OhiranjitzaZ

Ohowdhuri

The Union of

India and

OthtJTS.

DasJ.

Dec. 14,

SUPREME COURT REPORTS [1950]

and their shareholders and has penalised this particular company and its shareholders, leaving out other companies and their shareholders who may be equally guilty of the alleged vice of mismanagement and neglect of the type referred to in the preambles. In my opinion the legislation in question infringes the fundamental rights of the petitioner and offends against article 14 of our Constitution.

The result, therefore, is that this petition ought to succeed and the petitioner should have an order m terms of prayer (3) of the petition with costs.

Petition dismissed .

Agent for the.petitioner: M. S. K. Aiyengar .

Agent for opposite party Nos. 1 & 2: P.A. Mehta.

Agent for opposite party Nos. 3 to 5 and 7 to 10:

Rajinder Narain.

J ANARDAN REDDY AND OTHERS

THE STATE.

[SHRI HARILAL KANIA C.J., SA!YID FAZL ALI,

PATANJALI SASTRI, MUKHERJEA, DAS and

CHANDRASEKHARA AIYAR JJ.J

Constitution of India, Arts. 134, 136, 374(4)-Special leave to appeal-Judgment of Hyderabad High Court passed before !16th Jan.

1950-Application for special leave-1'.faintainability-Pendency of application for leave to appeal to Judicial Committee of Hyikrabad when new constitution came into force, effect of-Scope of Art. 136- " Any court or tribunal in the territory of India "-Interpretation of •tatute.-Presumption of prospective operation--Right to appeal.

The petitioners, who v.ere convicted and sentenced to death by a special tribunal in the Hyderabad State, preferred appeals to the High Court of Hyderabad which were dismissed, and they applied to the.High Court on the 21st Jan., 1950, for leave to appeal to the Judicial Committee of Hyderabad against the judgments of the High Court. On the 26th Jan., 1950, the Constitution of India came into force and under the Constitution, Hyderabad became a part of India, the Judicial Committee of Hyderabad ceased to exist, and all appeals and other proceedings pending before that

Committee stood transferred to the Supreme Court of India.

The 1950

applLntions of the petitioners were amended so as to 1nake them - applications under Art. 134 of the Constitution, but they wereJana?"dan Reddy dismissed on the ground that no such petitions lay under Art. and Others 134 and also on the merits.

The p!3titioners thereupon made v. an application to the Supreme Court of India under Art. 136 of The State. the Constitution for special leave to appeal:

Held that, inasmuch as Art. 136 confers power on the Supreme Court to grant special leave to appeal only from any judgment, decree, sentence or order passed or made by " any court or tribunal in the territory of India," and the Hyderabad High Comt was not a Court in the territory of India when the judgments in question were pronounced the Supreme Court bad no jurisdiction to grant special leave. Art. 136 cannot be so construed as to apply to judgments or orders pronounced before Hyderabad became part of India and tc confer a right of appeal inferentially, merely because the petitioners bad a right to appeal to the Judicial Committee of Hyderabad when the Constitution came into force and they had been deprived of this right by the abolition of that Committee without making a provision enabling them to appeal to the Supreme Court.

APPELLATE JURISDICTION (Criminal) : Criminal Mis. cellaneous Petitions Nos. 71 to 73 of 1950.

Petitions under Art. 136 of the Constitution praying for special leave to appeal to the Supreme Court from the orders of the High Court of Judicature at Hyderabad dated 12th, 13th and 14th December, 1949, dismissing the appeals preferred by the petitioners against orders of the Special Tribunal of Hyderabad con\'icting them of murder and sentencing them to death.

The material facts and arguments of the counsel appear from the judgment.

D. N. Pritt (K. B. Asthana, Daniel Latifi, Bhawa Shiv Charan Singh and A. S. R. Chari, with him) for tbe petitioners.

M. C. Setalvad, .Attorney-General for India, and Raja Ram Iyer (G. N. Joshi, with them) for the respondent.

1950. December 14.

The Judgment of the Court was delivered by

KANIA C.J.-These are three criminal miscellaneous Kania c. J. petitions asking for special leave to appeal to the

- ·-------------------------

, '

\ [1950]

1950 • Supreme Court under articie 136 of the Constitution of

- -· _India. ·-- Janard'an Reddy ·- . . a•a Others .

All the accused were charged WI th berng members of

- •. ,__ .the Communist Party wedded to the policy of over- Th• Stat•. throwing the existing Government at Hyderabad by violence and establishing in its place a communist

Ka•i~C. J. regime:-- It is alleged that they demanded subscriptions towards their communist organization and some of the villagers who did not meet their demands were abducted on the 21st of September, 1948, and murdered. They were charged with various offences including murder before a special tribunil established under the regulations promulgated by tlie Military Governor under the -authority of H. E. H. the Nizam and convicted and sentenced to deathon the 9th, 13th and 14th of August, 1949, by separate judgments. The petitioners appealed from those judgments to the Hyderabad High Court and the High Court, by its judgments dated the 12th, 13th and 14th December, 1949, respectively, dismissed the appeals. The petitioners applied to the High Court for a certificate to appeal to the Judicial Committee of the Hyderabad State on the 21st of January, 1950. It appears that H.E. H. the ' Nizam issued a jirman.on the 23rd of November, 1949, stating that the proposed Constitution of India was suitable for the government of Hyderabad and he accepted, it as the Constitution of, the Hyderabad State as one of the States of PartB in the First Schedule. On the 26th of January, 1950, the Constitution of India became applicable to the Union of India and the Part B States. The petitions originally filed for a certificate for leave to appeal to the Judicial Committee of the Privy Council of the Hyderabad State were, by leave of the Court, amended, and made into petitions under article 134 of the Constitution of India. A Division Bench of the High Court at Hyderabad considered the petitions and dismissed therri on the ground that no such petitiim-slay under article 134 and they also declared that on the merits no case was made out for a certificate as asked by the petitioners. Tlie petitioners have now filed their petitions to this Court under

article 136 of the Constitution of India, for special 19zo leave to appeal from the judgments of the High . Court ; r -d -R aa .· dated the 12th, 13th and 14th of December, 1949. a:i:; d ~h,:, Y Two questions arise for consideration. The'first is, v. whether any application under article 136, under the Th• St•t•. circumstances of the case, can be made to the Supreme

Court;-and, the second is, whether on a consideration Kan; a c. J. of the facts, if it has jurisdiction to entertain the petitions, the Court should grant special leave. The first question depends on the construction of the relevant articles in the Constitution of India. Under article 374 (4), on and from the commencement of this Constitution the jurisdiction of the authority functioning as the Privy Council in a State specified in.

Part B to the First Schedule to entertain and dispose of appeals and .petitions from or in respect of any judgment, decree or order of any court within that State ceased, and all appeals and other proceedings pending before the said authority at such commencement stand transferred to and have to be disposed of by the Supreme Court. This sub-clause thus abolishes the jurisdiction of the Privy Council of the Hyderabad_ State and after the Constitution of India came into force that body and its jurisdiction altogether ceased.

On the facts before us, it is clear that as no proceeding or appeal in respect of these judgments of the Hydera-. bad High Court.was pending before the Hyderabad Privy Council before its abolition, nothing got transferred to the Supreme Court by operation of this sub- . clause.

It wls argued on behalf of the petitioners that on the 25th January, 1950, they had a right to move the High Court at Hyderabad for a certificate granting them leave to appeal to the Privy Council of the Hyderabad State. In fact such petitions were pending on that day. It was therefore argued that a right to appeal which existed on the 25th of January, 1950, cannot be impliedly taken away by the Constitution of India being made applicable to the State of Hyderabad. It was pointed out that in respect of convictions all pers.ons who had rights of appeal, or

SUPREME COURT REPORTS [1950]

1950 who had time to file their applications for a certificate, - as also persons whose petitions were pending before

Ja:a;:~::::dy the Hyderabad High Court sking for such. certificates v. and which had not been disposed of because of the The State. congestion of work in the High Court would lose their right to appeal to the higher court if article 136 is not

Km1ia c. J. construed so as to give a right of appeal to the Supreme Court of India. It was pointed out by the Attorney- General, appearing on behalf of the State, that if a wide construction is given to article 136 it will not only permit persons who are stated to be under such hardship to apply for leave under article 136 but several . other rights will be created. Such rights will arise not . only in criminal cases but in civil cases also and they can be exercised without any limitation as to the period within which the application has to be made, with the result that old judgments may also be called into question. Moreover, on the wider construction of article 136, judgments which had become final in those States in which there existed no court like the Privy Council to whom appeals could lie from the judgments of their High Courts, will be subject to appeal though no such appeal lay before. It was therefore argued that on the ground of convenience the balance if at all. is against the argument advanced by the petitioners.

It was strenuously urged that this is a wrong approach to the question altogether.

Articles of the Constitution have to be construed according to their plain natural meaning and cases of hardship should not be brought to bear on the natural construction. Hard cases should not be permitted to make bad law. In our opinion, this argument of the Attorney-General is sound.

The question of hardship cannot be and should not be allowed to affect the true meaning of the words used in the Constitution. It is therefore proper to approach the articles irrespective of considerations of hardship.

In order to decide whether on the facts of this case, the Supreme Court has jurisdiction to grant special leave, it is necessary only to consider articles 133, 134, 135 and 136 of the Constitution of India. Article 133, in substance, retains the old provisions of the Civil

...

Procedure Code in respect of appeals to the Privy 1950 Council from High Courts in civil matters. Under 1 d-R dd article 134, it is provided that an appeal shall lie to· •::d h.:, 11 the Supreme Court from any judgment, final order or v. sentence in a criminal proceeding of a High Court in The Stato. the territory of India if the High Court ......... (then follow three contingencies under which such appeals Kania c. J. can lie).

In article 133 also the words " in the territory of India " are used. Article 135 provides for matters to which the provisions of articles 133 or 134 do not apply. It is there provided that until Parliament by law otherwise provides, the Supreme Court shall also have jurisdiction and powers with respect to any matter to which the provisions of article 133 or 134 do not apply, if jurisdiction and powers in relation to that matter were exercisable by the Federal Court immediately before the commencement of this Constitution under any existing law. This article was included in' the Constitution to enable the Supreme Court to exercise jurisdiction in cases which were not covered by articles 133 and 134, in respect of matters where the Federal Court had jurisdiction to entertain appeals etc. from the High Courts under threviously existing law.

