed analysis of the judgment provides a comprehensive overview of the issues addressed by the Allahabad High Court, the legal interpretations made, and the final decisions rendered in the context of the U.P. Sales Tax Act.
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1962 (12) TMI 34
Issues Involved:
1. Jurisdiction of the Assessing Authority to make a best judgment assessment after the expiry of three years.
2. Adequacy and effectiveness of alternative remedies available to the petitioner.
3. The procedural validity of notices issued by the Assessing Authority.
4. The scope and timing of the Assessing Authority's decision to proceed with a best judgment assessment.
Issue-wise Detailed Analysis:
1. Jurisdiction of the Assessing Authority to Make a Best Judgment Assessment After the Expiry of Three Years:
The petitioner argued that the Assessing Authority had no jurisdiction to assess the petitioner-firm after the expiry of three years from the end of the respective periods, much less to make a best judgment assessment after the expiry of that period. The petitioner contended that there was no finding on the record that the Assessing Authority proceeded to make a best judgment assessment within the stipulated three-year period. The respondents, however, argued that the assessment fell within the purview of section 11(3) and was lawful, asserting that the statutory notice was issued within the appropriate timeframe and that the assessment order was based on the examination of the petitioner's account books and evidence produced.
2. Adequacy and Effectiveness of Alternative Remedies Available to the Petitioner:
The court emphasized that the ordinary remedy provided by statute, such as appeal and revision, was both adequate and effective. The petitioner's argument that the remedy was ineffective because it required the deposit of the assessed tax was dismissed. The court noted that the petitioner had not demonstrated financial inability to deposit the tax. It was further observed that procedural measures for collecting taxes should be construed liberally to facilitate the object, especially in a welfare state.
3. The Procedural Validity of Notices Issued by the Assessing Authority:
The petitioner challenged the procedural validity of the notices issued by the Assessing Authority, specifically annexures "A" and "B." The court found that the first notice (annexure "A") dated 12th July 1960, informed the petitioner of the Assessing Authority's dissatisfaction with the return filed for the year ending 1957-58 and required the production of documents for assessment purposes. The second notice (annexure "B") was a memorandum in continuation of the first notice and did not bear any date. The court determined that the assessment order related to the year 1957-58, and thus, the procedural validity of the notices for other years was not relevant to the case at hand.
4. The Scope and Timing of the Assessing Authority's Decision to Proceed with a Best Judgment Assessment:
The petitioner argued that the Assessing Authority must make a note on the record indicating the decision to proceed with a best judgment assessment. The court, however, found that this was a question of fact to be determined by the appellate authority based on the specific circumstances of each case. The court observed that the impugned assessment was not a clear-cut case where it could be determined that the assessment was outside the statute and without the authority of law. The court further noted that too much interference through extraordinary remedies in the sphere of taxation could adversely affect fiscal administration and state revenue.
Conclusion:
The court dismissed both petitions, emphasizing the adequacy of statutory remedies and the necessity of pursuing them before seeking extraordinary writ jurisdiction. The court also highlighted the importance of facilitating tax collection in a welfare state and cautioned against undue interference in tax administration. The petitioner's failure to demonstrate any manifest error of law or procedural irregularity that would justify quashing the assessment order was noted, leading to the dismissal of the petitions with costs.
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1962 (12) TMI 33
Issues Involved:
1. Whether the assessees are dealers within the meaning of the explanation to the definition of 'dealer' as given in section 2(c) of the U.P. Sales Tax Act?
2. Whether the explanation is ultra vires of the Legislature?
3. Whether the assessees are not agents of ex-U.P. principals?
4. Whether the sales were inter-State sales under Article 286 of the Constitution of India?
5. Whether Tulai charges formed part of the selling price?
Detailed Analysis:
Issue 1: Definition of 'Dealer'
The court examined whether the assessees qualify as dealers under the U.P. Sales Tax Act. The definition of "dealer" includes any person "carrying on the business of buying or selling and supplying goods in the United Provinces whether for commission, remuneration or otherwise." The explanation extends this to agents of non-resident principals. The court concluded that the assessees are dealers because they carry on the business of selling goods in Uttar Pradesh, even though they do so as commission agents for non-resident principals. The court emphasized that the term "for commission, remuneration or otherwise" is broad and includes agents selling goods for commission. The court clarified that the essence of being a dealer is the business activity itself and not the ownership of the goods sold.
