COMMISSIONER OF INCOME-TAX, BIHAR v.

RAMNIKLAL KOTHARI

March 1, 1969

[J. C. SHAH AND ~- N. GROVER, JJ.]

Income-tax Act (11 of 1922), s.r. 10(1) & (2), J6(1)(b) and 23(5)

(a) (ii) Partnership carrying on business-Partner's lvhere determined- Partner if further entitled to deductions under s. 10(2).

The respondent was carrying on business in diverse lines as a partner in four different firms.

For the assessment years 1955-56 and 1956-57 he declared his share df pmfits from the four firms and claimed deductions made up of saJarv and bonus to staff. expense$ for maintenance and depreciation of motor-car, traveJiing expenses and interest.

The Incbmetax Officer and the Appellate Assistant Commissioner allowed only the claim for interest as a permissible deduction. The Tribunal set aside the orders and remanded the cases for the two years for an examination of the nature of expenditure claimed to have been incurred by the respon~ dent. as, in its view, deductions admissible under s. 10(2) of the Incometax Act, 1922 were allowable in computing the taxable income of the respondent.

On the question, whether expenses incurred by the respondent (who was not carrying on any independent business of his own), in

carnin~ income from the various firms in which he wa~ a partner, were allowable in law as deductions, the High Court held in favour of the 'respondent.

Tn appeal to this Court,

HELD: Section 23 (5)(a)(ii) of the Income-tax Act, 1922 provides that the share of the partner in the profits and gains of a registered firm shall be included in the total income of the partner. The share so received by the partner is 'profits and gains of business' earned on by him and is on that account liable to be computed under s. 10. The receipt being business income for the ourpose of s. 10(1) expenditure necessary for the purpose of earning that income and allowances appropriate under s. 10(2) are deductible therefrom in determining the taxable income of the partner.

The facts that in computing the total profits of the partnership allowances admissible to the pcrtnership in the computation of its profits and gains were taken into acbount, in the manner provided by s. 10, or that s. 16(1) (b) reauires that salary, i.nterest, commission or othe'r remuneration payable by the firm besides the share in the balance of profit is to be taken into account, do not imply that in determining the taxable income of the partner, expenditure incurred by the partner in earning the profits.

salary, interest, commission or other remuneration is not to be allowed.

[862 C-H]

Shantikumar Narnttam Morarji v.

Commissioner of Income-tax, Bombay Citv, 27 I.T.R. 69 . .Titmal Bhurama/ v. Commissioner of Incometax, Bihar & Orl<ro. 37 J.T.R. 528 and Basantlal Gupta v. Commissioner of Income-tax, Madras, 50 I.T.R. 541, approved.

M/1. !JWardas Subhkaran v. Commf.r•ioner of lncom•-tax West Bengal, Jncome-tax Reference No. 38 of 1952 dated June 2. 1953, of the Calcutta Hih Court, disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 575

and 576 of 1966.

Appeals by special leave from the judgment and order dated October 5, 1963 of the Patna High Court in Misc. Judicial Cases Nos. 1274 and 1275 of I 960.

D. Narasaraju, S. K. Aiyar, R. N. Sachthey and B. D. Sharma, for the appellants (in both the appeals).

M. C. Chagla and U. P. Singh, for the respondent (in both the appeals).

The Judgment of the Court was delivered by

Shah, J. The respondent Ramniklal Kothari carried on business in diverse lines as a partner in four different firms.

He received from time to time income from the different registered firms as his share of profits.

For the assessment year I 955-56 the respondent declared his share of profits from the four firms at Rs. 77,027 /- and he claimed an allowance of Rs. 13,283/- being payment of salary and bonus to staff, expenses for maintenance and depreciation of motor-car, travelling expenses and interest. The Income-tax Officer, Hazaribagh, allowed the claim for interest as a permissible deduction and disallowed the rest. In the view of the Income-tax Officer since the respondent did not carry on any independent business, the amount, except interest, were not claimable by the respondent on_ his own account; if at all, the amounts should have been claimed as business expenses incurred in the accounts of the four firms.