This is obviously a provision to vest in the Supreme Court the jurisdiction enjoyed by the Federal Court, under the Abolition of Privy Council Jurisdiction Act, 1949. It may be mentioned that the jurisdiction of the Privy Council to entertain appeals from High Courts, except those which were already pending before it on the 10th October 1949, was taken away by this Act. Provision had therefore to be made in respect of appeals which were already pending or which were not covered by th~ provisions of articles 133 and 134. Article 136 of the Constitution of India is in these terms:~

"136. (1) "Notwithstanding anything in this Chapter, the Supreme Court may, in its discretion, grant special leave to appeal from any judgment, decree, determination, sentence or order in any cause or matter passed or made by any Court or tribunal in the territory of India.''

l~\

(2) ......... " -- The expression "territory of India" is defined in

Ja•ar:~:hReddy article 1 in these terms :-

•• v. "' "1. The territory of India shall comprise Th• State.

(a) the territories of the States (meaning the States mentioned in Parts A, B and C of the First Kania G. J. Schedule),

(b) the territories specified in Part D of the First Schedule, (viz., The Andaman and Nicobar Islands) and

(c) such other territories as may be acquired." The question for consideration is whether on the facts of the present case the Supreme Court can grant special leave to appeal from a judgment, sentence or order which was passed and made by the Hyderabad High Court before 26th January, 1950. The important fact to be borne in mind is that the Hyderabad courts were not courts within the territory of India when they pronounced their judgments on the 12th, 13th and 14th of December, 1949. It is argued on behalf of the petitioners that a narrow construction will take away the valuable rights of appeal which had existed in persons iJ.i the position of petitioners when the Constitution onndia was directed by H. E. H. the Nizam by his firman to be applicable to the Hyderabad State on the 26th of January, 1950, it should be held that as no substantive right was provided in the Constitution separately, the words of article 136 were wide enough to give such right to the petitioners.

On the other hand, it was then argued by the learned Attorney- General that every legislation is primarily prospective and not retrospective.

A right of appeal has to be given specifically by a statute and it is not merely a procedural right. If therefore there exists no right of appeal under the Constitution such right cannot be inferentially held to come into being on the application of the Constitution to the Hyderabad State.

For this, reliance was placed on the decision of the Privy Council in Delhi Cloth and General Mills Ltd. v. Income Tax Commissioner, Delhi & Another(') and The Colonial Sugar Refining Co. Ltd. v. Irving(•).

(1) 54 I.A. 421.

(2) [190\] A.O. 369,

In our opinion, the contention of the Attorney- !950 general on this point is correct.

There appears no --- reason why in the present case the normal mode ofJanardan Reddy

 t 1 1 t · I ] and Others mterpre mg a eg1s a 10n as prospective only s iou d be v. departed from. It was contended by Mr. Pritt that The State. the interpretation sought to be put by the State on article 136 will require the insertion of the word Kania c. J. "hereafter" in the clause, for which there was no justification. We are unable to accept this contention because, prima f acie, every legislation is prospective and even without the use of the word "hereafter" the language of article 136 conveys the same meaning. It should be noticed in this case that before the 26th January, 1950, the Government of H. E. H. the Nizam was an independent State in the sense that no court in India or the Judicial Committee of the Privy Council in London had any jurisdiction over the decisions of the Hyderabad State Courts. To give the Supreme Court of India jurisdiction over the decisions of courts of such a state, one requires specific provisions or provisions which necessarily confer jurisdiction to deal, on appeal, with the decisions of such courts. It is com. mon ground that there is no express provision of that kind.

There appear to us also no such necessary circumstances which on reasonable construction should

be treated as impliedly giving such right of appeal. Indeed the words "territory of India" lead to a contrary conclusion.

Under the words used in article 136 the courts which passed judgments or sentence must be courts within the territory of India. The territory of the Government of H.E.H. the Nizam was never the territory of India before the 26th of January, 1950, and therefore the judgment and sentence passed by the High Court of H.E.H. the Nizam on the 12th, 13th and 14th December, 1949, cannot be considered as judgments and sentence "passed by a court within the territory of India". On that short ground alone it seems that the petitioners' contention must fail.

It was argued by Mr. Pritt on behalf of the petitioners that if such construction were put, the territory of the Province of Bombay also may be exduded from

1950 the operation of article 136. The answer however is that a right to file an appeal from the judgments of Janardan R•ddy the High Court at Bombay in both civil and criminal

and Othors matters existed under the Civil Procedure Code,

Criminal Procedure Code and the Letters Patent of The State the High Court before the 26th of January, 1950. Such

Kania o. J. right of appeal to the Judicial Committee of the

Privy Council, which previously existed, was transferred to the Federal Court by the appropriate legislation and eventually by article 135 to the Supreme Court. Therefore by the interpretation, which we think is the proper interpretation of article 136 of the Constitution of India, the right of appeal from the judgment of the Bombay High Court is not taken away. It is true that having regard to the words used in article 136 which can bear a wider meaning a right to apply for leave to appeal to the Supreme Court is given in respect of decisions not only of High Courts but of other tribunals also. That larger right, if it did not exist before the 26th January, 1950, can be legitimately construed as newly conferred by article 136 and such construction does not give rise to any' anomaly. In our opinion, therefore as the judgments were pronounced and sentences passed in all these matters before us by the High Court of Hyderabad, which was in the territory of H.E.H. the Nizam and which territory was not the territory of India before the 26th of January, 1950, and as those judgments were passed before the Constitution came into force they do not fall within the class of judgments against which special leave to appeal to the Supreme Court can be asked for under article 136. It is obvious that such judgments are not covered under article 135 of the Constitution of India.

In our opinion this Court has therefore no jurisdic- • tion to entertain these petitions for special leave to appeal against such judgments of the High Court of Hyderabad under Article 136 of the Constitution.

Cases like those of the petitioners are thus not covered by articles 134, 135 or 136 and therefore the Supreme Court in the present state of the legislation is unable to

render any assistance to them. An omission to pro- 1950 vide for such relief in the Constitution cannot be d. d b h S C d fJanardan Reddy reme 1e y t e upreme ourt an assumption o d Oth jurisdiction which is not warranted by the clear words an

v. "'

i!O' of articles 134, 135 or 136 will be tantamount to mak- Tile Stat•· ing legislation by the Supreme Court which it is never its function to do.

Kania o. J.

The petitions, under the circumstances, are rejected.

Petitions dismissed.

Agent for the petitioners : I. N. Shroff.

Agent for the respondent: P. A. Mehta.

GNANAMBAL AMMAL v.

T. RAJU A YYAR AND OTHERS.

[SAIYID FAZL ALI, MuKHERJEA and

CHANDRASEKHARA AIYAR JJ.]

Hindu law-Will-Construction-General pinciples-Presunw tion ag iinst intestacy.

The cardinal maxim to be observea by courts in construing a will is to endeavour to ascertain the intentions of the testi:i.tor.

This intention has to be gathered primarily from the language of the document which is to be read as a whole without indulging in any conjecture or speculation as to what the testator would have done if he had been better informed or better advised.

~ The courts are however entitled and bound to bear in mind other matters than merely the words used.

They must consider

~-, the surrounding circumstances, the position of the testator, his family relationship, the probability that he would use words in a particular sense, and many other things which are often summed up in the somewhat picturesque figure 'the court is entitled to put itself into the testator's armch&ir '.

But all this is solely ae an aid to arriving at a right construction of the will, and to ascertain the meaning of the language - when used by that particular testator in that document.

As soon as the construction is settled, the duty of the court is to carry out the intentions as expressed. The court is in no c•se justified in adding to testarnentary dispositions.

In all cases it musb loyally carry out the will as properly construed, &nd thi~ duty is

Dec. 21.

article 14

M. S. K. Aiyengar

P.A. Mehta

Rajinder Narain

J ANARDAN REDDY AND OTHERS

THE STATE

SHRI HARILAL KANIA C.J.

SA!YID FAZL ALI

PATANJALI SASTRI

MUKHERJEA

DAS

CHANDRASEKHARA AIYAR JJ

Constitution of India

Arts. 134, 136, 374(4)

Art. 136

High Court of Hyderabad

21st Jan., 1950

Judicial Committee of Hyderabad

26th Jan., 1950

Constitution of India

Supreme Court of India

Art. 134

Art. 136

Art. 136

Supreme Court

India

Hyderabad High Comt

Art. 136

Hyderabad

APPELLATE JURISDICTION

Art. 136

High Court of Judicature at Hyderabad

12th, 13th and 14th December, 1949

Special Tribunal of Hyderabad

D. N. Pritt

K. B. Asthana

Daniel Latifi

Bhawa Shiv Charan Singh

A. S. R. Chari

M. C. Setalvad

Raja Ram Iyer

G. N. Joshi

KANIA

The Judgment of the Court was delivered by

KANIA C.J.-These are three criminal miscellaneous Kania c. J. petitions asking for special leave to appeal to the
·-------------------------

, '

\ [1950]

1950 • Supreme Court under articie 136 of the Constitution of
-· _India. ·--

21st of September, 1948

All the accused were charged WI th berng members of
•. , .the Communist Party wedded to the policy of over- Th• Stat•. throwing the existing Government at Hyderabad by violence and establishing in its place a communist

Ka•i~C. J. regime:-- It is alleged that they demanded subscriptions towards their communist organization and some of the villagers who did not meet their demands were abducted on the 21st of September, 1948, and murdered.

H. E. H. the Nizam

Hyderabad High Court

21st of January, 1950

H.E. H. the ' Nizam

23rd of November, 1949

Constitution of India

First Schedule

26th of January, 1950

Constitution of India

Union of India

article 134

Constitution of India

article 134

article 136

Constitution of India

12th, 13th and 14th of December, 1949

article 136

Supreme

Court;-and

Constitution of India

article 374

First Schedule

Constitution of India

25th January, 1950

25th of January, 1950

Constitution of India

State of Hyderabad

article 136

article 136

article 136

article 136

articles 133, 134, 135 and 136

Constitution of India

Article 133

article 134

Kania

article 133

Article 135

articles 133

Parliament

article 133

articles 133 and 134

10th October 1949

articles 133 and 134

Article 136

Constitution of India

article 1

First Schedule

26th January, 1950

article 136

ofJanardan Reddy

Pritt

article 136

Kania

article 136

Government of H. E. H. the Nizam

London

Hyderabad State Courts

article 136

Government of H.E.H. the Nizam

Bombay

article 136

Janardan R•ddy

High Court at Bombay

Criminal Procedure Code

article 135

article 136

Constitution of India

Bombay High Court

article 136

article 136

article 136

article 135

Constitution of India

Article 136

articles 134, 135

fJanardan Reddy

articles 134, 135

I. N. Shroff

P. A. Mehta

SAIYID FAZL ALI

MuKHERJEA


S.C.R.