Issue 2: Ultra Vires of the Legislature
This issue was deemed irrelevant as the court found the explanation to the definition of "dealer" not applicable to the assessees. Therefore, the question of whether the explanation is ultra vires did not arise.
Issue 3: Agents of Ex-U.P. Principals
The court acknowledged that the assessees act as agents for principals residing outside Uttar Pradesh. However, it clarified that they sell the goods in the course of their own business of selling goods on commission, and not for carrying on the principals' businesses in Uttar Pradesh. The court distinguished between carrying on another's business as an agent and selling goods as part of one's own business.
Issue 4: Inter-State Sales
This issue was not pressed by the assessees and was answered in the negative.
Issue 5: Tulai Charges as Part of Selling Price
The court examined whether weighing dues (Tulai charges) form part of the selling price. The assessees argued that these charges are for services rendered and are separate from the sale proceeds. However, the court disagreed, stating that the dues are received on account of the sale of goods and are incidental to the sale. The court referred to Explanation 1 to the definition of "turnover," which includes any sums charged for anything done in respect of the goods sold at the time or before delivery. Therefore, the court concluded that weighing dues are part of the proceeds of sale and should be included in the turnover.
Conclusion:
1. The assessees are dealers under the definition provided in the U.P. Sales Tax Act, but not under the explanation.
2. The question of ultra vires does not arise.
3. The assessees are agents of ex-U.P. principals but operate in their own business of selling goods on commission.
4. The sales were not inter-State sales under Article 286 of the Constitution of India.
5. Tulai charges form part of the selling price and are included in the turnover.
The court ordered that copies of the judgment be sent to the Judge (Revisions), Sales Tax, U.P., and the Commissioner, Sales Tax, U.P., and that the assessees pay the costs of the reference, assessed at Rs. 100.
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1962 (12) TMI 32
Issues:
1. Whether the assessee collected tax at a higher rate than disclosed in the price structure.
2. Whether the Board of Revenue's inference that the additional tax was collected by the dealer is justified.
3. Whether the assessing authorities have the jurisdiction to determine if any amount was collected as additional tax.
Detailed Analysis:
1. The primary issue in this case was whether the assessee had collected tax at a higher rate than disclosed in the price structure. The Appellate Assistant Commissioner examined the records and concluded that there was no evidence of extra tax being collected or included in the price structure. The assessee argued that any differences in prices were due to credit facilities for local sales and market conditions. The Board of Revenue, however, took a different view based on the price differences for local and inter-State sales. The Court analyzed the price variations and the gross profit margin, ultimately siding with the Appellate Assistant Commissioner's conclusion that no extra tax was collected or included in the prices.
2. The second issue revolved around the Board of Revenue's inference that the dealer had collected the additional tax in a disguised form. The Board relied on price differentials before and after the imposition of the additional tax to support its conclusion. However, the Court found that the Board's inference was not supported by the evidence presented. The Court emphasized that the Board failed to consider market conditions, variations in prices, and the lack of uniformity in price additions across transactions. The Court ultimately held that the Board's inference was not justified based on the available material.
3. Lastly, the question of the assessing authorities' jurisdiction to determine if any amount was collected as additional tax was raised. The Court referred to a previous decision where the burden of proof was on the assessee to establish non-collection of the additional tax. While acknowledging the authorities' right to scrutinize the price structure, the Court emphasized that the crucial issue was whether any additional tax was actually collected. The Court clarified that its jurisdiction under the Madras Sales Tax Act allowed for a broader scope of review compared to writ jurisdiction. In this case, the Court concluded that the assessing authorities had not established that the additional tax was collected by the dealer.
