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Showing 181 to 200 of 699 Records
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1966 (10) TMI 7
Issues:
1. Deductibility of bonus amount awarded by Labour Appellate Tribunal in a subsequent year as a deduction in the assessment year in question.
Detailed Analysis:
The case involved a private limited company engaged in manufacturing woollen rugs, blankets, and cloth. The company claimed a deduction of bonus amounting to Rs. 16,275 in the assessment year 1952-53, representing the bonus for the accounting year ended on 30th June, 1949. The workers demanded bonus for the half-year ending on 30th June, 1949, during the accounting year ending on 30th June, 1951. The conciliation officer awarded a bonus of Rs. 9,300 for the half-year ended 30th June, 1949, which was later increased to Rs. 16,275 by the Labour Appellate Tribunal on 8th August, 1951. The Income-tax Officer disallowed the entire bonus amount as it was awarded after the close of the accounting year, leading to a dispute over the deductibility of the bonus amount.
The Appellate Assistant Commissioner allowed the deduction of Rs. 9,300 as it was awarded within the accounting year and disallowed the balance of Rs. 6,975, considering it as not an ascertained liability in the relevant accounting year. The Tribunal upheld the decision of the Appellate Assistant Commissioner, disallowing the deduction of Rs. 6,975 against the profits of the relevant assessment year but allowed it in the subsequent assessment year. The assessee sought a reference under section 66(1) of the Income-tax Act, which was refused, leading to an application under section 66(2) of the Act for the court's direction to refer the question.
The court considered the conflicting views in Commissioner of Income-tax v. Nagri Mills and Commissioner of Income-tax v. Swadeshi Cotton and Flour Mills. The Supreme Court's decision in the latter case established that an employer following the mercantile system of accounting incurs the liability to pay bonus only when the claim is settled amicably or by industrial adjudication. The court, in line with the Supreme Court's decision, held that the bonus amount awarded by the Labour Appellate Tribunal in a subsequent year was not allowable as a deduction in the assessment year in question. The court referenced similar decisions in New Victoria Mills Co. Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Amrit Banaspati Co. Ltd. to support its conclusion.
In conclusion, the court answered the question regarding the deductibility of the bonus amount in the negative, ruling against the assessee. No order as to costs was issued, and the counsel's fee was assessed at Rs. 200.
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1966 (10) TMI 6
ITO rejected application for renewal of registration relying upon cl. (4) of the partnership deed which provided for the share of the minor in the same proportion as the share of profits and losses of other partners and as such the deed was held to be contrary to law - assessee's appeal dismissed
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1966 (10) TMI 5
Assessee not having disclosed the income in the asst. yr. 1946-47, it cannot be said that there was no omission or failure on the part of the assessee so as to attract s. 34(1)(b) - applicability of clause (a) of sub-section (1) of section 34 - impugned clause will be applied
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1966 (10) TMI 4
Tribunal is not justified in law in holding that the purchase and sale of cashew and the manufacture of tin containers constituted two different businesses because venture on tin cans was, the start with, ancillary or subsidiary to that of cashew-nuts until by a gradual shifting of emphasis, the former developed and the latter ended
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1966 (10) TMI 3
Assessee is the author of a book - agreement with the Govt. of Kerala, whereby he undertook to print an edition of the book and supply the copies of that edition to the Govt. of Kerala - Tribunal was right in holding that the provisions of s. 12AA of the Act did not apply and that the income of the assessee was income from business
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1966 (10) TMI 2
The Supreme Court held that the levy of additional tax on excess dividend by the Income-tax Officer was illegal. The respondent-company was entitled to a refund of the tax collected. The High Court's order directing the Commissioner to refund the amount was upheld. The appeal was dismissed with no order as to costs.
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1966 (10) TMI 1
Issues:
Validity of notice issued under section 34 of the Income-tax Act challenged before the Kerala High Court. Grounds of challenge included lack of reasons for believing income escaped assessment and lack of bona fides in issuing the notice. Single judge allowed the petition, quashing the notice on the ground of insufficient belief in the escape of income due to failure to disclose all material facts. Division Bench upheld the decision. Appeal before Supreme Court challenging the jurisdiction of High Court in quashing the notice on a ground not raised by the respondent.
Analysis:
The case involved a challenge to the validity of a notice issued under section 34 of the Income-tax Act before the Kerala High Court. The respondent contended that the notice lacked sufficient reasons to believe income had escaped assessment and was issued without bona fides. The single judge quashed the notice on the basis that the appellant did not have the required belief that income escaped due to the respondent's failure to disclose all material facts. The Division Bench upheld this decision. The appellant appealed to the Supreme Court, arguing that the High Court wrongly exercised its jurisdiction by quashing the notice on a ground not raised by the respondent.
The Supreme Court acknowledged that the respondent did not raise the specific ground regarding the appellant's belief in the escape of income due to the failure to disclose material facts in the petition or supporting affidavit. The Court noted that the High Court erred in inferring this ground from the affidavits without proper averments by the respondent. The Court emphasized that since neither party addressed this issue in their affidavits, the High Court should not have decided on this new ground. The Supreme Court found that the notice issued under section 34(1)(a) was valid based on the report submitted by the appellant to the Commissioner of Income-tax, indicating sufficient reasons to believe the income was under-assessed.