SUPREME COURT REPORTS 949

render any assistance to them. An omission to pro- 1950 vide for such relief in the Constitution cannot be d. d b h S C d fJanardan Reddy reme 1e y t e upreme ourt an assumption o d Oth jurisdiction which is not warranted by the clear words an

v. "'

i!O' of articles 134, 135 or 136 will be tantamount to mak- Tile Stat•· ing legislation by the Supreme Court which it is never its function to do.

Kania o. J.

The petitions, under the circumstances, are rejected.

Petitions dismissed.

Agent for the petitioners : I. N. Shroff.

Agent for the respondent: P. A. Mehta.

GNANAMBAL AMMAL v.

T. RAJU A YYAR AND OTHERS.

[SAIYID FAZL ALI, MuKHERJEA and

CHANDRASEKHARA AIYAR JJ.]

Hindu law-Will-Construction-General pinciples-Presunw tion ag iinst intestacy.

The cardinal maxim to be observea by courts in construing a will is to endeavour to ascertain the intentions of the testi:i.tor.

This intention has to be gathered primarily from the language of the document which is to be read as a whole without indulging in any conjecture or speculation as to what the testator would have done if he had been better informed or better advised.

~ The courts are however entitled and bound to bear in mind other matters than merely the words used.

They must consider

~-, the surrounding circumstances, the position of the testator, his family relationship, the probability that he would use words in a particular sense, and many other things which are often summed up in the somewhat picturesque figure 'the court is entitled to put itself into the testator's armch&ir '.

But all this is solely ae an aid to arriving at a right construction of the will, and to ascertain the meaning of the language - when used by that particular testator in that document.

As soon as the construction is settled, the duty of the court is to carry out the intentions as expressed. The court is in no c•se justified in adding to testarnentary dispositions.

In all cases it musb loyally carry out the will as properly construed, &nd thi~ duty is

Dec. 21.

GnanambaZ

Ammal

v. 'l', Raju Ayyar

and Others.

SUPREME COURT REPORTS [ 1950)

universal, and is true alike of wills of every nationality and every religion or ra.nk of life.

A presumption against intestacy may be ra!sed if it is justified by the context of the document or the surrounding circumstances; but it can be invoked only when tbe"e is undoubted ambiguity in ascertainment of the intentions of the testator.

It cannot be that merely with a view to avoiding intestacy you are to do otherwise than construe plain words a.ccording to their plain mea.ning.

A Hindu died leaving a widow, a widowed daughter N, and a married daughter G, after he had ma.de a will giving authority to bis widow to adopt a son of G should she beget one, or in tbe alternative a. son of One of his nephews.

Para. 4 of the will provided that if his widow adopted G's son all bis properties except the village of K and the house at I and other properties disposed of by the will shall pass to the adopted son ; and par&. 5 provided as follows: "The whole of the village of Kand tho house al I, my daughter N shall enjoy with life interest and after her the said properly shall pass to my daughter G and her children on p•yment by the latter of Rs. 5,000 to A, the daughter of N." Later on, amongst the provisions which he wished to ma.ke if a.

son of a nephew was adopted, there was a provision which ran as follows: " Para. 13.

The village of K shall Le enjoyed by N as stated in para. 5.'' A nephew's son was arlopted and he insti luted a suit against G after N's death for recovery of the village K contending that under para. 13 of the will there was no disposition of the village after the life interest of N and on her death the village vested in him as the testatof's heir: Held, on a construction of the will as a whole, thal the testator did not intend that in the contingency of the adoption of a nephew's son, \he village K should pass, on N's death, to the adopted son; on ohe other hand, the provisions of para. 5 of the will were intended to apply even in the case of such a contin gency and the village passed to G on N's death under para. 5 of the will.

Judgment of the High Court of Madras reversed.

Venkatanarasimha v. Parthasarathy (HI.A. 51) and Re Edward; Jones v. Jones [1906, 1 Ob. 570], referred to.

APPELLATE JURISDICTION : Civil Appeal No. XIII of 1950.

Appeal from a judgment and decree of a Division Bench of the Madras High Court (Wadsworth and Rajamannar JJ.) dated 27th November, 1945, in Appeal No. 518 of 1941, reversing the judgment of the Subordinate Judge of Mayuram dated 10th July, 1944, in Original Suit No. 34 of 1943.

B. Somayya (R. Ramamurti, with him) for the

apellant.

K. S. Krishnaswami Aiyangar (K. Narasimha rnso Aiyangar, with him) for respondent No. 1.

GnanambaZ

1950. December 21. The Judgment of the Court Ammal was delivered by v.

T. Raju Ayyar M UKHERJEA J.-This appeal is directed against an and Others. appellate judgment of a Division Bench of the Madras High Court dated November 27, 1945, reversing the Muklieriea J, decision of the Subordinate Judge of Mayuram made in Original $uit No. 34 of 1943.

There is no dispute about the material facts of the case which lie within a short compass and the controversy centers round one point only which turns upon the construction of a will left by one Kothandarama Ayyar to whom the properties in suit admittedly belonged. Kothandarama, who was a Hindu inhabitant of the District of Tanjore and owned considerable properties, died on 25th April 1905, leaving behind him as his near relations his adoptive mother Valu Ammal, his widow Parbati and two daughters Nagammal and Gnanambal, of whom Nagammal, who became a widow during the testator's life time had an infant daughter named Alamelu.

Kothandarama executed his last will on 13th March, 1905, and by this will, the genuineness of which is not disputed in the present litigation, he gave an authority to his widow to adopt unto him a son of his second daughter Gnanambal, should she beget one before January, 1908, or in the alternative any of the sons of his two nephews, if the widow so chose.

The suit, out of which the appeal arises, was commenced by Raju Ayyar, who was a son of the testator's nephews and was taken in adoption by the widow in terms of the will; and it was for recovery of possession of certain properties, known as Kothangudi properties whicl; l formed part of the testator's estate on the allegation that under the will mentioned above, these properties were given to Nagammal, the widowed daughter of the testator for her life-time, but as there was no disposition of the remaining interest after the death of the life tenant, the properties vested in the

Gnan.atnbai

Ammal

T. Raju Ayyar

a'ld Oth1rs.

Jfukherjea J.

plaintiff as the adopted son and heir of the deceased on the death of Nagammal which took place on 3rd of ] anuary, 1943. Gnanambal, the second daughter of the testator, was the first and main defendant in the suit, and she resisted the plaintiff's claim primarily on the ground that there was no intestacy as regards the suit properties after the termination of the life interest of Nagammal, and that under the terms of the will itself she was entitled to get these properties in absolute right after the death of Nagammal, subject to payment of a sum of Rs. 5,000 to Alamelu, the daughter of Nagammal.

Alamelu was made the second defendant in the suit and as she died when the snit was pending in the trial court, her heirs were impleaded as defendants 3 to 9.

The first court accepted the contention of the defendant No. 1 and dismissed the plaintiff's suit. On appeal to the High Court, the judgment was reversed and the plaintiff's claim was allowed. The defendant No. 1 has now come up appeal to this court.

To appreciate the contentions that have been raised by the parties to this appeal, it would be convenient first of all to refer briefly to the relevant provisions of the will: After cancelling his previous wills. the testator in the third paragraph of his will, gave his widow authority to adopt a son. She was to adopt the son of Gnanambal, if the latter got a son previous to January 1908, or she could adopt any of the sons of the testator's nephews. Paragraph 4 provides that if the first course is followed, that is, if the son of Gnanambal is adopted by the widow, then all the properties, movable and immovable, belonging to the testator excepting the village of Kothangudi, the house at Injigudi and the other properties which were disposed of by the will would go to such adopted son. Paragraph 5, which is material for our present purposes runs as follows :-

" The whole village of Kothangudi and the house at lnjigudi, both of Nannilam Taluk, my daughter Nagammal, shall enjoy with life interest and after her the said property shall pass to my daughter Gnanambal and her children on payment by the latter of Rs. 5,000 to Alamelu, Nagammal's daughter."

S.C.R.

SUPREME COURT REPORTS 953 , ' By the sixth paragraph the Nallathukudi and 1950 Pungavur villages together with certain house prot M h , d Gnanabal per y at ayavaram are given tot e testators a op- Ammal tive mother and wife in equal shares to be enjoyed v. by both of them during their life-time and after r. Raiu Ayyar their death they are to pass on to the adopted son. and Othm.

Paragraph 7 gives a small house absolutely to Nagam.

MukherJ•• J mal for her residence and paragraph 8 makes certain provisions for management of the properties. In para. graph 9 direction is given to collect the money due on the insurance policy on the life of the testator an.d to. pay off his debts.

Paragraph IO mentions certain charities, the expense;; of which are to be defrayed from the income of the Nallathukudi properties. Para. graph 11 then says that in the event of the widow adopting any of the nephew's sons of the testator, such son shall inherit the entire property at Kokkur and also the lands of Nallathukudi after the death of the testator's wife and mother. By paragraph 12, the village of Maruthanthanallur is given to Gnanambal and paragraph 13 provides that "the village of Kothangudi shall be enjoyed by Nagammal as stated in paragraph 5 ". By paragraphs IS and 16 the remainder in the house at Mayavaram situated in the east row of Vellalarkovil Street is given to Gnanambal after the death of the testator's wife and mother. Paragraph 18 provides for certain other charities. In paragraph 20 it is stated that if the wife of the testator should die before January, 1908, without making any adoption, then the eldest or any son of Gnanarnbal would be his adopted son without any formality and inherit all the properties subject to the conditions mentionecj in the will. Paragraph 21, which is the penultimate paragraph in the will, further lays down that if all the three contingencies fail and no adoption is taken, the male chilci or children born to Gnanambal shall inherit as grandsons all the properties of the testator, subject to the conditions specified in the will. These, in brief, are the dispositions made in the will. The plaintiff founds him claim upon paragraph 13 of. the will which, according to him, contams the et1tlre disposition so far as the Kothangudi

SUPREME COURT REPORTS [1950) ' 1950 property is concerned.