In conclusion, the Court allowed the petition, ruling in favor of the assessee and holding that the Board of Revenue's order could not be sustained. The Court awarded costs to the appellant, emphasizing that the inference drawn by the Appellate Assistant Commissioner was more aligned with the available evidence than the Board's conclusion.
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1962 (12) TMI 31
Whether the appropriation of goods amounted to transfer of property by the retail dealer to another person?
Whether such transfer amounted in law to sale?
Held that:- Appeal dismissed. The levy and collection of sales tax on motor spirits and lubricants consumed by the company cannot therefore be regarded as illegal unless it is found that the goods were of the ownership of the company, and for reasons already set out the question whether the goods consumed belonged to the company must be left to be determined under the Act. The first question raised in the petition cannot therefore be determined by this Court as it could not be determined by the High Court.
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1962 (12) TMI 29
Whether the company is liable to pay sales tax in respect of goods consumed for its motor vehicles during the period in question?
Held that:- Appeal allowed. If it is competent to the Sales Tax Officer to adopt a proceeding, to bring to tax consumption of goods by the company for its own vehicles, relying upon the first part of the definition of "retail sale" in section 2(1), because of the terms of the agreement and other relevant surrounding circumstances, it will be open to him to do so.
The petition will therefore be allowed and a writ will issue declaring that the order of assessment made by the first respondent dated December 26, 1960, in so far as it relates to levy of tax on motor spirit and lubricants consumed during the period of assessment for the vehicles of the company is invalid. The respondents will pay the costs of this petition to the company.
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1962 (12) TMI 16
Whether the appellants were personally liable to refund the amount paid to them?
Held that:- by section 15 of the Life Insurance Corporation Act, 1956, the Life Insurance Corporation is entitled to demand that any amount paid over to any person without consideration, and not reasonably necessary for the purposes of the controlled business of the insurer be ordered to be refunded, and by sub-section (2) authority is conferred upon the Tribunal to make such order against any of the parties to the application as it thinks just having regard to the extent to which those parties were respectively responsible for transaction or benefited from it and all the circumstances of the case. The trustees as representing the trust have benefited from the payment. The amount was, it is common ground, not disposed of before the Corporation demanded it from the appellants, and if with notice of the infirmity in the resolution, the trustees proceeded to deal with the fund to which the trust was not legitimately entitled, in our judgment, it would be open to the Tribunal to direct the trustees personally to repay the amount received by them and to which they were not lawfully entitled. Appeal dismissed.
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1962 (12) TMI 15
The High Court of Madras allowed the criminal revision case filed by petitioner Soma Veerappa, who was acquitted in a previous case for failing to submit annual returns and balance-sheets. The court upheld the plea of autrefois acquit, stating that the current prosecution for the same offences between 1956-1959 was not valid due to the prior acquittal.
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1962 (12) TMI 1
Whether the second proviso to sub-section (3) of section 34, as amended in 1953, saves the proceedings impugned?
Held that:- proceedings under section 34(1)(a) of the Act were started against Kalavatibai for the assessment years 1944-45, 1945-46 and 1946-47 in respect of the business which her husband, Jagannath Ramkishan, had claimed to be a partnership business of the respondent's Hindu undivided family and himself. Two orders were passed by the Income-tax Officer for those years. Kalavatibai took appeals against those orders and the Appellate Assistant Commissioner on October 10, 1956, in allowing those appeals gave a finding that the business belonged to the partnership as claimed by Jagannath Ramkishan and the Income-tax Officer was authorised to make assessments under the provisions of section 34 on the said partnership as also on the respondent for the assessment years 1944-45, 1945-46 and 1946-47. Thereupon, a notice was issued with regard to the three assessment years on February 18, 1957, against M/s. Jagannath Fakirchand and Jagannath Ramkishan. These notices were challenged and were held to be illegal. Against that order of the High Court this appeal is brought on a certificate of the High Court under article 132(1) and article 133(1)(b) of the Constitution. Appeal dismissed.