The respondent attempted to support the High Court's decision on the ground that the appellant did not comply with the requirement to record reasons for issuing the notice as per the proviso to section 34(1). However, this argument was not raised earlier and lacked necessary facts for consideration. The Court rejected this new ground. Additionally, the respondent alleged mala fides in issuing the notice, which the Court found to be adequately countered by the appellant's counter-affidavits. The Court concluded that the High Court's order was set aside, and the respondent's petition under article 226 of the Constitution was dismissed with costs in both the Supreme Court and the High Court.
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1966 (9) TMI 168
Issues:
Appeal against conviction under Sections 323 and 436 read with s. 109, I.P.C.
Analysis:
The case involved an appeal against the conviction of the appellant under Sections 323 and 436 read with s. 109, I.P.C. The trial court had convicted the appellant and four others for rioting and offenses under Sections 323 and 436 I.P.C. Jodha Singh was specifically charged with the offense under Section 436 I.P.C. The High Court acquitted two appellants and acquitted Jodha Singh of the offense under Section 436 I.P.C. but upheld his conviction under Section 323 I.P.C. The appellant's counsel did not dispute the conviction under Section 323 I.P.C. but challenged the conviction under Section 436 read with s. 109 I.P.C., arguing that since Jodha Singh was acquitted of setting fire to a hut, the appellant's conviction for abetment was legally flawed.
The Supreme Court analyzed the provisions of the Indian Penal Code related to abetment, specifically Sections 107, 108, 109, and 115. The Court emphasized that abetment is a distinct offense and does not require the actual commission of the crime abetted. The Court referred to previous judgments to highlight that an abettor can be guilty even if the offense abetted is not committed. The Court clarified that abetment is complete once the instigation or conspiracy to commit the offense occurs, irrespective of the actual commission of the offense. The Court also distinguished between instigating an offense and aiding in its commission, noting that in the latter case, the abetment charge might fail if the alleged perpetrator is acquitted.
In the present case, the Court found that the appellant had instigated Jodha Singh to commit the offense under Section 436 I.P.C., even though Jodha Singh was acquitted of that specific offense. The Court held that the appellant's instigation constituted abetment under Section 115 I.P.C. since the offense was not committed due to Jodha Singh's acquittal. The Court clarified that the appellant could not be held liable under Section 109 I.P.C. as the actual setting of fire was not a consequence of the appellant's abetment. Consequently, the Court modified the appellant's conviction from Section 436 read with s. 109 I.P.C. to Section 436 read with s. 115 I.P.C., which carries a lesser punishment.
The Court distinguished the present case from a previous judgment where the conviction under abetment was upheld due to the direct involvement of the accused in the commission of the offense. In this case, since the other alleged co-accused were acquitted and the actual setting of fire was not linked to the appellant's instigation, the conviction under Section 436 read with s. 109 I.P.C. was deemed incorrect in law. Therefore, the Court allowed the appeal in part, upholding the conviction under Section 323 I.P.C. but modifying the conviction under Section 436 to a lesser offense under Section 115 I.P.C. and reducing the sentence accordingly.
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1966 (9) TMI 167
Issues Involved:
1. Constitutional validity of the Metal Corporation of India (Acquisition of Undertaking) Act, 1965.
2. Compensation principles for acquisition under the Act.
3. Relevance of the principles to the determination of "just equivalent" compensation.
4. Judicial scrutiny of the adequacy of compensation.
Issue-Wise Detailed Analysis:
1. Constitutional Validity of the Metal Corporation of India (Acquisition of Undertaking) Act, 1965:
The appeal questioned the constitutional validity of the Metal Corporation of India (Acquisition of Undertaking) Act, 1965. The Act was challenged under Article 31 of the Constitution, which pertains to the right to property and compensation for compulsory acquisition. The High Court had previously declared the Act void, citing that it contravened the provisions of Article 31.
2. Compensation Principles for Acquisition under the Act:
The Act provided for the acquisition of the undertaking of the Metal Corporation of India Limited by the Central Government. Section 10 of the Act mandated that compensation be paid to the company, determined according to principles specified in the Schedule. The Schedule outlined the method for calculating the value of properties and assets, including land, buildings, machinery, and other tangible assets, as well as the liabilities and obligations of the company.
3. Relevance of the Principles to the Determination of "Just Equivalent" Compensation:
The High Court found that the principles laid down in clause (b) of para II of the Schedule for valuing machinery were not relevant to determining "just equivalent" compensation. The principles in question were:
- Valuation of unused machinery at its original cost.
- Valuation of used machinery at its written-down value as per the Income-tax Act, 1961.
The High Court held that these principles did not account for the rise in prices over time and did not reflect the actual value of the machinery at the time of acquisition. This was deemed arbitrary and not a fair method for determining compensation.
4. Judicial Scrutiny of the Adequacy of Compensation:
The Supreme Court upheld the High Court's reasoning, stating that the principles for determining compensation must be relevant to the value of the property at the time of acquisition. The Court emphasized that compensation should be a "just equivalent" for the property acquired. The principles in the Act failed this test as they were arbitrary and did not reflect the current market value of the machinery.