That village is given to Nagammal for her life with no disposition of the Gnanamba.l b Ammal remaining interest. If the remain<ler has not een v. disposed of, there is no doubt that the plaintiff would T. Raju Ayyar be entitled to the property as the heir of the testator ·

and Others. under the ordinary law of inheritance.

Mukherjea J, The defen<lant No. l, on the other hand, relies on paragraph 5 of the will, which gives the Kothangudi village and the Injigudi house to Nagammal to be enjoyed by her so long as she lives and after her death they are to go to Gnanambal and her children. subject to the payment of a sum of Rs. 5,000 to be paid .to Alamelu, the daughter of Nagammal.

The High Court on a construction of the will has found in favour of the plaintiff primarily on the ground that in the contingency which happened in the present case, viz., that the widow took in adoption a nephew's ,; on of the testator, paragraph 5 of the will did not come into operation at all. The disposition as regards Kothangudi property is, therefore, to be found exclusively in paragraph 13 of the will and the actual words employed by the testator in that paragraph do not . indicate that apart from Nagammal's taking a life estate in the Kothangudi village the rest of the provisions in regard to this property as laid down in paragraph 5 would also be incorporated into para- graph 13.

An obvious difficulty, according to the learned Judges, in accepting the construction sought to be put upon the will by. defendant No. 1 is that paragraph 5 speaks both of Kothangudi and Injigudi properties, whereas paragraph 13 does not mention the Injigudi house at all, nor does it purport to give a life interest in the same to Nagammal. It could not be reasonably held on a construction of the will that the intention of the testator was that Gnanambal was to pay Rs. 5,000 to Alamelu for the Kothangudi property alone.

The result was that the plaintiff's claim was allowed. It is the propriety of this decision that has been challenged before us in this appeal.

In course of the arguments, we have been referred by the learned Counsel on both sides to quite a large

number of decided authorities, both English and Indian, in support of their respective contentions. It is seldom profitable to compare the words of one will with those of another or to attempt to find out to which of the wills upon which decisions have been given in reported cases, the will before us approximates closely. Cases are helpful only in so far as they purport to lay down certain general principles of construction and at the present day these general principles seem to be fairly well settled.

The cardinal maxim to be observed by courts in construing . a will is to endeavour to ascertain the inten. tions of the testator. This intention has to be gathered primarily from the language of the document which is to be read as a whole without indulging in any conjecture or speculation as to what the testator would have done if he had been better informed or better advised. In construing the language of the will as the Privy Council observed in Venkata Narasimha v.

Parthasarathy (1), "the courts are entitled and bound to bear in mind other matters than merely the words used.

They must consider the surrounding circumstances, the position of the testator, his family relationship, the probability that. he would use words in a particular sense, and many other things which are often summed up in the somewhat picturesque figure 'The court is entitled to put itself into the testator's armchair' ...... Ent all this is solely as an aid to arriving at a right construction of the will, and to ascertain the meaning of its language when used by that particular testator in that document.

So soon as the construction is settled, the duty of the court is to carry out the intentions as expressed, and none other. The court is in no case justified in adding to testamentary dispositions ...... In all cases it must loyally carry out the will as properly construed, and this duty is universal, and is true alike of wills of every nationality and every religion or rank of life."

A question is sometimes raised as to whether in construing a will the court should lean against

\\) i l. 1-.. nl at~- io.

Gnanatnbal

Amtnal

T. Raju Ayyru

and Othera.

kfuk1ierjea J,

1950 intestacy. The desire to avoid intestacy was considered by the Privy Council in the case referred to Gnananibal above as a rule based on English necessity and English Ammal v. habits of thought which should not necessarily bind an T. Rniu Ayyar Indian court. It seems that a presumption against

and Others. intestacy may be raised if it is justified by the context of the document or the surrounding circumstances; Muk7"'j'" J. but it can be invoked only when there is undoubted ambiguity in acertainment of the intentions of the testator.

As Lord Justice Romer observed in Re Edwards; Jones v. Jones (1), "it cannot be that merely with a view to avoiding intestacy you are to do otherwise than construe plain words according to their plain meaning". It is in the light of the above principles that we should proceed to examine the contents of the will before us.

The present will, which is the last of four testamentary document executed by the testator, appears to have been prepared with a great deal of care and circumspection. The testator had clearly in mind the different situations that might arise in case his widow adopted either Gnanambal's son or a son of one of the nephews of the testator.

He envisaged also the possibility of the widow dying without making any adoption at all. Besides the son to be adopted, the only other relations who had natural claims upon the affection and bounty of the te,; tator and for whom he desired to make provisions were his wife, his adoptive mother, the two daughters and the infant grand-daughter. The interests given to his wife, the adoptive mother and the eldest daughter, who were all widows, were for their life-time, except a small house \..- property which was given absolutely for the residence of the eldest daughter. On the other hand, the bequests in favour of Gnanambal, who was a married daughter, and the adopted son of the testator, were absolute in their character. Besides these dispositions, there were certain gifts for charity which were to be met out of the income of the properties given to the wife and the adoptive mother for their lives.

One singular feature

(II [1906] 1 Ch. 570 at p. 574.

in the will is that the testator took scrupulous care to 1950 include in it every item of property that he owned.

Gnanambal There are two provisions in the wiJI relating to Ammal Kothangudi property to which the dispute in the prev. sent suit relates. One is in paragraph 5 which gives T. Raju Ayyar this property along with the house at Injigudi to and Othe ....

Nagammal, the remainder being given to the appellant Mu,;;:erjea J, subject to the payment of a sum of Rs. 5,000 to Alamelu, the daughter of Nagammal. The other is in paragraph 13, which merely says that Nagammal was to get it for life as stated in paragraph 5. The view taken by the High Court and which has been pressed for our acceptance here by the learned Counsel for the respondents is that paragraph 5 was meant to be operative only if Gnanarnbal's son was adopted by the widow.

As that was not done, paragraphs 4 to 8 of the will, it is urged, will go out of the picture altogether and it is not permissible to refer to them except to the extent that they were impliedly incorporated in the subsequent paragraphs of the will. We do not think that this is the correct way of reading the document.

The testator undoubtedly contemplated different contingencies; but a reading of the whole will d<;>es not show that he wanted to make separate and self-contained provisions with regard to each of the .contingencies that might arise and that each set of provisions were . to be read as exclusive of the other set or sets. That does not appear to be the scheme of the will. The testator's main desire undoubtedly was that his widow should adopt the son of his daugllter Gnanam bal, and in the first part of his will after making provisions for his two daughters, his wife and adoptive mother and also for certain charities, he left the rest of his properties to the son of Gnanambal that was to be adopted by his widow. ln the second part of the will, which is comprised in paragraphs II to 16, the testator sets out the modifications which he desires to make in the earlier dispositions in case a son of one of his nephews was adopted by the widow. It was not the intention of the testator that on the happening of the second contingency, all

Gnanambal

Ammal

T. RaJu Ayyar

and Others.

M11, kherjea J.

the earlier provisions of the will would stand cancelled and the entire dispositions of the testator's property would have to be found within the four corners of paragraphs 11 to 16 of the will.

In our opinion, the provisions made for the two daughters, the widow and the adoptive mother as made in paragraphs 5, 6 and 7 of the will and also the provisions for charities and payment of debts contained in paragraphs 9 and 10 were meant to be applicable under all the three contingencies referred to above.

This is clear from the fact that provisions of paragraphs 7, 9 and 10 have not been repeated or incorporated in paragraphs 11 to 16, although it cannot be suggested that they were not to take effect on the happening of the second contingency.

Again in the third contiugency contemplated by the testator, which is described in paragraph 20, it is expressly stated that if no adoption is made, the eldest or any son of Gnanambal would inherit the properties and he shall take the properties subject to the conditions mentioned in the will.

The conditions spoken of here undoubtedly refer to the provisions made for the mother, wife and the two daughters of the testator as well as in respect to payment of debts and carrying out of the charities specified in paragraph 10.

The changes that are to take effect on the happening of the second event are in regard to the beq nests in favour of the adopted son.

Under paragraph 4 of the will, the adopted son was to get all the properties of the testator with the exception of those given to the two daughters, the mother and the wife.

Under para. graph 11, if the adoption is of a nephew's son of the testator, the adopted son gets only the Kokkur properties and the reversionary interest in Nallatlmkudi village after the death of the testator's wife and mother.

The village Maruthanthanallur which would go to the adopted son under paragraph 4 is taken away under paragraph 11 and is given to Gnanambal.

She is also given the remaining interest in the Mayavaram house which was given to the adopted son under paragraph 6.

Subject to the changes thus made, the provisions

-,..

of paragraphs 5. 6 and 7 would, in our opinion, still remain operative even if the person adopted was a nephew's son of the testator. No change is made in paragraphs 11 to 16 with regard to the provision in paragraph 5 of the will.

In paragraph 13 it is only stated that the village Kothangudi shall be enjoyed by Nagammal as stated in paragraph 5. It may be conceded that this statement by itself does not let in the entire provision of paragraph. 5, but that is not material for our present purpose. It is enough that paragraph 5 has not been changed .or altered in any way. The statement in paragraph 13 may, after all, be a loose expression which the testator used only for the purpose of emphasising that the Kothangudi village would be enjoyed by Nagammal even if Gnanambal's son was not adopted. This is not by way of making any new disposition, but only to affirm what has been already done.

The affirmation of a portion of the provision which is perfectly superfluous cannot exclude the rest.

It is somewhat difficult to say why the rest of the provisions in paragraph 5, particularly the benefit that was meant to be given to Alamelu, was not repeated in paragraph 13. It may be that the testator did not consider it necessary or it may be that it was due to inadvertance. It is to be noted here that the testator did not mention anywhere in paragraphs 11 to 16 the small house that was given absolutely to Nagammal under paragraph 7. It was certainly not the intention of the testator that Nagammal would not have that house on the happening of the second contingency. If paragraph 5 itself is held to be a pp Ji. cable-and in our opinion it should be so held-there is no question of adding to or altering any ofthe words made use of by the testator. It is not a question of making a new will for the testator or inventing a bequest for certain persons simply because the will shows that they were the objects of the testator's affection.