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1962 (11) TMI 91
Issues Involved:
1. Whether the suit document is a mortgage by conditional sale or a sale with a condition of repurchase.
Issue-wise Detailed Analysis:
1. Whether the suit document is a mortgage by conditional sale or a sale with a condition of repurchase:
The primary issue in this appeal was to determine whether the document in question constituted a mortgage by conditional sale or an outright sale with a condition of repurchase. The appellants argued that the document was a mortgage by conditional sale, while the respondents contended it was an outright sale.
Facts of the Case:
On February 2, 1924, the appellants executed a deed conveying 12.6 acres of property to the respondents for Rs. 2,800/- and transferred possession. In 1950, the appellants sought redemption, claiming the document was a mortgage by conditional sale. The trial court and the Subordinate Judge ruled in favor of the appellants, but the High Court reversed this decision, declaring it an outright sale. The appellants then appealed to the Supreme Court.
Document Analysis:
The Court analyzed the document's terms to ascertain the parties' intentions. The document included terms like "sold and vended" and provisions for re-conveyance upon repayment, which are typically associated with an outright sale. The Court noted that the document was created to meet pressing financial needs, not merely to renew an earlier mortgage.
Legal Distinction:
The Court emphasized the legal distinction between a mortgage by conditional sale and a sale with a condition of repurchase. In the former, the debtor-creditor relationship continues, and the right to redeem remains with the debtor. In the latter, the owner transfers all rights to the purchaser, reserving only a personal right of repurchase.
Appellants' Arguments:
The appellants' counsel argued that:
- The consideration mainly discharged a prior sudbharna bond, suggesting a continuing debtor-creditor relationship.
- The document lacked explicit words of conveyance and re-conveyance.
- The executants retained liability for rent and created a charge on the property for refunding the consideration with interest in case of dispossession due to title defects.
Court's Rebuttal:
The Court found these arguments unconvincing, noting:
- The document addressed multiple financial needs beyond repaying the sudbharna bond.
- The terms "sold and vended" and provisions for re-conveyance were adequate, even if not in formal legal language.
- The liability for rent was a neutral circumstance, possibly due to pre-existing obligations.
- The charge on the property for refunding consideration was a standard legal provision, not indicative of a mortgage.
Crucial Circumstance:
A key factor was that the land's value matched the consideration amount, making it improbable that a mortgagee would lend an amount equal to the property's value without a margin for contingencies. This suggested an outright sale rather than a mortgage.
Distinguishing Precedent:
The Court distinguished the present case from "Pandit Chunchun Jha v. Sheikh Ebadat Ali," noting that the crucial circumstances in that case (e.g., continuation of revenue proceedings) were absent here. Conversely, the present case had its own crucial circumstance (sale of a smaller extent for a higher amount).
Conclusion:
The Supreme Court concluded that the document was an outright sale with a condition of repurchase, not a mortgage by conditional sale. The High Court's decision was upheld, and the appeal was dismissed without costs.
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1962 (11) TMI 90
Issues Involved
1. Whether the appellant's prosecution was barred by the special rule of limitation in Section 161(1) of the Bombay Police Act, 1951.
2. Whether Rule 542 of the Bombay Police Manual barred the appellant's prosecution.
3. Whether the appellant was guilty under Section 218 of the Indian Penal Code for preparing a false Panchnama and report.
Detailed Analysis
Issue 1: Limitation under Section 161(1) of the Bombay Police Act, 1951
The primary question was whether the appellant's prosecution was barred by the special rule of limitation in Section 161(1) of the Bombay Police Act, 1951. The section states: "the prosecution or suit shall not be entertained, or shall be dismissed, if instituted more than six months after the date of the act complained of." The prosecution was initiated much later than six months after the alleged act, which involved the preparation of a false Panchnama and report on February 24, 1954.
The court analyzed whether these acts were done "under colour or in excess of any such duty or authority" as per the Act. It was established that preparing a correct Panchnama and report was indeed the duty of the police officer. The court concluded that even if these documents were false, they were still prepared under the "colour of duty" since the officer used his legal duty as a cover for his corrupt actions. This interpretation was supported by various legal dictionaries and previous judgments, including those from the Bombay High Court.