For the assessment year 1956-57 the respondent declared Rs. 53 ,540 as his share of the profits in the four firms and claimed an aggregate amount of Rs. 19,380 as admissible deduction on various grounds including Rs. I ,956 as interest paid by him. The Income-tax Officer allowed the claim for interest and disallowed the rest of the claim.

The Appellate Assistant Commissioner confirmed the orders of the Income-tax Office•.

But the Income-tax Appellate Tribunal set . aside the orders passed by the Income-tax Officer and remanded the cases for examination of the nature of expenditure claimed tci have been incurred by the respondent.

In the view of the Tribunal share of the profits received by the respondent from the firms was taxable as business income and approprite deductions admissible under s. I 0(2) of the Incoe-tax Act 1922 were allowable in computing the taxable income of the 'respon'. dent.

The Tribunal then referred the following question in the two cases to the High Court of Patna for opinion under s. 66(1) of the Indian Income-tax Act, 1922 :

"Whether the expenses incurred by the assessee (who was not carrying on any independent business of his own), in earning income from various firms in which he was a partner, are allowable in law as deductions?"

The High Court of Patna answered the reference in favour _of the respondent.

With special leave granted by this Court, these two appeals have been preferred by the Commissioner of Incometax.

Where a person carries on business by himself or in partnership with others, profits and gains earned by him are income liable to be taxed under s. JO of the Indian Income-tax Act, 1922.

Share in. the profits of a partnership received by a partner is "profits and gains of business" carried on by him and is on that account liable to be computed under s. 10, and it is a matter of no moment that the total profits ol the pannership were computed in the manner provided by s. 10 of the Income-tax Act and allowances admissible to the partnership in the computation of the profits and gains were taken into account.

Income of the partnership carryin, g on business is computed as business income.

The share of the partner in the taxable profits of the 1egistered firms liable to be included under s. 23(5)(a)(ii) in his total income is still received as income from business carried on by him.

Counsel for the Commissioner accepted, and in our judgment counsel was right in so doing, that the share of the respondent from the profits of the firm was income from business carried on by the partner. Business carried on by a firm is business carried on by the partners. Profits of the firm are profits earned by all the partners in carrying on the business. In the individual assessment of the partner, his share from the firm's business is liable to be taken into account under s. 10(1).

Being income from business, allowances appropriate under s. 10(2) are admissible before the taxable income is determined.

Section 23(5)(a)(ii) provides that the share of the partner in the profits and gains of a registered firm shall be included in the total income of the partner; and s. 16(1)(b)· requires that salary, interest, commission or other remuneration payable by the firm beside the share in the balance of profits is to be taken into account in determining the total income.

But it is not thereby implied that expenditure properly allowable in earning the profits, salary, interest, commission or other remuneration is not to be allowed in determining the taxable total income of the partner.

The receipt by the partner is business income for the purpose of

s. 10(1), and being business income, expenditure necessary for the purpose of earning that income and appropriate .allowances are deductible therefrom in determining the taxable income of the partner.

The legal principles which we have endeavoured to set out are well settled by several decisions. In ShanJikumar Narottam J.!o rarji v. Commissioner of Income-tax, Bombay City(') the Htgh Court of Bombay held that it is not correct as a general legal proposition that a partner in a registered firm is not entitled to claim any deduction against the share of the profits included in his total income, the share having been arrived at on the assessment of the firm with regard to its profits.

It would be open to the partner to claim a .deduction provided he satisfies the taxing

a..uthority that such deduction represents necessary expenditure, the expenditure being incurred in order to enable him to earn the profits which are being subjected to tax.

In Basantlal Gupta v. Commissioner of Income-tax, Madras(') the High Court of Madras held that in determining the income of an assessee who is a partner, deduction under s. 10(2) of the Income-tax Act may be made from his share of income in the firm even after the share has been ascertained.