The provision is in the will itself and it is only a. question of interpretation as to whether it is applicable in the circumstances which have happened in the present case. The position, therefOie, seems

1950 .

Gnanambal

Animal

v. 1'. Raju Ayyar

and Others.

Mukherjea J,

' 1950

to be that the disposition made in paragraphs 5, 6 and 7, which were in favour of the mother, the wife and the Gnanamb:tl

Ammal two daughters of the testator were meant to take effect v. immediately on the testator's death. They were not T. Raju Ayyar contingent gifts in the sense of being made dependent

and Othors upon the adoption of Gnanambal's son by the wife of the testator. Only the reversionary interest in the Mukherjea J. Mayavaram house, which was to vest in the adopted son under the provision of paragraph 6 after the death of the widow and the mother was taken away from the adopted son and given to Gnanambal in case the person adopted was not her own son. If the whole of paragraph 5 remains operative the Injigudi house must also be deemed to have been given to Nagammal for her life and in fact the evidence is that she enjoyed it so long as she was alive.

No difficulty also arises regarding the payment of Rs. 5,000 to Alamelu as has been stated by the High Court in its judgment.

Having regard to the meticulous care with which the testator seems to have attempted to provide for the different contingencies that might arise and the anxiety displayed by him in making an effective disposition of all the properties he owned, it is not probable that he would omit to make any provision regarding the future devolution of the Kothangudi village if he really thought that such direction had to be repeated in the latter part of the will. The omission of the gift of Rs. 5,000 to Alame\u also cannot be explained on any other hypothesis. It is not necessary for the purpose of the present case to invoke any rule of . presumption against intestacy, but if the presumption exists at all, it certainly fortifies the conclusion which we have arrived at..

The result is that the appeal is allowed, the judgment and decree of the of the High Court are set aside and those of the Subordinate Judge restored.

The appellant will have costs of all the courts.

Appeal allowed.

Agent for the appellant : M. S. K. Aiyangar.

M. S. Krishnamoorthi

Sastri,.

Agent for respondent No. I:

fJanardan Reddy

articles 134, 135

Supreme Court

I. N. Shroff

P. A. Mehta

GNANAMBAL AMMAL

T. RAJU A YYAR AND OTHERS

SAIYID FAZL ALI

MuKHERJEA

CHANDRASEKHARA AIYAR JJ.

GnanambaZ

Raju Ayyar

Kand

High Court of Madras

Wadsworth

Rajamannar

B. Somayya

R. Ramamurti

K. S. Krishnaswami Aiyangar

K. Narasimha rnso Aiyangar

GnanambaZ

Ammal

Madras High Court

November 27, 1945

Muklieriea

Kothandarama Ayyar

Kothandarama

Tanjore

25th April 1905

Valu Ammal

Parbati

Nagammal

Gnanambal

Alamelu

13th March, 1905

Raju Ayyar

T. Raju Ayyar

Jfukherjea

Gnanambal

Kothangudi

Injigudi

Nannilam Taluk

Nagam

MukherJ••

Kokkur

Nallathukudi

Maruthanthanallur

Mayavaram

Gnanarnbal

Mukherjea

Gnanambal

Kothangudi village

T. Raju Ayyru

Gnananibal

Romer

Ammal Kothangudi

Gnanam bal

Gnanambal

Ammal

T. RaJu Ayyar

kherjea

Nallatlmkudi village

Mukherjea

Mukherjea J. Mayavaram

Alame\u

M. S. K. Aiyangar

M. S. Krishnamoorthi


S.C.R.

SUPREME COURT REPORTS 961

V. V. R. N. M. SUBBAYYA CHETTIAR

COMMISSIONER OF INCOME.TAX, MADRAS.

[SAIYID FAZL Au, MUKHERJEA and

CHANDRASEKHARA AIYAR JJ.J

Indian Income-tax Act (XI of 1922), s. 4A (b)-Hindu undivided family-Residence-Tests--Occasional visits to India and attending to family affairs there, effect of-B, wden of proof-" Control and management",'' situated", "wholly" and

11 affairs", meanings of.

The words used in s. 4A (b) show: (i) that, normally a Hindu undivided family will be taken to be resident in the taxable territorieE1, but such a. presumption will not apply if the case can be brought under the second part of the provision, (ii) the word 11 affairs " means affairs which are .relevant for the purpose of the Income-tax Act and which have some relation to income, (iii) the question whether the case falls within the exception depends on whether the seat of the direction and control of the affairs of the family is inside or outside British India, and (iv) the onus of proving facts which would bring his case within the exception which is provided by the latter p.rt is on the assessee.

The expression "control and management" ins. 4A (b) ol the Income-tax Act signifies the controlling and directive power, the

"head and brain" as it is sometimes called;

11 situated" implies the functioning of such power at a particular place with some degree of permanence; and ''wholly" seems to recognise the possibility ol the seat of such power being divided between two distinct a.ad separate places and thn.t a Hindu undivided family may have more than one residence in the same way as a corporation may have.

The karta of a Hindu undivided family lived with bis wife and children and ca, rried on business in Ceylon, which bad become their place of domicile. He owned some immoveable property and bad a house. anil investments in British India. In the year of account be visited British India and stayed there for periods amounting in all to 101 days and during his stay started two firms in British India, personally attended to a litigation relating to tbe family lands, and appeared before the Income-tax 1rnthorities in proceedings relating to assessment of the. income of the family: Held, that these facts were not necessarily conclusive to establish tbe existence of a centre of control and management of the affairs of the family in British India, but they were by no ineans irrelevant to the matter in issue, and inasmuch as the assessee had not discharged the onus which lay upon him under the law by producing all' the material evidence which be was p&lled upon to produce to show that norms.11¥ and s.s a matter of

l l3

Dec, 21.

1950 course the affairs in India were also being controlled from Colombo, the normal presumption under the firot part of s. 4 A (b) V. V. R. N. M. must be given effect to and the assessee must be treateil as a

SubQayya resident in British India during the year in question. It was

Ghttiar however open to the assessee to prove in future years by proper v. evidence that the seat of control and managerr1ent of the affairs Oommissiontir of of the fau1ily wa.s wholly out.side British InUia.

Incometa•, De.Beere V Howe 15 Tax Oas. 198), Swedish Central Railway Madra•.

Co. Ltd. v. Thompson (9.Tax Oas. 373) l'eferred to.

APPELLATE jURISDICTION: Civil Appeal No.

XXXVIII of 1949.

Appeal from a Judgmept of the High Court of Judicature at Madras (Gentle C. J. and Patanjali Sastri J.) dated August 22, 1947, in a reference under section 66 (1) of the Indian Income-tax Act made by the Income.tax Appellate Tribunal (Ref. No. 25 of 1946).

K. Rajah Aiyar (K. Srinivasan, with him) for the appellant.

M. C. Setalvad (G. N. Joshi, with him) for the res. pondent.

1950: December 21.

The Judgment of the Court was delivered by

Fa•! A!i J.

FAZL ALI J. -This is an appeal from a judgment of the High Court of Judicature at Madras on a reference made to it under section 66 (1) of the Indian Incometax Act by the Income-tax Appellate Tribunal in connection with the assessment of the appellant to income-tax for the year 1942-43. The question of law referred to the High Court was as follows:-

" Whether in the circumstances of the case, the assessee (a Hindu undivided family) is 'resident' in British India under section 4A (b) of the Income-tax Act."

The circumstances of the case may be briefly stated as follows. The appellant is the karta of a joint Hindu family and has been living in Ceylon with his wife, son and three daughters, and they are stated to be domiciled in that country. He carries on business in Colombo under the name ano style of the General Trading Corporation, and he owns a house, some immoveable property and investments in British India.

He has also shares in two firms situated at Vijaya- 1950 puram and Nagapatnam in British India. In the year of account, 1941-42, which is the basis of the present v.;;,::; Y:~ M. assessment, the appellant is said to have visited Oh•ttiar British India on seven occasions and the total period v. of his stay in British India was 101 days. What he Commissioner of did during this period is summarized in the judgment Incom•tax, of one of the ]earned Judges of the High Court in Madras. these words : - Fazl Ali J. " During such stays, he personally attended to a litigation relating to the family lands both in the trial

Court and in the Court of appeal. He was also attending the income tax proceedings relating to the assessment of the family income, appearing before the income. tax authorities at Karaikudi and Madras.

On one of these occasions, he obtained an extension of time for payment of the tax after interviewing the authority concerned ....... "

The other facts relied upon by the income-tax authorities were that he did not produce the file of correspondence with the business in Colombo so as to help them in determining whether the management and control of the business was situated in Colombo and he had started two partnership businesses in India on 25th February, 1942, and remained in India for some time after the commencement of those businesses.

Upon the facts so stated, the Income-tax Officer and the Assistant Commissioner of Income-tax held that the appellant was a resident within the meaning of section 4A (b) of the Income-tax Act, and was therefore liable to be assessed in respect of his foreign income.

The Income-tax Appellate Tribunal however came to a different conclusion and held that in the circumstances of the case it could not be held that any act of management or control was exercised by the appellant during his stay in British India and therefore he was not liable to assessment in respect of his income outside British India. This view was not accepted by a Bench of the Madras High Court consisting of the learned Chief Justice and Patanjali Sastri]. They held that the Tribunal had misdirected itself in determining the

1950 question of the " residence" of the appellant's family and that on the facts proved the control and managev. ; b~~Y~~ M. ment of the affairs of the family cannot be held to have

Ghettiar been wholly situated outside British India, with the v. result that the family must be deemed to be resident Commissioner of in British India within the meaning of section 4A (b)

Income-ta•, of the Income-tax Act.

In this appeal, the appellant

Ma.dra" has questioned the correctness of the High Court's

Fa•I Ali J. decision :-

Section 4A (b) runs thus:- "For the purposes of this Act- A Hindu undivided family, firm or other association of persons is resident in British India unless the control and management of its affairs is situated wholly without British India."

It will be noticed that section 4A deals with " residence ", in the taxable territories, of (a) individuals, (b) a Hindu undivided family, firm or other association of persons, and (c) a company. In each of these cases, certain tests have been laid down, and the test with which we are concerned is that laid down in section 4A (b ).

