TMI Blog1960 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge(s) : HIDAYATULLAH., KAPUR., S. K. DAS JUDGMENT The judgment of the court was delivered by KAPUR, J.--- This is an appeal against the judgment and order of the High Court of Punjab made on a reference under, section 66(1) of the Indian Income-tax Act which was answered in favour of the Commissioner of Income-tax. The appellant is the assessee--a Hindu undivided family---with Sheel Chandra as its karta and the respondent is the Commissioner of Income-tax. The appeal relates to the assessment year 1951-52. The appellant, a Hindu undivided family, consisted of Sheel Chandra and his younger brother. Their father Adhishwar Lal, up to his death on April 16, 1950, was the treasurer of several branches of the Central Bank of India (which in the judgment will be referred to as the bank). During his father's lifetime Sheel Chandra was employed as an overseer in the bank on a salary of Rs. 400 a month. Sheel Chandra was appointed treasurer of the bank at Delhi and sixteen other branches of the bank. As treasurer, he furnished security to the bank of certain properties of the Hindu undivided family, which consisted of title deeds of immovable properties in Chandni Cho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersonal qualification but he was appointed because (a) his father was a treasurer of the bank before him and (b) he had furnished substantial security which was part of the property of the Hindu undivided family. Against this judgment and order the appellant has come in appeal to this court. The nature of the employment of Sheel Chandra has to be gathered from the agreement dated September 19, 1950, between him and the bank. It shows that on his application for appointment as a treasurer at Delhi and sixteen other branches of the bank, the bank appointed him treasurer for those branches and he could, by mutual agreement, be appointed at other branches in the Punjab, U.P. and Rajasthan. The appointment took effect from April 16, 1950. Sheel Chandra undertook to perform the duties and be responsible as treasurer of the various branches of the bank and was required to engage and employ subordinate staff called the cash department staff such as head cashiers, cashiers, potdars, guaranteed peons, godown keepers, assistant godown keepers, chowkidars and clerks and other persons necessary for the efficient working of the said offices. He had the power to " control, dismiss and change " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssory notes, hundies or other securities. Besides this he was required to satisfy the agent or the manager of the branch that all the monies of the bank and other valuable securities which had not been duly used and accounted for were intact and in their proper places. Sheel Chandra was paid a salary of Rs. 1,750 per mensem for all the branches he was employed in. Besides this he was paid certain sums of money for guaranteeing the conduct of godown keepers, assistant godown keepers and chowkidars supplied by him. If the branches or out-agencies were increased he was to receive such increase in salary as might mutually be agreed upon. On the closing of any branch there was to be a corresponding reduction in the remuneration. The members of the cash department staff were to be paid travelling allowance according to the rules of the bank. In addition to the remuneration above-mentioned the treasurer or his authorised representative when visiting different branches were to get actual railway fare. The various members of the cash department staff were to be paid their salary directly by the bank but the bank was not bound to pay more than the scale laid down by it. The permanent memb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agent of the bank but was a salaried servant. The contention on behalf of the respondent on the other hand was that the agreement showed that Sheel Chandra was carrying on a business in that he was supplying cashiers and other members of the cash department staff for a monetary consideration. He guaranteed their fidelity which was an insurance undertaken by him. He was to get certain sums of money for supplying each member of certain classes of servants to the bank and the agreement between the bank and Sheel Chandra could be terminated by notice and there was an arbitration clause and he was not required to serve personally. Undoubtedly there are some terms in the agreement which are unusual as ordinary agreements of service go but in the case of an agreement between a bank and a treasurer they are not so unusual. There was an agreement with very similar clauses in Shivnandan Sharma v. Punjab National Bank Ltd. and it was held to be an agreement of service and not of agency. Now, the duties of Sheel Chandra under the agreement are such as are peculiar to the employment of treasurers. It is true that as treasurer, Sheel Chandra had also undertaken to indemnify the bank not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above the duties of the treasurer in the present case, his obligations and the manner of control exercised over him and the staff employed by him to carry out the work of the cash department of the bank. It is no doubt true that the treasurer guaranteed the fidelity, good faith and honesty of the persons who were employed in the cash department of the bank but that was a part of the duty that he undertook and that is peculiar to the very nature of his employment. Applying the test which was laid down by Bhagwati, J., in Dharangadhara Chemical Works Ltd. v. State of Saurashtra that having regard to the nature of the work whether there was due control and supervision of the bank over the treasurer, the treasurer in the instant case must be held to be a servant of the bank. What we have to see is the effect of the agreement as a whole and taking the various clauses together it must be held that Sheel Chandra, the treasurer, was a servant of the bank. In view of this it is not necessary to discuss in detail the various cases that were cited at the Bar. Bhargava v. Commissioner of Income-tax was the case of a treasurer of the Central Bank of India at Agra. There he was paid a salary of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indu undivided family. Treasurership is an employment of responsibility, trust and fidelity and personal integrity and ability, and mere ability to furnish a substantial security is not the sole or even the main reason for being appointed to such a responsible post in a bank like the Central Bank of India. On the other hand his previous experience as an overseer of the bank and his being appointed on his applying for the post are indicative of personal fitness for it. There is nothing to show that Sheel Chandra had received any particular training at the expense of the family funds or his appointment was the result of any outlay or expenditure of or detriment to the family property. But it was argued on behalf of the respondent that because he had lodged joint family property by way of security his earnings as treasurer became a part of the income of the Hindu undivided family for the reason that the acquisition was not without risk to the family estate. He relied on Gokul Chand v. Firm Hukum Chand Nath Mal and Commissioner of Income-tax v. Kalu Babu Lal Chand. In the former case a member of a joint family entered the civil service and that was made possible by the expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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