The court rejected the state's contention that Section 161(1) applied only to offences under the Bombay Police Act and not to those under the Indian Penal Code. The term "offence" was broadly defined to include any act punishable by law. Therefore, the prosecution should have been dismissed under Section 161(1) of the Bombay Police Act.
Issue 2: Rule 542 of the Bombay Police Manual
The appellant contended that Rule 542 of the Bombay Police Manual barred his prosecution as prior permission from the District Superintendent of Police had not been obtained. Both the Trial Court and the High Court rejected this defense, stating that Rule 542 had no statutory force. The Supreme Court did not delve into this issue further, as the primary focus was on the limitation under Section 161(1) of the Bombay Police Act.
Issue 3: Guilt under Section 218 of the Indian Penal Code
The appellant was charged under Section 218 of the Indian Penal Code for preparing a false Panchnama and report to save an individual caught with Ganja. Both the Trial Court and the High Court found the appellant guilty. However, given the Supreme Court's interpretation of the limitation period under Section 161(1) of the Bombay Police Act, the conviction and sentence were set aside.
Conclusion
The Supreme Court concluded that the prosecution was barred by the special rule of limitation in Section 161(1) of the Bombay Police Act, 1951. The appeal was allowed, and the conviction and sentence were set aside. The case against the appellant was dismissed.
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1962 (11) TMI 89
Issues Involved:
1. Whether the appeal is barred by Section 11, Civil Procedure Code (CPC), or by the general principles of res judicata due to the finality of decisions in previous suits.
Issue-Wise Detailed Analysis:
1. Application of Section 11, CPC and Res Judicata:
The primary question referred to the larger bench was whether the appeal is barred by Section 11, CPC, or by the general principles of res judicata, given the finality of decisions in suits Nos. 77 and 91 of 1951. The court examined the essential conditions for the application of res judicata, which include:
- The matter directly and substantially in issue in the subsequent suit must be the same as in the former suit.
- The former suit must have been between the same parties or their representatives.
- The parties must have litigated under the same title in the former suit.
- The court which decided the former suit must have been competent to try the subsequent suit.
- The matter in issue must have been heard and finally decided in the former suit.
The court noted that the two main issues in all the four suits were: (1) whether Sri Harnam Singh and adopted son Sri Ram Kishan died in a state of jointness with Ch. Bhagwan Sahai and his son Ch. Shiv Dan, and (2) whether the property in suit was the joint family property of Ch. Bhagwan Sahai and Ram Kishan.
The court found that the decision of the Civil Judge on these issues was against Ch. Bhagwan Sahai, and since the appeals against the decrees in suits Nos. 77 and 91 of 1950 were dismissed, the findings on these issues became final and binding. Therefore, the appeals in suits Nos. 365 and 366 of 1951 were held to be barred by res judicata.
2. Consistency with Previous Judgments:
The court referred to previous judgments to support its decision. In Zaharia v. Debia, it was held that when two suits involve common issues, the final decision in one suit operates as res judicata in subsequent suits or appeals. The court also referred to the Full Bench decision in Shankar Sahai v. Bhagwan Sahai, which emphasized the principle of conclusiveness of judgments and finality of litigation.
3. Distinction from Other Cases:
The court distinguished the present case from Ghansham Singh v. Bhola Singh, where it was held that an appeal is not barred by res judicata if the appellant did not object to the decree which did not prejudice him. The court noted that in the present case, the appeals against the decrees in suits Nos. 77 and 91 of 1950 were dismissed, making the judgments final and binding.
4. Examination of Narhari's Case:
The court examined the decision in Narhari v. Shankar, where it was held that when there has been one trial, one finding, and one decision, there need not be two appeals even though two decrees may have been drawn up. However, the court clarified that this principle applies only when all the issues in the appeals are the same. If there are separate issues, appeals must be filed against all decrees.
5. Explanation by Supreme Court:
The court referred to the Supreme Court's explanation in Badri Narayan Singh v. Kamdeo Prasad Singh, which clarified that the necessity of filing two appeals is dispensed with only when all issues in the appeals are the same. The Supreme Court also explained that the principle of res judicata applies even when decisions are given simultaneously if one of the decrees becomes final.