An allowance under s. 10(2) will be permissible in proper cases even after the share has been ascertained if the expenditure sought to be deducted was incurred by the partner solely and exclusively for the purpose of earning his share in the income of the firm.

In a case decided by the High Court of Patna in litmal Bhuramal v. Commissioner of Income-tax, Bihar & Orissa(') a Hindu undivided family which was a partner in a firm claimed that the salary paid to its members for attending to the business of the firm was incurred as a matter of commercial expediency and for the purpose of earning profits from the partnership business. Tue Court held that in the assessment of the Hindu undivided family the expenditure would be properly claimed as an allowance under s. 10(2) (xv) of. the Indian Income-tax Act, 1922.

Jitmal Bhuramars case( 8 ) was brought i:n appeal to this Court: see Jitmal Bhuramal v.

Commisioner of Income-tax, Bihar & Orissa('). It was observed by this Court that a Hindu undivided family will be owed t<;> deduct salary paid to members of the family, if the

pyment 1S made 3;8 a matter of commercial or business expediency, but the service rendered must be to the family in relation to the business of the family.

Counsel for t!ie Commissioner relied upon an unreported 1udgment of the High Court of Calcutta in Messrs. Iswardas Subh-

(1) 27 l.T.R. 69.

(3) 371.T.R. 528~

(2) 50 l.T.R. 541.

(4) 44 I.T.R. 887. (S.C.)

karan v. Commissioner of Income-tax, West Bengal('). In that case a Hindu undivided family entered into a partnership agree- ' ment with third parties for the purpose of carrying. on a rice mill business.

It .was not possible for any of the members of the family to attend personally to that business and, therefore, the family employed a Munim to look after its interest. Salary paid to the Munim was claimed as an allowance in determining the taxable income out. o.f the share of the partnership income. Chakravartti, C.J., delivering the judgment of the Coun was of the opinion that since the Munim did not look after the interest of the assessee in the firm's business, but only as a servant of the assessee, the amount paid to the Munirn was not an allowance admissible in determining the taxable income.

In any event, observed the learned Chief Justice, the profits which have come to the assessee from the partnership have come as net profits, and after they have so come, there cannot be any futther deduction on account of expenditure incurred not by the partnership but by the partner who received the share or incurred on any account whatsoever.

We are unable to agree with the view expressed by the learned Chief Justice. The case was apparently not fully argued and counsel for the assessee conceded. that the amount paid to the Munim was not a permissible deduction in assessing the taxable income of the family out of the share of the profits received from

the firm.

The appeals fail and are dismissed with costs.

One hearing fee.

V.P.S.

Appeals dismissed.

-{\) lncomc Tax Reference No. 38 of 1952 decided on lune, 2, 1953.

COMMISSIONER OF INCOME-TAX, BIHAR

RAMNIKLAL KOTHARI

March 1, 1969

C. SHAH

N. GROVER, JJ.

Income-tax Act

s. 10(2)

s. 10(2)

Incometax Act, 1922

Section 23

Income-tax Act, 1922

s. 10

s. 10(1)

s. 10(2)

s. 10

s. 16(1)

CIVIL APPELLATE JURISDICTION

D. Narasaraju

S. K. Aiyar

R. N. Sachthey

B. D. Sharma

M. C. Chagla

U. P. Singh

Shah

Ramniklal Kothari

Hazaribagh

Incoe-tax Act 1922

High Court of Patna

s. 66(1)

Indian Income-tax Act, 1922

JO of the Indian Income-tax Act, 1922

s. 10

s. 10

Income-tax Act

s. 23(5)(a)(ii)

s. 10(1)

s. 10(2)

Section 23(5)(a)(ii)

s. 16(1)(b)

s. 10(1)

Htgh Court of Bombay

High Court of Madras

s. 10(2)

Income-tax Act

s. 10(2)

s. 10(2)

Indian Income-tax Act, 1922

Jitmal Bhuramars

High Court of Calcutta

Iswardas Subh-

Chakravartti

Munim

lune, 2, 1953


WESTERN U.P. ELECTRIC POWER & SUPPLY

COMPANY LTD.