This provision appears to be based very largely on the rule which has been applied in England to cases of corporations, in regard to which the law was stated thus by Lord Loreburn in De Beers

v. Howe(').

"A company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see where it really keeps house and does business ...... The decision of Chief Baron Kelly and Baron Huddleston in The Calcutta jute Mills v. Nicholson and The Cesena Sulphur Company v. Nicholson('), now thirty years • ago, involved the principle that a company resides for purposes of income-tax where its real business is carried on. Those decisions have been acted upon ever since. I regard that as the true rule, and the real business is carried on where the central management and control actually abideS"."

It is clear that what is said in section 4A (b) of the Income-tax Act is what Lord Loreburn intended to

(1) 5 Tax C••· 198. (2; (18761 1 Ex. D. 428,

convey by the words " where the central management !950 and control actually abides." . h" ~~&~• The principles w ich are now well-established in subbayya England and which will be found to have been very Ohettiar clearly enunciated in Swedish Central Railway Comv. pany Limited v. Thompson(1), which is one of the Commissioner of 1 d th b t Income-tax ea mg cases on e su 1ec , are:- Madra•.'

(1) that the conception of residence in the case of a fictitious "person ", such as a company, is as artificial Farl Ali J. as the company itself, and the locality of the residence can only be determined by analogy, by asking where is the head and seat and directing power of the affairs of. the company. What these words mean have been explained by Patanjali Sastri J. with very great clarity in the following passage where he deals with the meaning of section 4A (b) of the Income-tax Act:-

"Control and management " signifies, in the present context, the controlling and directive power, "the head and brain" as it is sometimes called, and "situated" implies the functioning of such power at a particular place with some degree of permanence, while "wholly" would seem to recognize the possibility of the seat of such power being divided between two distinct and separated places."

As a general rule, the control and management of a business remains in the hand of a person or a group of persons, and the question to be asked is wherefrom the person or group of persons controls or directs the business.

(2) Mere activity by the company in a place does not create residence, with the result that a company may be "residing" in one place and doing a great deal of business in another.

(3) The central management and control of a company may be divided, and it may keep house and do business in more than one place, and, if so, it may have more than one residence.

(4) In case of dual residence, it is necessary to show that the company performs some of the vital organic

Ill 9 T•x Oas. R73.

1950 functions incidental to its existence as such in both the places, so that in fact there are two centres of

V.~R.N M. t Subbayya managemen .

Ghettiar It appears to us that these principles have to be v. kept in view in properly construing section 4A(b) of Gommi,, fon.r afthe Act.

The words used in this provision clearly

Income.ta~. show firstly, that, normally, a Hindu undivided family

Madras. will be taken to be resident in the taxable territories,

Fa•t Ali J. but such a presumption will not apply if the case can be brought under the second part cf the provision.

Secondly, we take it that the word " affairs " must mean affairs which are relevant for the purpose of the Income-tax Act and which have some relation to income.

Thirdly, in order to bring the case under the exception, we have to ask whether the seat of the direction and control of the affairs of the family is inside or outside British India. Lastly, the word " wholly " suggests that a Hindu undivided family may have more than one "residence" in the same way as a corporation may have.

The question which now arises is what is the result of the application of these principles to this case, and whether it can be held that the central control and management of the affairs.of the assessee's family has been shown to be divided in this case.

It seems to us that the mere fact that the assessee has a house at Kanadukathan, where his mother lives, cannot constitute that place the seat of control and management of the affairs of the family. Nor are we inclined in the circumstances of the present case to attach much importance to the fact that the assessee had to stay in British India for 101 days in a particular year. He was undoubtedly interested in the litigation with regard to his family property as well as in the income-tax proceedings, and by merely coming out to India to take part in them, he cannot be said to have shifted the seat of management and control of the affairs of his family, or to have started a second centre for such control arid management. The same remark must apply to the starting of two partnership businesses, as mere" activity " cannot be the test of residence.

It seems to us that the learned Judges of the High 1950 Court have taken rather a narrow view of the meaning of section 4A(b). because they seem to have proceeded v. v. R. N. M. .

Subbavya on the assumption that merely because the assessee Chsttiar attended to some of the affairs of his family during his v. visit to British India in the part!cular year, he brought Oommissw•er of himself within the ambit of the rule.

On the other focoms-tax, hand, it seems to us that the more correct approach to Madras. the case was made by the Appellate Assistant Com- Faz! Ali J. missioner of Income-tax in the following passage which occurs in his order dated the 24th February, 1944 :-

" During a major portion of the accounting period (year ending 12th April, 1942) the appellant was controlling the businesses in Burma and Saigon and there is no evidence that such control was exercised only from Colombo. No correspondence or other evidence was produced which would show that any instructions were issued from Colombo as regards the management of the affairs in British India especially as it was an unauthorized clerk who was looking after such affairs.

The presumption therefore is that whenever he came to British India the appellant was looking after these affairs himself and exercising control by issuing instructions ............... It has been admitted that there are affairs of the family in British India. Has it been definitely established in this case that the control and management of such affairs has been only in Colombo?

I have to hold it has not been established for the reasons already tated by me."

There can be no doubt that the onus of proving facts which would bring his case within the exception, which is provided by the latter part of section 4A (b), was on the assessee. The appellant was called upon to adduce evidence to show that the control and management of the affairs of the family was situated wholly outside the taxable territories, but the correspondence to which the Assistant Commissioner of Income-tax refers and other material evidence which might have shown that normally and as a matter of course the affairs in India were also being controlled from Colombo were not produced. The position therefore is this.

On the one

1950 hand, we have the fact that the head and karta of the assessee's family who controls and manages its affairs

v. v. R. N. M. permanently lives in Colombo and the family is domi-.

Subbayya .

Oh•ttiar ciled in Cey Ion. On the other hand, we have cert am v. acts done by the karta himself in British India, which, Oommisaioner o[though not conclusive by themselves to establish the ·

In"me-ta>, existence of more than one centre of control for the

Madras. affairs of the family~ are by no means irrelevant to the

Faz! Ali J. matter in issue and therefore cannot be completely ruled out of consideration in determining it.

In these circumstances, and in the absence of the material evidence to which reference has been made, the finding of the Assistant Commissioner, that the onus of proving such facts as would bring his case within the exception had not been discharged by the assessee and tlie normal presumption must be given effect to, appears to us to be a legitimate conclusion. In this view, the appeal must be dismissed with costs, but we should like to observe that as this case has to be decided mainly with reference to the question of onus of proof, the decision in this appeal must be confined to the year of assessment to which this case relates, and it would be open to the appellant to show in future years by proper evidence that the seat of control and management of the affairs of. the family is wholly outside British India.

Mukherjea J.

MuKHERJEA J.-1 agree with my learned brother, :f:azl Ali J., both in his reasoning and in his conclus10n.

d kh CHANDRASEKHARA AIYAR J.-I concur in the 1'udg- Chan rase ara f I .

Ai.yar 1. ment o my earned brother, Faz! Ah J.

Appeal dismissed.

Agent for the appellant : M. S. K. Sastri.

Agent for the respondent: P.A. Mehta.

961

V. V. R. N. M. SUBBAYYA CHETTIAR

COMMISSIONER OF INCOME.TAX, MADRAS

MUKHERJEA

CHANDRASEKHARA AIYAR JJ

Indian Income-tax Act

s. 4A

s. 4A

Income-tax Act

Income-tax Act

Ceylon

British India

India

Colombo

s. 4

Patanjali Sastri

section 66

Income-tax Act

K. Rajah Aiyar

K. Srinivasan

M. C. Setalvad

G. N. Joshi

A!i

FAZL ALI

High Court of Judicature at Madras

section 66

section 4A

Income-tax Act

Nagapatnam

Madras

Fazl Ali

Karaikudi

25th February, 1942

section 4A

Income-tax Act

Madras High Court

section 4A

Income-tax Act

Ali

Section 4A

section 4A

section 4A

England

Loreburn

Chief Baron Kelly

Huddleston

section 4A

Income-tax Act

Farl Ali

section 4A

Income-tax Act

section 4A(b)

Income-tax Act

Kanadukathan

section 4A(b)

Subbavya

24th February, 1944

Burma

Saigon

section 4A

Cey Ion

Faz! Ali

Mukherjea

MuKHERJEA

azl Ali

Faz! Ah J.

M. S. K. Sastri

P.A. Mehta


S.C.R.

SUPREME COURT REPORTS 969

EXECUTORS OF THE ESTATE OF ] . K. DUBA.SH

COMMISSIONER OF INCOMETAX, BOMBAY

CITY.

[SHRI HARILAL KANIA C.J., PATANJALI SASTRI

and DAS JJ.]

Indian Inrom•-tax Act (XI of 1922), s. 25 (4)-Succmion-

Drith of person carrying on business-Executors ca.•rrying on busi ness as going concern for selling it tnder ter111s of u•ill-Whether 1 ' succeed in su!:h capacity" to testator-Date of succession

A person who carried on a business on which tax had been levied under the Income-tax Act of 1918 died on the 9th of April, 1942, leaving a will by which he authorised his executore to carry ou his business as a going concern, as if they were absolute owners but without being responsible for looe, for • period not exceeding 12 months during which if any of his nephews wanted to purchaee the husinese, they might sell it to him or them. The husineee was sold to one of the nephews on the let January, 1943. The question being whether for the purposee of s. 25 (4) of the Income-tax Act of 1922 as amended in 1939 the succeseion to the business took place on the 9th April, 1942, when the testator died or on the 1st January, 1943, when the business was sold: Held, affirming the decision of the Bombay High Court, that inaemuch as the business got vested in the executors on the death of the testator and the executors carried on the business within the meanin~ of ss. 3 and 10 of the Act, and as such become personally liable as assessees and there wa.s thus a. change in the assesses, a. succession to the testator "in such capacity" took place on the date of the death of the assessee, even though the executors carried on the business as a going concern under the terms of the will and the business was also being carried on not for the benefio of the executors but for the benefit of the estate of the testator. i' Per PATANJALI SASTRI J.-The expression "succeeded by another person" in s. 26 (2) and s. 25 (4) of the Act includes not only cases of succession inter vivos but also cases of succession on death.