Conclusion:
The court concluded that the appeals in suits Nos. 365 and 366 of 1951 are barred under Section 11, CPC, to the extent of the decision of the five common issues in the four connected suits. The matter was returned to the learned single Judge with this opinion.
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1962 (11) TMI 88
The Kerala High Court ruled in a case under the Indian Income-tax Act, 1922, that the loss incurred due to an employee's embezzlement was incidental to the bank's business. The employee, as an agent of the bank, took Rs. 18,000 from the safe on a holiday. The court held that the loss was within the risks of relying on employees and was part of conducting the bank's business. The judgment favored the assessee, following the principles in Badridas Daga v. Commissioner of Income-tax [1958] 34 I.T.R. 10.
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1962 (11) TMI 87
Issues:
Deduction of road and P. W. D. cess, education cess, and royalty payments under the Income Tax Act.
Analysis:
The case involved the Samla Collieries Ltd., which carried on coal mining business and incurred expenses for road and P. W. D. cess, education cess, and royalty payments. The Appellate Tribunal allowed deduction for royalty payments but excluded cess amounts due to section 10(4) of the Income Tax Act, which prohibits allowance for sums paid as cess on profits or gains of any business. The relevant sections of the Bengal Cess Act and the Bengal (Rural) Primary Education Act were cited, outlining the imposition of road and P. W. D. cess and education cess on annual profits from mines and other immovable properties.
The Income Tax Act's section 10(2) provides for allowances, including section 10(2)(ix) for land revenue, local rates, or municipal taxes, and section 10(2)(xv) for revenue nature expenses. However, section 10(4) explicitly disallows deductions for sums paid as cess, rate, or tax on business profits or gains. The court held that the cess paid by the mining company was excluded under section 10(4) as it was assessed on profits derived from mining operations, falling outside the scope of allowable deductions under section 10(2).
The argument made by the assessee's counsel to distinguish between profits from coal extraction and profits from the mining business was rejected. Reference to a Supreme Court case emphasized that profits from mining operations, even if not directly sold but used in manufacturing, are still considered business profits. The court concluded that the cess imposed on the company's mining profits was not allowable under section 10(2) as it was based on profits or gains of the business, as per section 10(4).
Additionally, the judgment highlighted a Division Bench case precedent where cess was held applicable not only to the occupier but also to the owner of the property generating profits. The court affirmed that the cess under the Acts had to be paid by the mining company due to the profits earned, but such payments were not deductible under section 10(2) because of the restrictions in section 10(4. The final decision was that the cess amounts were not allowable as deductions under the Income Tax Act.
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1962 (11) TMI 86
Issues Involved:
1. Consideration of claims for promotion.
2. Alleged arbitrariness and mala fide in appointments.
3. Compliance with the Rajasthan High Court (Conditions of Service of Staff) Rules.
4. Validity of Rule 10 under Articles 14 and 16 of the Constitution.
5. Preliminary objections regarding maintainability, delay, and scandalous allegations.
Detailed Analysis:
1. Consideration of Claims for Promotion:
The petitioners, staff members of the Rajasthan High Court, contended that their claims for promotion to the posts of Assistant Registrar and Secretary to the Chief Justice were not properly considered. They alleged that juniors were promoted over them without a proper selection process. The court noted that the Chief Justice, as the appointing authority under Article 229(1) of the Constitution, has the discretion to make appointments based on integrity and impartiality, irrespective of seniority.
2. Alleged Arbitrariness and Mala Fide in Appointments:
The petitioners argued that the appointments were arbitrary and made without following any procedure. The court found that the Chief Justice had exercised his discretion in good faith, based on recommendations from the Registrar. The appointments were made after considering the cases of several candidates, and the Chief Justice's discretion in such matters is protected to ensure judicial independence.
3. Compliance with the Rajasthan High Court (Conditions of Service of Staff) Rules:
The petitioners claimed the appointments violated the Rajasthan High Court (Conditions of Service of Staff) Rules, particularly Rule 10. The court observed that the appointments were made under Article 229(1) of the Constitution, which grants the Chief Justice unfettered power in such matters. The rules did not mandate a specific procedure that had to be followed, and the Chief Justice's discretion was found to be properly exercised.