STATE OF U.P. & ANR.

March 7, 1969

(J. C. SHAH AND V. RAMASWA, MI, JJ.)

Indian Electricity Act 9 of 1910 as amended by the Indian Electricity (Uttar Pradesh Sanshodhan) Adhiniyam 1961, ss. 3(1) and 3(2)(e)(ii)- Constitution of India Arts. 14 and 31(1) and (ZA)-Licencee under s. 3 ( 1) of Electricity Act supplying electricity in certain area--State Gov- C ernment ordering under s. 3(2)(e) (ii) that energy be supplied lo a factory in the said area directly by Electricity Board-Whether discrimination results-'Public interest'., in s. 3 (2) (e) (U)-SatLrfaction under sec .. tion whether subjective-Order of direct supply by Board whether compulsory acquisition of licencee's property without compensation-Natural justice, whether satisfied.

The appellant held a licence under s. 3(1) of the Indian Electricity Act, 1910 to supply electricity in certain areas in the State of U.P. The 3rd respondent was a factory manufacturing electrical equipment in the appellant's area of supply, and was redeiving energy from the appellant.

The 3rd respondent made complaints to the State Government that the supply of electrical energy by the appellant was inadequate and fluctuating. There was no improvement in the supply even a'fter discussions between the parties. Thereafter at the request of the 3rd respondent the State Government by order dated December 26, 1961 under s. 3(2)(e) (ii) of the Indian Electricity Act, 1910 as •mended by the Indian Electricity

(Uttar Pradesh SanshO'dhan) Adhiniy•m, 1961 directed the State Electricity Board to supply electrical energy directly to the 3rd respondent. The appellant made representations to the Gove'rnment against the order but these were rejected. The appellant then filed a writ petition in the High Court which was dismissed by a Single Judge. A Letters Patent Appeal against the decision was also dismissed although the High Court allowed the appellant to raise an additional plea based on Art. 14 of the Constitution without allowing further evidence to be given for that purpose. In this Court, in , appeal against the High Court's order it was contended :

(i) That owing to the different rates at which electricity was supplied by the State Government, there was discrimination, (a) between the 3rd respondent and other consumers, and (b) between the 3rd respondent and the appellant; (ii) That the impugned order of the State Government was not made in the public interest within the meaning of s. 3(2)(e)(ii) of the Act; (iii) That the impugned order amounted to compulsory acquisition of the property of t.he appellant without compensation; and (iv) That the impugned order was passed in violation of the principles of natural justice.

HELD : (i) Article 14 of the Constitution ensures equality among equals : its aim is to protect persons similarly placed against discriminatory treatment.

It does not operate against ratiollal classiJidation.

A person setting up a grievance of denial of equal treatment by law must establish that between persons similarly circumstanced, some were treated to their prejudice and the differential treatment had no relation to the object sought to be achieved by the law. [870 DJ

In the present case, as .to the' alleged discrimination between the 3rd A respondent and the other consumers in the area there was no evidence on record showing the operative rates on the date of the impugned order, and no grievance by any consumer of any prejudicial treatment accorded to him.

Further the 3rd respondent and other consumers did not belong to the same class because in the one case energy .was being slJpplied by the appellant and in the other by the Electricity Board. (870 E-GJ

Similarly in respect of the alleged discrimination between the 3rd B respondent and the appellant there "'as no evidence that the 'rates Charged by the State Electricity Board to the 3rd respondent were lower than the raies charged to the appellant. The appellant and the 3rd respondent again did not belong to the same class inasmuch as the appelJant was a distributor of electrical energy, whereas the 3rd respondent was a consumer.

[870 H-871 BJ

The plea of violation of Art. 14 of the Constitution on behalf of the C appellant, could not therefore be accepted.

The Western U.P. Electric Power and Supply Co. Ltd. v. State of U.P. & Ors., A.l.R. 1968 S.C. 1099, distinguished.