The Court referenced previous decisions, such as The State of West Bengal v. Mrs. Bela Banerjee and State of Madras v. D. Namasivaya Mudaliar, which established that compensation must be based on the value at the time of acquisition, not an anterior date. The Court reiterated that the adequacy of compensation is beyond judicial scrutiny if the principles are relevant and not arbitrary. However, in this case, the principles were found to be irrelevant and arbitrary.
Conclusion:
The Supreme Court concluded that the Act did not provide for "compensation" as required under Article 31(2) of the Constitution. The principles for determining compensation were not relevant to the value of the property at the time of acquisition, rendering the Act unconstitutional. The appeal was dismissed, and the High Court's judgment was upheld. The Act was declared void, and the respondents were awarded costs.
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1966 (9) TMI 166
Issues Involved:
1. Executability of a consent decree.
2. Jurisdiction of the executing court.
3. Interpretation of Order 23, Rule 3 of the Code of Civil Procedure.
4. Validity of including extraneous matters in a decree.
Issue-wise Detailed Analysis:
1. Executability of a Consent Decree:
The primary issue in this case was whether a consent decree, which included terms of a contract between the defendants, could be executed. The court held that the part of the consent decree relating to transactions between defendant No. 1 Trilok Chand Kapur and defendant No. 2 Dayaram Gupta was "a contract between the parties. Even if it is put into the decree that does not make it executable." The court emphasized that an executing court cannot enforce an extraneous contract included in the decree by consent of parties. A decree is "the formal expression of an adjudication which, so far as regards the Court expressing it, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit."
2. Jurisdiction of the Executing Court:
The court reiterated the well-settled principle that an executing court cannot go behind the decree. However, it is authorized to question the validity of the decree if it was made without jurisdiction. The court cited Gorachand Holder's case AIR1925Cal907, which stated that "the executing Court is entitled to refuse to execute it on the ground that it was made without jurisdiction."
3. Interpretation of Order 23, Rule 3 of the Code of Civil Procedure:
The court analyzed Order 23, Rule 3 of the Code of Civil Procedure, which mandates that "Where it is proved to the satisfaction of the Court that a suit has been adjusted wholly or in part by any lawful agreement or compromise the Court shall order such agreement, compromise or to be recorded and shall pass a decree in accordance therewith (so far as relates to the suit)." The court emphasized that the consent decree must be confined to matters which relate to the suit and must not travel beyond that. The court cited Lord Buckmaster's observation in Hemanta Kumari Debi v. Midnapore Zemindary Co. 46 Ind App 240: (AIR 1919 PC 79), which stated that the decree should be confined to the actual subject matter of the litigation.
4. Validity of Including Extraneous Matters in a Decree:
The court examined various case laws to determine whether extraneous matters included in a consent decree could be enforced by execution. The court referred to cases like Shahu Shyamlal v. Shyamlal AIR1933All649 and Manindra Nath Biswas v. Radhasyam Biswas AIR 1963 Cal. 676, but ultimately concluded that the transaction between the pro forma defendant Dayaram and the principal defendant Trilok Chand was wholly extraneous to the frame of the suit, the relief claimed, and the relief allowed. The court stated, "The unpaid purchase price payable by the pro forma defendant to the principal defendant, under the independent contract between them, would not be part of the decree and executable as such."
Conclusion:
The court dismissed the appeal, holding that the consent decree's terms relating to the independent contract between the defendants were not executable. The court directed that the parties bear their own costs. The judgment emphasized the principle that an executing court cannot enforce extraneous matters included in a decree by consent of parties.
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1966 (9) TMI 165
Issues:
1. Seizure of documents and currency notes from the accused by police.
2. Authorization for seizure under the Foreign Exchange Regulation Act, 1947.
3. Authority of Enforcement Officer to seek custody of seized documents.
4. Validity of the authorization letter issued by the Deputy Director.
5. Return of seized documents to the petitioners.
6. Investigation under the Foreign Exchange law.
7. Contemplation of investigation in cases of suspected violations.
8. Retention of seized documents by the Enforcement Officer.
Analysis:
1. The case involved the seizure of documents and currency notes from the accused by the police on suspicion of sharp practices related to an international gang violating Foreign Exchange laws. The accused moved for the return of the seized documents, challenging the orders for delivery to the Enforcement Officer.
2. The Enforcement Officer sought custody of the documents under Section 19-D of the Foreign Exchange Regulation Act, 1947, for further investigation. The authorization for seizure was issued by the Deputy Director, which was contested by the petitioners as not in conformity with the Act.
3. The court held that the Deputy Director had the authority to authorize the Enforcement Officer for seizure under Section 19-D, despite the formal defect in the authorization letter. The letter was deemed a valid empowerment for the seizure of documents from the concerned individuals.
4. Regarding the return of seized documents, the court found it appropriate for the Magistrate to deliver the documents directly to the Enforcement Officer, considering the purpose and authority under the Act. This avoided a mere formality of delivery to the petitioners followed by immediate seizure by the Enforcement Officer.
5. The investigation under the Foreign Exchange law was ongoing, and the court emphasized that the sufficiency of grounds to suspect violations by the petitioners could not be questioned at that stage. The statutory authorities were still in the preliminary investigation phase.
6. The Act contained provisions for arrest, search, and seizure of documents in cases of suspected violations, implying an investigation process. The Enforcement Officer was empowered to seize documents to facilitate investigations under the Act.