4. Validity of Rule 10 under Articles 14 and 16 of the Constitution:
The petitioners challenged Rule 10 as ultra vires, arguing it violated Articles 14 and 16 of the Constitution, which guarantee equality before the law and equal opportunity in public employment. The court held that Article 16 guarantees equal opportunity but does not mandate a specific procedure for appointments. The Chief Justice's discretion, as exercised, did not violate these constitutional provisions.
5. Preliminary Objections:
- Maintainability: Respondent No. 5 argued that a writ against the Chief Justice's administrative action was not maintainable. The court did not decide this point but suggested that a writ might be issued if a fundamental right was breached.
- Delay: The court found substantial delay in filing the petitions, as the appointments were made in April 1961, and the petitions were filed in July 1962. The delay was not justified by the petitioners' representations, leading to the dismissal of the petitions on this ground.
- Scandalous Allegations: The petitioners initially made scandalous allegations against the then Chief Justice, which were later withdrawn. The court expressed strong disapproval of this conduct but did not dismiss the petitions solely on this ground.
Conclusion:
The court dismissed the writ petitions, finding no merit in the petitioners' arguments and noting the significant delay in filing the petitions. The Chief Justice's discretion in making the appointments was upheld, and the rules and constitutional provisions were found to be properly applied. The petitioners were ordered to bear the costs.
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1962 (11) TMI 85
Issues Involved:
1. Validity of the reassessment proceedings under section 34(1)(b) of the Indian Income-tax Act, 1922.
2. Applicability of the Merged States (Taxation Concessions) Order, 1949.
3. Rectification under section 35 of the Indian Income-tax Act, 1922.
Analysis:
1. Validity of the reassessment proceedings under section 34(1)(b) of the Indian Income-tax Act, 1922:
The primary issue was whether the Income-tax Officer (ITO) was justified in initiating reassessment proceedings under section 34(1)(b). Section 34(1)(b) allows the ITO to reassess if he has "in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment, or have been under-assessed, or assessed at too low a rate." The court noted that when the original assessment order was passed on 28th February 1950, the ITO already had information about the income received by the assessee in the former Indian Union. This information was confirmed by the assessee on 21st May 1950. The court observed that if the original assessment order had stood alone, there would be no basis for invoking section 34 as there was no under-assessment or escaped income. The right to invoke section 34 arose only after the rectification order under section 35 was passed on 27th July 1950, which assessed the income at Baroda rates. The court concluded that the ITO could not use the information he already had before the rectification to justify reassessment under section 34(1)(b). The information must be subsequent to the rectified order for the ITO to have the right to take action under section 34(1)(b).
2. Applicability of the Merged States (Taxation Concessions) Order, 1949:
The Merged States (Taxation Concessions) Order, 1949, was promulgated to provide concessional tax rates for income accruing or arising in merged states. The ITO initially did not apply this order, leading the assessee to appeal. During the rectification process, the ITO acknowledged the applicability of the concessions order but found that part of the income was taxable at Indian Union rates. This recognition led to a reassessment which the assessee contested, arguing that the ITO erred in not applying the concessions order initially. The court observed that the ITO had information about the income's nature and its taxability at different rates before the rectification, which should have been considered initially.
3. Rectification under section 35 of the Indian Income-tax Act, 1922:
Section 35 allows rectification of any "mistake apparent from the record." The ITO used this provision to rectify the original assessment by applying the concessional rates of the Merged States Order. However, the rectification led to a situation where part of the income was assessed at too low a rate, prompting the ITO to initiate reassessment under section 34. The court highlighted that the ITO should not use section 35 to create a situation that justifies reassessment under section 34. The rectification order must be based on apparent mistakes without launching fresh inquiries or investigations. The court found that the ITO, by rectifying the assessment under section 35, had all the necessary information to avoid under-assessment and should not have resorted to section 34 for reassessment.