(ii) The question whether an order under s. 3(2)(e) as amended by U.P. At 30 of 1961 is in public interest is not one on which the opinion of the Government is :finaJ.

If challenged, the Gove'rnment must show that exercise of the power was necessary in the public interest. The court is thereby not intended to sit in appeal over the satisfaction of the Government.

If there be prima jacie evidence on which a reasonable body of persons may hold that it is in the public iterest to supply energy directly to the consumers. the requirements of the statute are fulfilled.

Normally a licencee of electrical energy, though he has no monopoly, is the person through whom electrical energy would be distributed within the area of supply, since the licencee has to lay down electric supply lines for transmission of energy and to maintain its establishment. An inroad may be made in that right in the conditions which a're statutorily prescribed, but the s_atisfaction of the Government that the supply is necessary in the public interest is in appropriate cases not excluded from judicial review. [872 B-D)

In the present case there was ample evidence on record to prove that uninterrupted supply of electrical energy to the 3rd respondent was necessary i~ he public. interest .and the appellat was unabe to ensure it.

For ma1ntam1ng effective working of a large industry which gave scope of employment to the local population and earned foreign exchange, if it was necessary to give direct supply of electrical energy to the 3'rd respondent, the order to the Electricity Board to make a direct supply to the 3rd respondent was in the public interest within the meaning of s. 3(2) (e)

(ii) of the Act. [872 G; 873 D-El

(iii) Even assuming that the right to supply electrical energy is property (a question on which the court expressed no opinion) there was in the present case no infringement of the guarantee under Art. 31(2). By

cl. (2A) of Art. 31 there. is no .dompulsory aquisition or requisitioning of property unless ownership or right to possession of the property stands

transferred to the State or a corporation owned or controllCd.by the State.

By the order granting direct supply of electrical energy ownership of property or right to possession of property was not transferred to the State or to a corporation owned or controlled by the State, and on that limited ground it must be held that Art. 31(2) had no application to the case. [873 G-874 D]

(iv) In view of the fact that the complaints made by the 3rd respondent were discussed with the appellant and that several reprc:sentJ.tious \Vere n1ade by the appellant to the State Government whit.:h \Vere co11sidered by the latter and rejected it could not be said that the appellant had been denied natural justice. [874 E-GJ

C1vu. /\ PPELLATE JURISDICTION : Civil Appeal Nu .. '.482 of 1968.

Appeal by special leave from the judgment and on.icr cbtcd March 18, 1968 of the Allahabad High Court in Second Appeal No. 317 of 1965.

Muhan Behari Lal, for the appellant.

O. P. Rana, for respondents Nos. I and 2.

C. K. Daphtary, B. R. L. Iyengar, Bishambar Lal and H. K.

Puri, for respondent No. 3.

The Judgment of the Court was delivered by Shah, J. The Western U.P. Electric Power & Supply Company Ltd.-hereinafter called 'the Company'-holds a licence under s. 3(1) of the Indian Electricity Act 9 of 1910 to supply electricity in certain areas in the State of U .P.

Messrs Htnd Lamps Private Ltd. set up a factory for manufacturing electrical equipment within the area of supply of the Company.

Hind Lamps was receiving energy from the Company. Hind Lamps made several representations to the State Government that the supply of energy by the Company was inadequate to meet its requirements and was 'interrupted and fluctuating·. Meetings were held between the Company, the State officials and HinaLamps for devising means to ensure uninterrupted and adequate supply of energy required by Hind Lamps, but there was no improvement in the supply position.

Hind Lamps then applied to the Government of U.P. to grant direct supply of electricr.1 energy from the State Electricity Board.

The State Government by order dated December 26, 1961. issued in exercise of th~ powers conferred by s. 3(2)(e)(ii) of the Indian Electricity Act, 1910 as amended by the Indian Electricity G (Uttar Pradesh Sanshodhan) Adhiniyam, 1961, directed the State Electricity Board "to supply electrical energy directly to Hind Lamps upon terms a; nd conditions similar to those on which it supplied electrical energy to other customers". In reply to a representation to reconsider the decision, the Government informed

he Company that the "decision was necessitated in the public H mterest and there was no justification for revising it".