7. It was argued that the Enforcement Officer could only seize documents under Section 19-D but not retain them. The court dismissed this argument, stating that retention for a reasonable time to facilitate investigations was implied in the power to seize suspected articles.
8. Ultimately, the court found all grounds raised by the petitioners to be without merit. The motions challenging the orders for delivery of documents to the Enforcement Officer were dismissed, affirming the authority of the Enforcement Officer to retain custody for investigation purposes under the Foreign Exchange Regulation Act.
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1966 (9) TMI 164
Issues Involved:
1. Whether Rule 17 of the Employees' State Insurance Rules is ultra vires the rule-making power of the State Government under Section 96(1) of the Employees' State Insurance Act, 1948.
Issue-Wise Detailed Analysis:
1. Ultra Vires Nature of Rule 17:
The primary question was whether Rule 17, which prescribes a period of limitation for applications to the Employees' Insurance Court, is within the rule-making power of the State Government under Section 96(1) of the Employees' State Insurance Act, 1948. The Corporation argued that Rule 17 is ultra vires, while the Opponents and the State Government claimed its validity.
The Court analyzed the scope of Section 96(1)(b), which allows the State Government to make rules regarding "the procedure to be followed in proceedings before such Courts." The Court held that "the procedure to be followed in proceedings" refers to the mode or manner in which proceedings are conducted and disposed of, and does not include rules that operate prior to the commencement of proceedings, such as limitation periods for filing applications.
The Court reasoned that the term "procedure" in Section 96(1)(b) is clear and unambiguous, and does not extend to rules that bar the institution of proceedings. The impugned Rule 17, being a rule of limitation, operates at a stage antecedent to the commencement of proceedings and is thus outside the scope of Section 96(1)(b).
The Court further noted that while the law of limitation is procedural, it does not fall within the ambit of "the procedure to be followed in proceedings" before the Court. The distinction was made between procedural rules that apply during the course of proceedings and those that bar the initiation of proceedings.
2. Legislative Intent and Scheme of the Act:
The Court examined the legislative intent and the scheme of the Employees' State Insurance Act, 1948. The Act aims to provide benefits to employees in cases of sickness, maternity, and employment injury, and the success of the scheme depends largely on the collection of contributions from employers.
The Court observed that the legislature intended the Employees' State Insurance Fund to grow rapidly to enhance benefits and cover more employees. The collection of contributions is vital, and it is unlikely that the legislature intended to subject the Corporation's right to recover contributions to varying periods of limitation prescribed by different State Governments.
The Court highlighted provisions such as Section 94, which gives priority to contributions in insolvency and liquidation proceedings, and Section 40(4), which makes employers express trustees of deducted contributions. These provisions suggest that the legislature did not intend for the Corporation's right to recover contributions to be limited by State Government rules.
3. Period of Limitation for Applications:
The second question addressed the period of limitation applicable to applications filed by the Corporation to the Employees' Insurance Court. The Court clarified that applications filed before 1st January 1964 were not subject to any period of limitation under the Indian Limitation Act, 1908. However, applications filed on or after 1st January 1964 are subject to the period prescribed in Article 137 of the Limitation Act, 1963, which provides a three-year limitation period from when the right to apply accrues.
Conclusion:
The Court concluded that Rule 17 is ultra vires the rule-making power of the State Government under Section 96(1) of the Employees' State Insurance Act, 1948. Applications filed by the Corporation before 1st January 1964 are not subject to any period of limitation, while those filed thereafter are subject to a three-year limitation period under Article 137 of the Limitation Act, 1963. The Court granted a certificate for appeal to the Supreme Court, acknowledging the differing views of High Courts on the issue and the significance of the question in pending cases.
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1966 (9) TMI 163
Issues Involved:
1. Whether a writ of mandamus is available against a government-owned company without statutory obligations.
2. Whether the actions of the West Bengal Small Industries Corporation Ltd. violate Article 14 of the Constitution.
3. Whether the petitioner has a legal right to enforce equitable distribution of chanks by the Corporation.
Detailed Analysis:
Issue 1: Availability of Writ of Mandamus Against Government-Owned Company
The primary question is whether a writ of mandamus can be issued against a company that is wholly owned and managed by the government but lacks statutory obligations. The court noted that the Corporation is a company registered under the Companies Act and not a statutory corporation. It operates under its Memorandum and Articles of Association, which do not have statutory force. Therefore, the Corporation does not fall under the definition of 'State' as per Article 12 of the Constitution. The court emphasized that the mere fact that the Corporation is a government undertaking does not make it 'State' under Article 12. Consequently, the writ of mandamus cannot be issued against the Corporation as it is a private entity in terms of statutory obligations.
Issue 2: Violation of Article 14 of the Constitution
The petitioner argued that the Corporation's action of distributing chanks to only three out of 24 Co-operative Societies violated Article 14, which guarantees equal protection of the laws. The court clarified that Article 14 applies only to 'State' actions. Since the Corporation does not qualify as 'State' under Article 12, the petitioner's challenge under Article 14 must fail. The court referred to various judicial decisions to support the interpretation that only bodies exercising governmental or legislative powers fall within the definition of 'State.'