Conclusion:
The court held that the ITO was not justified in making a reassessment under section 34(1)(b) as the information was already in his possession before the rectification order. The reassessment was invalid because the ITO could not rely on pre-existing information to justify reassessment under section 34(1)(b). The question was answered in the negative, favoring the assessee, and costs were awarded to the assessee.
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1962 (11) TMI 84
Issues Involved:
1. Inclusion of the value of shares owned by the assessee in his net wealth under section 4(1) of the Wealth-Tax Act.
2. Inclusion of the compensation sanctioned by the Government on the abolition of the assessee's jagir in his net wealth under section 4(1) of the Wealth-Tax Act.
Issue-wise Detailed Analysis:
1. Inclusion of the Value of Shares in Net Wealth:
The primary issue is whether the value of the shares owned by the assessee in limited companies should be included in his net wealth as on the valuation date under section 4(1) of the Wealth-Tax Act, 1957. The assessee contended that since the shares represent the wealth of the limited company, the company is liable to pay tax on the same, and the wealth represented by the shares should not be included again in his net wealth. This contention was rejected by the Income Tax Officer, the Appellate Assistant Commissioner, and the Tribunal. The Tribunal held that the wealth of the limited companies is not the same as the wealth of a shareholder as represented by the value of the shares. Since the assessee was the owner of the shares, they were properly included in his net wealth.
The court noted that the principle of double taxation is relevant to this question. The taxing section 3 of the Wealth-Tax Act imposes a tax on the net wealth of individuals, Hindu undivided families, and companies. Section 4 specifies what should be included in computing the net wealth of an individual, including assets held by his wife, minor child, or transferred to others for the benefit of the individual or his family. Section 5 enumerates the assets exempted from inclusion in the net wealth.
The court concluded that shares in a limited company held by an assessee are assets owned by him and not by the company. The value of the shares should be included in the net wealth of the assessee, subject to the relief provided under rule 2 of the Schedule to the Wealth-Tax Act to avoid double taxation. Therefore, the answer to the first question is that the value of the shares owned by the assessee in limited companies is properly includible in his net wealth, subject to the application of rule 2 of the Schedule to the Wealth-Tax Act.
2. Inclusion of Compensation for Abolition of Jagir in Net Wealth:
The second issue is whether the compensation sanctioned by the Government on the abolition of the assessee's jagir, though not paid but due as on the valuation date, should be included in the net wealth of the assessee under section 4(1) of the Wealth-Tax Act. The court examined the definitions of "assets" and "net wealth" under the Act. Every kind of property, movable or immovable, the valuation of which is computable under the Act, constitutes the net wealth assessable under section 3.
The court analyzed whether commutation amounts are "assets" within the meaning of section 2(e) of the Act. The commutation sum for every jagir is calculated based on the basic annual revenue of the jagir. The commutation amount represents the net value of compensation payable to the jagirdar in liquidation of his rights in the jagir. The court concluded that the commutation amount payable to the assessee is his asset within the meaning of section 2(e) of the Wealth-Tax Act.
The court also addressed the contention that the commutation amount is a right to an "annuity" under section 2(e)(iv). The court rejected this contention, stating that the commutation amount is a capitalized amount of the value of the jagir taken over by the Government and is not a right to an annuity. The court further rejected the argument that the commutation amount is exempt under section 5(1)(xviii) of the Wealth-Tax Act, which exempts property received from the Government in pursuance of any gallantry or merit award. The commutation amount is not granted for gallantry or merit and is not an award instituted or approved by the Central Government.
Therefore, the answer to the second question is in the affirmative, meaning that the compensation sanctioned by the Government on the abolition of the assessee's jagir is properly includible in the net wealth of the assessee.
Conclusion:
The court concluded that the value of the shares owned by the assessee in limited companies is properly includible in his net wealth, subject to the application of rule 2 of the Schedule to the Wealth-Tax Act. Additionally, the compensation sanctioned by the Government on the abolition of the assessee's jagir is properly includible in the net wealth of the assessee. The reference was answered accordingly with costs. Advocates' fee was fixed at Rs. 100.
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