While it is true that a transfer of ownership is ordir.ari!y involved in cases of succession falling wi.thin s. 26 (2) ands. 25 (4), it is not an essential element of succession within the meaning of those provisions.

The words "in such capacity " in s. 26 (2) and s. 25 (4) mean nothing more than the capacity of a person who carries on the business as the predecessor was carrying it on, that is, with a

liability to be \xed on its profibs ud g&ius. ·

I~•

19~0

Dec. l.

1950 Commissioner of Income-tax, Bombay v. P. E. Polson (L-R. 72 I-A. 196) referred to- Execu!ors 01 Ju, pu(li Kesava Rn, o v. Commi5sioner of Income-tax, Madraf th• Estate of (59 Mad. 377 ! explained.

J. K. Dubash - v.

APPEAL (Civil Appeal No. CV of 1949) from a

com,,•issioner of Judgment of the Bombay High Court (Chagla C.J. and

Incomc-taz, Tendolkar J.) dated March 19, 1948, in a reference

Bomb•y Cit11made by the Income-tax Appellate Tribunal under section 66 (1) of the Indian Income-tax Act (Incometax Reference No. 26 of 1947).

Sir N. P. Engineer (R. ]. Kolah, with him) for the appellant.

M. C. Setalvad, Attorney-General for India, (G. N.

Joshi, with him) for the respondent.

1950. December 21. The Court delivered Judgment as follows:

Kania o. J.

KANIA C.J- --This is an appeal from a judgment of the High Court at Bombay delivered on a reforence by the Income-tR.x Appellate Tribunal under the Indian Income-tax Act.

The material facts are these.

The assessees (appellants) are the executors of the will of Mr. ]. K. Dul>ash who died on the 9th of April, 1942, having made his last will on the 8th of April, 1942.

Probate of the will was issued to the executors on the 10th of August, 1942. During his life-time, the testator carried on the business of shipping agents.

Clause 13 of the will contains directions about carrying on this business of the testator till its disposal. It directs the executors to carry on the business as a going concern after his death with power to make fresh contracts and discharge the existing and future liabilities and all other usual and necessary powers, unless special circumstances arose which, in the opinion of the executors, made it expedient to sell the business earlier.

This business was to be carried on for a period not exceeding twelve months during which time the exe cutors were to ascertain whether or not any of his nephews was willing to purchase the said undertaking.

For this purpose and generally for sale purposes, he directed that the executors shall, as soon as possible,

after his death, have a valuation made of the said 19~0 undertakir1g.

The undertaking was to be sold so as to .

Executors of include all hlS interest in the premises, the goodwill, the Estat• of the stock-in-trade, plant, furniture etc. but excluding J. K. Dubash securities for rfl.oney and cash in the bank to the credit v. of the account of that undertaking. If the executors OommiSBionor of were satisfied before the expiration of one year from ;" 00bm•·~~· the testator's death that the said undertaking would

"' •Y '•· not be sold to his nephews because none was willing or Kania o. J. able to purchase it or if it remained unsold, at the end of a year, to any of the nephews then (whichever event first happened) the executors were directed to sell the undertaking to such third person on such terms and at such price as they thought proper. The clause ended with the following words:-' 'l expressly declare that in carrying on the said undertaking my trustees shall, in addition to all powers, discretion and authorities vested in them by law, have power to carry on or discontinue any part of the said undertaking or to augment or diminish the capital employed and generally to act as absolute owners without being responsible for any loss." The business was sold to one of the nephews on the 1st of January, 1943.

The appellants contended that within the meaning of section 25 (4) of the Indian Income tax Act the succession to the business took place on the 1st of January, 1943, while the taxing authorities contended that the succession was on the 9th of April, 1942, when the testator died.

The first question submitted for the High Court's opinion related to this dispute.

The second question referred to the High Court for its opinion was in respect of an amount paid by the executors to the widow of the testator. That question was answered against the appellants by the High Court. Learned counsel appearing for the appellants intimated that he did not want to contest the High Court's decision on the point. The appeal therefore is limited to the first question only.

Section 25 of the Indian Income.tax Act, 1939, gives certain concessions in respect of a business where tax had been paid by the person carrying the business

1950 under the provisions of the Indian Income-tax Act, 1918.

The material part of sub-clause 4 of section 25 E•ocutora of is in these terms : - the Estate of J. K. Dubash " Where the person who was at the commence-

- v, ment of the Indian Income-tax (Amendment) Act, 0••nm""0"" of 1939 (VII of 1939), carrying on any business, profes-

;;~~:; i;;~. sion or vocation on which tax was at any time charged under the provisions of the Indian Income-

Kania o . .r. tax Act, 1918, is succeeded in such capacity by another person ............ "

The scheme of section 25 read with the provisions of section 26 (2) appears to be to give relief, inter alia, to persons who were carrying on business in 1921 and had been taxed on their income under the Income-tax Act of 1918.

By a change effected by the Incometax Amendment Act of 1922 they were subjected to taxation twice on the income of 1921-22. The relief is intended against this levy of tax twice over.

The rival contentions urged on behalf of the parties are these. The assessee contends that on the death of the testator under clause rn of the will of the deceased, the executors were carrying on the business of the deceased only for the purpose of winding it up, and there was no succession to the business on the death of the deceased within the meaning of section 25 (4) of the Income-tax Act. It is _argued that the clause provides for nothing else than a direction to carry on the business with a view either (a) to sell it within a year to one of the nephews, or (b) to sell it to someone else at the end of the year as a going concern. It was pointed out that all directions in the clause permitting contracts to be made etc. were for the purpose of keeping the business alive and not allowing it to die so that the business which was a valuable asset of the deceased could be sold as a going concern with its goodwill.

It was therefore argued that the succession to the business took place only on the 1st of January, 1943, when the business was sold by the executors to one of the nephews in terms d clause 13 of the will.

Jn actual money, the contest is whether the executors

--...

are entitled to get the benefit of the exemption from 1950 income-tax in respect of the profits earned only for the Executors oi nine days between the 1st of April and the 9th of April, the Estate of 1942, or between. the 1st of April, 1942, and 1st of J. K. Du•ash January," 1943, under section 25 (4) of the Indian In. v • come tax Act. The High Court has answered the Commissioner of · t h Income.tax, question agams t e assessee.

Bombay City, In our opinion, the conclusion of the High Court is correct. It cannot be disputed that in the event of a .Kania a. J. sale or gift of the business by the original owner the succession within the meaning of section 25 (4) will take place only on the date of such sale or gift and the exemption from liability to tax will be for a period terminating on that day. It cannot again be seriously disputed that if the testator settled his business on trust under a deed of settlement there will be a succession to the business by another person on the day of the settlement. Similarly in the event of his death intestate his heir-at-law will succeed to the business on the date of his death. The argument advanced on behalf of the appellants that in the present case having regard to the terms of clause 13 of the will there has been "no succession in such capacity to another person" because the executors were carrying on the business only with a view to sell it as a going concern, cannot be accepted because on the day of the death of the deceased the estate including the business got vested in the executors and the executors carried on the business within the meaning of section 3 read with section IO of the Act and as such became personally liable as assessee. Thus there came about a change in the assessee and therefore " a succession in such capacity" took place within the meaning of section 25

(4) of the Income-tax Act.

It seems clear that if the testator had transferred the business to a trustee, although the trustees will not be the beneficial owners, in law there will be a succession of the business to ano. ther person within the meaning of section 25 (4) of the Indian Income tax Act. If in such a case that result follows there appears no reason why when the legal estate is transferred by operation of law to an executor

1950 there should not be considered a succession to the estate by another person within the meaning of the

~:·;;,;:;; :: same section 25 (4). The words "in such capacity" in

J. K. Duba•I• that clause further make the position clear. It makes v. the distinction of legal and beneficial owner:; hip irre.

Comm;,,; ontr •/levant. The contention that the business was to be car-

Inncome-ta"' ried on by the executors as such, as a going concern Bombay C>ty. or that it was being carried on for the benefit or loss

 0 J of the testator's estate is not relevant for the present ania . .

Patanjali

Sastri J.

discussion. The only relevant question under sec. tion 25 (4) of the Indian Income-tax Act is whether in respect of the business there is a succession to another person. This is a provision to give relief and the scope of the relief must be governed by the words used in the Act. In our opinion the answer to this question, on the facts of the present case, must be in the affirmative and the date of such succession must be considered to be the death of the testator, which was on the 9th of April, 1942.

The result is that the appeal fails and is dismissed with costs.

PATANJALI SASTRI J.-I agree that this appeal should be rejected.

The l)laterial facts have been set out in the judgment which has just been delivered.

The only question now remaining for decision is : on what date was the testator, who was carrying on the business of shipping agent and land contractor "succeeded in such capacity by another person" within the meaning of section 25

(4) of the Act-on the 9th April, 1942, when the testator died and the appellants as the executors took over the business and carried it on or on the 1st January, 1943, when the business was sold by them as a going concern?

The business being admittedly one which was charged to tax under the Income-tax Act, 1918, if there was no succession within the meaning of section 25 (4) until the sale took place, as the appellants contend, the profits and gains 9f the period from 1st April, 1942, to !st January, 1943, would not be liable to tax, whereas, if the testator could be said to have been "succeeded"

1960 by the appellants, the profits of the much shorter period between 1st April, 1942, and 8th April, 1942, alone

Executor& of would be exempt from taxation. The reason for this the Estate of relief is to be found in the change of the basis of taxa- J. K. Du'ash tion when the Act of 1922 was passed which resulted v. in the profits of the year 1921-22 being assessed twiceGommiss; on" of over once in that year as the income thereof ''on l•com•taz, d . ' " d h A f 1918 d . ti Bambay City. a iustrnent un er t e ct o an once m le next year as the income of the "previous year" under Pato•iali the Act of 1922 [see Commissioner of Income.tax, Sast•il.

Bombay v. P. E. Polson(')].

The relief was,. however, confined to discontinued businesses, as, m cases of succession till 1938 the successor alone was assessed to tax on the whole of the profits of the previous year including those earned by his predecessor before the succession occurred. But the Indian Income-tax (Amendment) Act, 1939, (hereinafter referred to as the amending Act). having amended section 26 (2) so as to provide, in the case of a succession in business, profession or vocation, for the assessment of the predecessor and the successor, each in respect of his actual share of the profits of the previous year, the relief was extended, by enacting section 25 (4), to cases of succession occurring after the commencement of that Act, with the same object as in the case of discontinuance, namely, to redress the hardship of the business having been charged twice over on the income of 1921-22. In other words, the predecessor is given the same relief as if he had discontinued the business on the date of succession. . It will thus be seen that the enactment of section 25 (4) is consequential on the amendment of section 26 (2), and the scope and meaning of the expression "succeeded in such capacity by another person" in section 26 (2) must determine also its scope and meaning in section 25 (4).