Issue 3: Legal Right to Enforce Equitable Distribution
The petitioner claimed a right to equitable distribution of chanks based on a scheme formulated by the Government of West Bengal. However, the court found that this scheme is non-statutory and does not impose any statutory obligations on the Corporation. The court examined the Memorandum of Association of the Corporation and found no provisions imposing a duty to distribute chanks equitably. The court also noted that the Corporation's assurance to supply chanks from a future consignment does not constitute a refusal. Therefore, the petitioner failed to establish a legal right enforceable by mandamus.
Conclusion:
The court dismissed the petition under Article 226, stating that the Corporation is not 'State' under Article 12 and thus not subject to writ jurisdiction for the alleged violation of Article 14. The court also found no statutory obligation on the Corporation to distribute chanks equitably. While dismissing the petition, the court acknowledged potential hardships and suggested that the petitioner might seek relief through administrative channels. The petition was dismissed without any order as to costs.
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1966 (9) TMI 162
Issues Involved:
1. Whether the payments of salaries and bonuses made to employees during their jail custody are allowable as deductions under section 10(2)(xv) of the Income-tax Act.
2. Whether the payment of Rs. 2,50,000 to the U.P. Government is allowable as a deduction under section 10(2)(xv) of the Income-tax Act.
Detailed Analysis:
Issue 1: Deductibility of Salaries and Bonuses Paid During Jail Custody
Facts:
The assessee, a private limited company, employed two individuals, H.P. Pasari and Madan Lal Singhania, who were involved in a murder case and remained in jail from August 23, 1948, to April 1950. They were acquitted in 1950. The company paid their salaries and bonuses during this period.
Legal Question:
"Whether, on the facts and in the circumstances of the case, the payments of salaries and bonuses made to Madan Lal and H.P. Pasari during the period of their jail custody are allowable as deduction under section 10(2)(xv) of the Income-tax Act and consequently under the Business Profits Tax Act?"
Judgment:
The court held that the payments made to these employees, who were closely related to the company's directors, were due to extra-commercial considerations. Therefore, the entire amount could not be deducted under section 10(2)(xv) of the Act. However, amounts paid to H.P. Pasari for 29 1/2 days and to Madan Lal Singhania for 24 1/2 days, for which they could remain on leave with full salary under their terms of service, were allowed to be deducted.
The Tribunal's findings indicated that the payments were made for reasons outside the scope of commercial expediency. The assessee's claims that the payments were to prevent leakage of trade secrets and that the employees continued to give advice during their jail custody were disbelieved by the income-tax authorities up to the Tribunal.
Conclusion:
The court answered the question in the negative, holding that the salaries and bonuses paid during the jail custody period could not be deducted, except for the periods for which the employees were lawfully entitled to leave under their service terms.
Issue 2: Deductibility of Payment to U.P. Government
Facts:
The assessee-company paid Rs. 2,50,000 to the U.P. Government following a raid by the Anti-corruption Police on the premises of M/s. Kanodia Brothers and the sealing of the godown of Laxmi & Company. The payment was made after discussions with a high-powered committee from the U.P. Government.
Legal Question:
"Whether, on the facts and in the circumstances stated above, the payment of Rs. 2,50,000 to the U.P. Government is allowable as a deduction under section 10(2)(xv)?"
Judgment:
The Tribunal found the nature and purpose of the payment "shrouded in mystery" and held that the assessee had not produced correspondence with the Government, implying the payment was not for commercial expediency. The Tribunal concluded that the payment did not represent "a loss incidental to business."
The assessee argued that the payment fell within the principle of commercial expediency, citing cases like Atherton v. British Insulated and Helsby Cables Ltd. and Golder v. Great Boulder Proprietary Gold Mines Ltd. However, the court found that the payment to the Government, ostensibly for "purchasing peace," was too nebulous and remote to be considered wholly and exclusively for business purposes.
The court noted that allowable deductions must be incurred by the assessee in its character as a business or trading concern. Payments to avoid criminal prosecution or to please the Government do not meet this criterion. The court cited previous decisions, including Haji Aziz and Abdul Shakoor Bros. v. Commissioner of Income-tax and Commissioner of Income-tax v. H. Hirjee, to support its conclusion.
Conclusion:
The court answered the second question in the negative, holding that the payment of Rs. 2,50,000 to the U.P. Government was not allowable as a deduction under section 10(2)(xv) of the Act. The assessee failed to prove that the payment was wholly and exclusively for business purposes. The court awarded Rs. 250 as costs to the Commissioner of Income-tax and Rs. 250 as counsel's fee.
Additional Remarks by Manchanda J.:
Manchanda J. agreed with the answers and added that the test of commercial expediency should not be pushed too far. He emphasized that the primary purpose of the payment was to save the company or its directors from embarrassment and trouble, not to carry on the business. He cited Pollock M.R.'s warning in Union Cold Storage Company Ltd. v. Jones and Wheatcroft's observations in British Tax Encyclopaedia to support this view.
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1966 (9) TMI 161
The Gujarat High Court judgment involved two appeals by Arvind Mills Ltd. Appeal No. 605 of 1965 related to the sale of goods between November 1952 and March 1953, while Appeal No. 608 of 1965 related to the period April 1953 to March 1954. The goods sold included old containers, discarded stores, machinery, iron scrap, waste caustic liquor, and miscellaneous items. The court ruled in favor of the company except for waste caustic liquor. No costs were awarded.
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1966 (9) TMI 160
Issues Involved:
1. Legality of the Magistrate's order without notice to parties.
2. Correctness of the civil court's finding regarding the relevant date for possession.
3. Inclusion of a party not part of the preliminary order under Section 145.
4. Absence of specific findings on possession of individual disputed plots.
Issue-wise Detailed Analysis:
1. Legality of the Magistrate's Order Without Notice to Parties:
The petitioner argued that the Magistrate's final order was invalid as it was passed without serving notice to the parties, thereby denying natural justice. The court examined the principle of natural justice, which demands that a party should be heard before an adverse decision is made. However, it was concluded that this principle does not apply in the context of Section 146 of the Code. The Magistrate's role under Sub-section (1B) of Section 146 is limited to disposing of the proceeding in conformity with the civil court's decision, without any discretion to vary the finding. The parties had already been heard twice, once by the Magistrate and once by the civil court. Therefore, the court held that the Magistrate was not required to hear the parties again before passing the final order.
2. Correctness of the Civil Court's Finding Regarding the Relevant Date for Possession:
The petitioner contended that the civil court erred by using the date of the filing of the application under Section 144 (7-1-1964) instead of the date of the preliminary order under Section 145 (17-2-1964) to determine possession. The court found that the civil court's reference to 7-1-1964 was merely a factual statement about the filing date and not the basis for determining possession. The relevant date for possession was indeed 17-2-1964, and the civil court's finding was based on this date. The court also noted that even if the civil court had erred, the finding could not be challenged under Section 435 or Section 439 of the Code, as per Sub-section (1D) of Section 146. The proper recourse would be a regular suit in the appropriate forum.
3. Inclusion of a Party Not Part of the Preliminary Order Under Section 145:
The petitioner argued that the civil court's decision was invalid as it included opposite party No. 4 (Life Insurance Corporation of India), who was not part of the preliminary order under Section 145. The court noted that opposite party No. 4 was brought on record on 4-4-1964, and the proceedings continued with their participation. Section 145 requires all parties concerned in the dispute to be part of the proceeding. The court held that the inclusion of opposite party No. 4 was valid, as they were given the opportunity to present their case, and the preliminary order could be treated as modified to include them.
4. Absence of Specific Findings on Possession of Individual Disputed Plots:
The petitioner contended that the civil court's finding was invalid as it did not specify which of the opposite parties was in possession of which portion of the disputed property. The court found that the civil court's task was to determine whether the first party or the second party members were in possession of the disputed plots. The civil court found that the first party had no possession and that the second party members were in possession. The court held that the civil court was not required to make separate findings for each plot, and the joint possession finding was sufficient given the circumstances.
Conclusion:
The court concluded that there were no grounds to interfere with the Magistrate's order. The Rule was discharged, and the operation of the order was stayed for two weeks upon verbal prayer. The final order was to be stayed until 4th October 1966, with no further extensions.
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1966 (9) TMI 159
Issues Involved:
1. Whether under the agreement of sale, time was of the essence.
2. Whether the respondent was ready and willing to perform his part of the contract.
Issue-wise Detailed Analysis:
1. Whether under the agreement of sale, time was of the essence:
The Supreme Court examined whether time was of the essence of the contract under the agreements dated April 4, 1959, and April 15, 1959. The Court referred to Section 55 of the Contract Act, which stipulates that a contract becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract. The Court noted that the intention to make time of the essence must be expressed in unmistakable language or inferred from the nature of the property, conduct of the parties, and surrounding circumstances.
The Court observed that the agreements did not express in unmistakable language that time was of the essence. The mere incorporation of a clause imposing a penalty for default did not necessarily indicate such intention. The Court held that in contracts for the sale of immovable property, it is normally presumed that time is not of the essence. The Court found that the appellants were in urgent need of money, but they had secured Rs. 3006/- from the respondent, which presumably tided over their difficulties temporarily. The Court concluded that there was no express stipulation or sufficiently strong circumstances to indicate that time was intended to be of the essence of the contract.
The Court further noted that even if time was not originally of the essence, the appellants could have served a notice making time of the essence and requiring the respondent to complete the contract within a reasonable time. However, no such notice was served by the appellants. Instead, by their letter dated July 30, 1959, they treated the contract as at an end.
2. Whether the respondent was ready and willing to perform his part of the contract:
The respondent claimed a decree for specific performance and needed to establish that he was continuously ready and willing to perform his part of the contract from the date of the contract to the date of hearing. The Trial Court found that the respondent was not ready and willing to perform his part of the contract. The High Court did not consider this finding and granted a decree for specific performance without expressing dissent.
The Trial Court considered the respondent's admission that he was not willing to take the sale deed on April 30, 1959, and found that the respondent committed default by not carrying out the contract on that date. The Court observed that the respondent was never eager, prompt, or willing to take the sale deed and concluded that he committed default in performing his part of the agreement. The High Court, however, focused on whether time was of the essence and whether the respondent was disentitled to relief on the ground of delay, without addressing the issue of readiness and willingness.
The Supreme Court noted that the Trial Court's finding on the issue of readiness and willingness was based on prima facie good evidence and could not be set aside without reappraisal of the evidence. The Court found that the High Court did not discuss the evidence on this part of the case and did not hold the Trial Court's finding to be incorrect. The Supreme Court accepted the Trial Court's finding that the respondent was not ready and willing to perform his part of the contract.