The first question which arises on the language of the amended section 26 (2), which speaks of " the person succeeded" being "assessed" and of his not being "found", is whether the sub.section should be construed as applicable only to cases of succession

(117~ u. 1~6

.-····

1960 inter vivas.

Whatever force there may have been in the sug,,"'estion that the sub-section could not have Ex:eutors of the Estate of contemplated cases of testamentary or intestate J. K. Dubash succession if there was no provision for the assessment v. of profits earned by a deceased person in the hands of Commissioner 0/his representatives, there seems to be no sufficient

Income-0tax, reason for excluding from the scope of the sub-section Bombay ity. f d

I · f h cases o success10n on eat i m view o t e pro-

Patanjali vision ih section 24B.

On the other hand, proviso saotr• J.

(c) to section 24(2), which refrs to a person "succeeded in such capacity by another person otherwise than by inheritance'', would seem to imply that "succession", as that term is used in the Act, includes devolution on death.

The next question is what is the meaning to be attributed to the phrase " in such capacity "? A Full Bench. of the Madras High Court in jupudi Kesava Rao v. Commissioner of Income tax, Madras('), held that the expression meant" in the capacity as owner", so that " the person who succeeds another must, by such succession, become the owner of the business which his predecessor was carrying on and which he, after the succession, carries on in such capacity, that is. the capacity as owner". Applying that test they held that the sole surviving member of a Hindu undivided family did not succeed to the business of the family within the meaning of section 26(2), as he was previously a part-mvner of the business and there was no tranSfer of ownership. While it is undoubtedly true that a transfer of ownership is ordinarily involved in cases of succession falling within section 26 (2) or section 25(4), it cannot, in my opinion, be regarded as an es.sential element of succession within the meaning of those provisions. The Income.tax Act directs its attention primarily to the person who receives the income, profits or gains rather than to the ownership or enjoyment thereof. The assessee is defined in sec. tion 2 (2) as the person by whom the income-tax is payable and by section 10 the tax is payable by an assessee who carries on the business, profession or

11) I.L.R. ~9 M•d. 377.

SUPREME COURT REPOf~TS 977

vocation. The statute thus fastens on the person who 1950 carries on the business, etc., the liability to pay the Executors of tax on the profits earned by him regardless of their th• Estat• of destination or enjoyment. It is also worthy of note J. EL Dubash that in several instances persons who have no propriev. tory or other right in the income charged to tax are Oommissionor of made liable to pay tlie tax for no other reason than Income-tax, h f t d 11 t' S h Bombay Oil!/. t e convemence o assessmen an co ec 10n. uc instances are to be found in section 26(2) proviso, Pata•jali section 18 (7), section 23-A (3), section 25-A and SastriJ. section 42(1). As observed by Lord Ca'\e in Williams v.

Singer & Others(') "the fact is that, if the Income-tax Acts are examined, it will be found that the person charged with tax is neither the trustee nor the beneficiary as such, but the person in actual receipt and control of the income, which it is sought to reach".

There seems to be no warrant, therefore, to insist on a transfer of ownership as the decisive test of 'succession' within the meaning of section 26(2) or section 25(4) any more than for insisting on the ownership of the business by the person carrying on a business, for the purposes of section 10.

I Jo not of course wish to be understood to say that a clerk or an agent in management of a business would be an assessee liable to be taxed in respect of its profits and gains. Some kind of title there must be, though not of a beneficial character.

Nor need it be of the same quality in the predecessor and the successor. The question in each case must be: Is the person who has come in carrying on the business as a principal? If so, the Revenue looks to him and makes him liable for payment of the tax. The words "in such capacity" in sections 25 (4) and 26 (2) mean nothing more than the capacity of a person who carries on the business as the predecessor was carrying it on, that is, with a liability to be taxed on its profits and gains.

Applying these principles to the present case, I am clearly of opinion that the testator who was carrying on the business in question was succeeded in such

(I) (1921] I A.O. 65,

1Q5

1950 capacity by the appellants when the former died on 9th April, 1942, and his. estate vested in them. As Executor!J of tho Estate of already stated, the testator expressly authorised the J, K. Dubash appellants to carry on the business as a going concern

v. for one year after his death and gave them power to Oommi,, ioner 0/enter into fresh contracts and to discharge liabilities

Incom•taz, past and future. They are thus an "association of Bomb•Y G>ty. ,, b d b bl persons carrymg on usmess, an , emg assessa e as Patani••• such in respect of the profits and gains of the business Sastri J. carried on by them under section 10 read with sec tion 3 of the Ac.t, they are liable to be taxed on the profits earned after the 9th April, 1942.

It was objected that the appellants being assessable as the representatives of the testator under section 24-B in respect of the profits earned by him in the accounting year, they could not be treated as sue. cessors assessable under section 26 (2) in respect of the profits earned during the rest of that year, as such apportionment would be meaningless, the same interest, namely, the testator's estate, having to bear the incidence of the tax in either case. It was accordingly suggested that unless there was a break in the contin. uity of the interest represented by the executors, there could be no real apportionment such as is contemplated by section 26 (2) and, therefore, no succession within the meaning of that section or of section 25 (4) where the same expression is used. The argument is, in my opinion, fallacious. It overlooks the distinction between the position of the executors vis a vis the Revenue and their position vis a vis the testator's estate.

As already pointed out, their liability to pay the tax on the profits earned after the testator's death arises under section 10 (1) and, being that .of assessees carrying on the business, is personal to them, although as between them and the estate they would be <mtitled to be indemnified in respect of the tax paid; while their liability to pay tax on the profits earned during the testator's life. time arises under section 24-B and, being that of legal representatives of the testator, is limited "to the extent to which the testator's estate is capable of meeting the charge". It is therefore not correct to

' .

' -

:t'

say that an apportionment under section 26 (2) would be meaningless, though, if the testator's estate was sufficiently solvent, it would have no practical significance.

DAS J.-I agree with the Chief Justice.

Appeal dismissed.

Agent for the appellant: R. S. Narula.

Agent for the respondent: P. A.Mehta.

PANNALAL JANKIDAS v.

MOHANLAL AND ANOTHER.

(SHRr'HARILAL KANIA C.J ., PATANJALI SASTRI

and DAs JJ.]

Contract-Damages-Remoteness of damage-Agent neglecting ta inwre goads against fire-Goads destroyed by explosian-Liabi lity al agent-Bombay Explosion (Compensation) Ordinance, 1944, ss. 14, 18-0rdinance granting compensation for damage by explosion-Loss by explosioii not covered by policy-Loss of compensation undu Ordinance by failure to insttre-Whetlwr direct or remote damage-Claim by principal against agent, whet/wr barred by Ordin ance-Indian Contract Aot, 1872, s. 212.

The plaintiffs who were commission agents purchased piecegoods according to defendant's instructions and storsd a portion of the goods in a godown in Bombay pending receipt of a permit from the Government authorities for consigning the same to the defendants. Before the goods could be despatched, a big explosion occurred in the Bombay Harbour and the goods stored were destroyed either by the fire or the explosion.

A few months later the Governor-General promulgated the Born bay Explosion (Compensa tion) Ordinance, 1944, which provided, inter alia, (i) that the Government shall pay a compensation of 50 per cent. of the damage caused in respeet of uninsured goods, and the entire damage in reepect of insured goods; and (ii) that no person 8hall have or be deemed ever to have bad, otherwise than under the Ordinance any right whether in contract or in tort or otherwise to any compensation for damage to or loss of property arising out of the explosion and no suit or other legal proceeding for any such compensation or damage shall be maintaiDable in any civil court. The plaintiffs received GO per cent. of the value of the destroyed goods as \hey

!950

Etttcutors of the Estaf4 of J. K. Dubt:uh

•• Commissioner of

Income-ta:t, Bombay City.

Patanjali

Saatri J.

Dae. 21.

SHRI HARILAL KANIA C.J.

PATANJALI SASTRI

DAS JJ.

s. 25

s. 25

Income-tax Act

9th April, 1942

1st January, 1943

Bombay High Court

ss. 3 and 10

s. 26

s. 25

s. 26

s. 26

s. 25

J. K. Dubash

APPEAL

section 66

Income-tax Act

N. P. Engineer

M. C. Setalvad

G. N.

Joshi

Kania

KANIA

High Court at Bombay

K. Dul

9th of April, 1942

10th of August, 1942

Clause 13

section 25

1st of January, 1943

Section 25

Indian Income-tax Act, 1918

clause 4

section 25

J. K. Dubash

The material part of sub-clause 4 of section 25 E•ocutora of is in these terms : - the Estate of J. K. Dubash " Where the person who was at the commence-
v, ment of the Indian Income-tax (Amendment) Act, 0••nm""0"" of 1939 (VII of 1939), carrying on any business, profes-

;;~~:; i;;~. sion or vocation on which tax was at any time charged under the provisions of the Indian Income-

Kania o .

section 25

section 26

Income-tax Act

section 25

Income-tax Act

clause 13

1st of April, 1942

1st of J. K. Du•ash January," 1943

section 25

Bombay City

section 25

clause 13

section 3

section 25

Income-tax Act

section 25

section 25

J. K. Duba•I•

Patanjali

Sastri

Income-tax Act

section 25

section 25

1st April, 1942

st January, 1943

8th April, 1942

section 26

section 25

section 25

section 26

section 26

section 25

section 26

section 24B

section 24(2)

Madras High Court

section 26(2)

section 26

section 25(4)

section 10

SUPREME COURT REPOf~TS 977

section 26(2)

section 18

section 23

section 25

section 42(1)

section 26(2)

section 25(4)

section 10

sections 25

J, K. Dubash

section 10

section 24

section 26

section 26

section 25

section 10

section 24

section 26

R. S. Narula

P. A.Mehta

SHRr'HARILAL KANIA

ss. 14, 18

s. 212

Bombay

J. K. Dubt

Saatri