Separate Judgment by Bachawat, J.:
Bachawat, J. agreed that time was not of the essence of the contract and that the respondent was entitled to specific performance. He noted that the High Court rightly held that time was not of the essence and that the respondent was not disentitled to relief on the ground of delay. He disagreed with the Trial Court's inference that the respondent was not ready and willing to perform the contract based on the delay from April 30, 1959, to the middle of July 1959. He held that mere delay, short of waiver or abandonment, is no ground for refusing relief and that the respondent was at all material times ready and willing to perform the contract. He concluded that the respondent was entitled to specific performance, and the High Court rightly decreed the suit.
Final Order:
In accordance with the majority opinion, the appeal was allowed, the decree passed by the High Court was set aside, and the decree passed by the Trial Court was restored. There was no order as to costs in the Supreme Court and the High Court.
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1966 (9) TMI 158
Issues:
1. Validity of house tax imposed by Broach Borough Municipality.
2. Legislative competence of the State Legislature to impose and validate the house tax.
3. Applicability and sufficiency of the Validation Act.
4. Confiscatory nature of the house tax and violation of fundamental rights under Article 19.
Analysis:
Issue 1: Validity of House Tax Imposed by Broach Borough Municipality
The petitions challenge the validity of the house tax imposed by the Broach Borough Municipality under section 73 of the Bombay Municipal Boroughs Act, 1925. The tax was levied on the capital value of lands and buildings. The Supreme Court in Gordhandas Hargovindas v. Municipal Commissioner, Ahmedabad (AIR 1963 SC 1742) had held that a tax designated as a rate must be based on annual letting value, not on capital value. The petitioners argued that the house tax imposed by the Municipality was illegal as it was based on capital value. However, the court determined that the house tax was not a rate but a tax, and thus, the Municipality had the authority to impose it on the capital value. The court concluded that the house tax did not fall within the mischief of the Supreme Court's judgment in Gordhandas' case.
Issue 2: Legislative Competence of the State Legislature
The petitioners contended that the State Legislature lacked the competence to impose the house tax on the capital value of lands and buildings, arguing that it fell under Entry 86 of the Union List. The court, however, held that Entry 49 of the State List allowed the State Legislature to impose taxes on lands and buildings, including on their capital value. The court referenced the precedent set by the Bombay High Court in Gordhandas' case (AIR 1954 Bom 188), which upheld the legislative competence of the State Legislature under Entry 42 of List II of the Government of India Act, 1935, corresponding to Entry 49 of the State List in the Constitution. The court found no conflict between Entry 49 of the State List and Entry 86 of the Union List, affirming the State Legislature's competence to impose the house tax.
Issue 3: Applicability and Sufficiency of the Validation Act
The Gujarat Imposition of Taxes by Municipalities (Validation) Act, 1963, was enacted to validate the imposition and collection of taxes based on capital value. The court analyzed section 3 of the Validation Act, which validated the rules and the levy of the house tax retrospectively, ensuring that the tax was not deemed invalid merely because it was based on capital value. The court held that the Validation Act was within the legislative competence of the State Legislature and effectively validated the past imposition and future collection of the house tax. The court rejected the petitioners' argument that the Validation Act was insufficient without amending section 73 of the Boroughs Act.
Issue 4: Confiscatory Nature of the House Tax and Violation of Fundamental Rights
The petitioners argued that the house tax was confiscatory and violated their fundamental rights under Article 19(1)(f). The court noted that petitioner No. 2, as a director and shareholder, had no fundamental right affected by the tax, and petitioner No. 1, being a company, was not a citizen entitled to protection under Article 19. The court also held that the Validation Act, enacted during an emergency, was protected by Article 358, which allowed the State to make laws and take executive actions that might otherwise violate Article 19. The court found no merit in the argument that the house tax was confiscatory, as the evidence did not conclusively establish that the tax was expropriatory in nature.
Conclusion:
The court dismissed the petitions, holding that the house tax imposed by the Broach Borough Municipality was valid, the State Legislature had the competence to impose and validate the tax, the Validation Act was sufficient and effective, and the tax did not violate fundamental rights under Article 19. The court also issued certificates under Articles 132(1) and 133(1)(c) for further appeal.
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1966 (9) TMI 157
Issues Involved:
1. Whether the suit for redemption and possession of mortgaged lands was barred by limitation.
2. Whether the statements in certain documents constituted acknowledgments under Section 19 of the Limitation Act, 1908, thereby extending the period of limitation.
Detailed Analysis:
1. Barred by Limitation:
The primary issue was whether the suit for redemption and possession of the mortgaged lands was barred by limitation. The period of limitation for redemption of the mortgages in question was sixty years, which expired in 1929. The appellants contended that certain statements in four documents constituted acknowledgments under Section 19 of the Limitation Act, 1908, thus extending the period of limitation and saving their suit from being time-barred.
2. Constituting Acknowledgments:
The appellants relied on four documents to argue that they contained acknowledgments within the meaning of Section 19 of the Limitation Act, 1908:
- Ex. P. 14: Written statement in Suit No. 50 of 1903, stating that Parmeshwardas held the lands as a mortgagee under the seven mortgages.
- Ex. P. 15: Plaint in Suit No. 31 of 1903, referencing the sub-mortgage executed by Parmeshwardas.
- Ex. X: Sale-deed executed by Parmeshwardas selling his mortgage rights.
- Ex. E: Deed of sub-mortgage executed by Parmeshwardas in 1902.
The appellants argued that an admission of the jural relationship of mortgagor and mortgagee was sufficient to constitute an acknowledgment. They contended that such an admission implied a subsisting mortgage and the corresponding right of redemption.
The respondents contested this, arguing that a statement must be a conscious and deliberate admission of the right of the mortgagor to redeem and the liability of the maker to be redeemed. The High Court held that the statements did not constitute acknowledgments and dismissed the suit as time-barred.
Legal Examination:
Section 19(1) of the Limitation Act, 1908, requires an acknowledgment of liability in respect of property or right, made in writing and signed by the party against whom such property or right is claimed. The acknowledgment must be made before the expiry of the period of limitation.
The Supreme Court reviewed various decisions and noted a divergence of opinion among different High Courts. Some decisions held that an admission by a mortgagee in a pleading or subsequent transaction was sufficient acknowledgment. Others required a conscious and deliberate admission of liability.
The Court referred to its decision in Shapur Fredoom Mazda v. Durga Prosad, which clarified that an acknowledgment must relate to a subsisting liability and indicate the jural relationship with the intention of admitting it. The admission need not be express but must be clear enough to imply the subsisting liability.
Application to the Case:
- Ex. E (April 8, 1902): The mortgage-deed referred to the mortgage for describing the interest being mortgaged, not for admitting a subsisting mortgage.
- Ex. X (August 16, 1902): The sale-deed recited the mortgages to describe the seller's rights, not to admit a subsisting jural relationship.
- Ex. P. 15: The plaint in Suit No. 31 of 1903 mentioned the sale of mortgage rights to trace the plaintiffs' rights, not to admit a subsisting mortgage.
- Ex. P. 14: The written statement in Suit No. 50 of 1903 specifically denied the right of redemption, thus not constituting an acknowledgment.
The Court concluded that none of the statements in these documents amounted to acknowledgments within the meaning of Section 19. Therefore, the High Court was correct in holding that the appellants' suit was barred by limitation.
Conclusion:
The appeal was dismissed with costs, affirming the High Court's judgment that the suit was barred by limitation and that the statements relied upon did not constitute acknowledgments under Section 19 of the Limitation Act, 1908.
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1966 (9) TMI 156
Issues Involved:
1. Retrospective vs. Prospective Application of the Amendment in the Jammu and Kashmir Land Acquisition Act regarding the rate of interest.
Detailed Analysis:
Retrospective vs. Prospective Application of the Amendment
The primary legal question addressed by the Full Bench was whether the amendment to the Jammu and Kashmir Land Acquisition Act, introduced by Act No. XXXIV of 1960, which changed the rate of interest from 6% to 4%, was to be applied retrospectively or prospectively.
Common Ground and Context
It was undisputed that the lands in question were acquired, and the awards by the Collector were given before the amendment came into force. Additionally, references to the District Judge for enhancing compensation were made before the amendment. The District Judge's orders, which included granting interest at 6% per annum, were passed after the amendment came into force.
Arguments and Contentions
The Advocate General argued that since the District Judge passed his orders after the amendment was in force, he should have granted interest at the amended rate of 4% per annum. The respondents contended that the amendment should be prospective, as there was no express or implied indication in the language of the amendment that it was to apply retrospectively. They also argued that section 28 was mandatory, conferring a duty on the court to grant interest, thus creating a vested right that could not be taken away by a retrospective amendment.
Analysis of Section 28
The court reviewed various authorities and concluded that there were two sets of opinions regarding whether section 28 was mandatory or directory. The court favored the view that section 28 was mandatory, meaning the court had a duty to grant interest at the specified rate. This interpretation was supported by the statutory language and the scheme of the Act, which aimed to provide fair compensation, including interest, to landowners.
Legal Principles and Precedents
The court emphasized well-settled principles of statutory interpretation, noting that the use of the word "may" in a statute does not necessarily indicate discretion and can imply a mandatory duty, especially when coupled with an obligation. The court cited several Supreme Court decisions supporting this interpretation.
Vested Rights and Retrospective Legislation
The court held that the right to receive interest at 6% per annum was a vested right that accrued when the land was acquired and the award made. Such a right could not be impaired by a retrospective amendment unless explicitly stated. The amendment did not contain any language indicating retrospective application.
Supporting Judgments
The court referenced several judgments, including decisions from the Privy Council and the Supreme Court, which supported the view that amendments affecting substantive rights should not be applied retrospectively unless clearly intended by the legislature. The court also referred to a Privy Council decision where a similar issue was decided, holding that the rate of interest should be determined based on the law in force at the time of acquisition.
Conclusion
The court concluded that the amendment to section 28 by Act No. XXXIV of 1960 was prospective in nature and did not apply to proceedings that were pending before the amendment came into force. Therefore, the rate of interest to be awarded should be 6% per annum, as per the provisions of section 28 before the amendment.
The cases were remanded back to the division bench for hearing in accordance with this interpretation of the law.
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