Another representation made by the Company was also turned down and direct supply of electrical energy was commenced by the State Electricity Board to Hind Lamps.

Lil Sup. C.1.-69.-6

A petition moved by the Company in the High Court of Allahabad for a writ of certiorari quashing the order dated December 26, 1961 was rejected by R. S. Pathak, J. In appeal under the Letters Patent against the order passed by the learned Judge, counsel for the Company applied for leave to plead that the order dated December 26, 1961, resulted in discriliiination between Hind Lamps and other consumers within the area of supply of the Company, and also between Hind Lamps and the Company and the order was on that account invalid.

The High Court permitted the Company to raise the contention, but declined to give opportunity to "enlarg11 the evidence on record at that stage".

Sole reliance was therefore placed by counsel for the Company on paragraph-2 of the Government Gazette Notification issued by the U.P. Government on April 24/28, 1962, containing the revised tariff for the supply of electrical energy to licensees obtaining bulk supply from the U.P. State Electricity Board and to other consumers. It stated :

"The revised tariff shall, except in the case of the licensees, be applicable to consumers in respect of consumption in the month of May 1962. In the case of licensees, obtaining bulk supply of energy from the Board, the revised tariff shall apply to supplies made from 1st July, 1962 and onwards."

The Schedules in the Gazette Notification set out the rates at which electrical energy was to be supplied by the Board to licensees as well as to diverse classes of consumers who received supply of energy from the Board. The High_ Court held that there was no evidence on the record to prove the rates at which energy was being supplied to the Company on December 25, 1961, and the rates at which the energy was being supplied to Hind Lamps.

The High Court observed that before the order dateOl>ecember 26, 1961 could be challenged on the ground of discrimination between Hind Lamps and other consumer! as also between Hind Lamps and the Company, it was necessary for the Company to establish by evidence the rates of supply of energy to the Company, the Hind Lamps and to the other consumers obtaining at the time of the impugned order, i.e. December 26, 1961, and in the absence of that evidence the plea of discrimination must fail.

The High Court also rejected the contention raised by the Company that the impugned order was not made in public interest, that granting direct supply of electrical energy to Hind Lamps amounted to compulsory acquisition of property of the Company without payment of compensation, and that in refusing to give an opportunity to the Company to object the rules of natural justice were violated.

The Indian Electricity Act 9 of .1910 makes provision by s. 3 for the grant of a licence to supply energy in any specified area and also to lay down or place electric supply lines for transmission of energy. Clause (e) of sub-s. (2) as amended by U.P. Act 30 of 1961, and sub-s. (3) provide :

"(2)(e) grant of a licence under this Part for any purpose shall not in any way hinder or restrict-

(i) the grant of licence to another person withfo the same area of supply for a like purpose; or

(ii) the supply of energy by the State Government or the State Electricity Board within the same area, where the State Government deems such supply necessary in public interest;"

"(3) Where the supply of energy in any area by the State Electricity Board is deemed necessary under subclause (ii) of clause (e) of sub-section (2), the Board may, subject to any terms and conditions that may be laid down by the State Government, supply energy in that area notwithstanding anything to the contrary contained in this Act or the Electricity Supply Act, 1948."

The State Government may grant a licence to supply electrical energy to consumers within a specified area on terms and conditions prescribed in the licence and subject to statutory conditions, but on that account the State Government is not debarred from granting a licence to another person or to supply energy directly to a consumer within the same area if the State Government deemed it necessary so to do in the public interest

Section 3(2)(e) is challenged on the ground of denial of the guarantee of the equal protection clause of the Constitution.

Strong reliance was placed by counsel for the appellant upon a recent judgment of this Court: The Western U.P. Electric Power and Supply Co. Ltd. v. The State of U.P. and Ors. (1) In that G case the Government of U.P. had by Notification dated September 21, 1966, authorised the State Electricity Board to supply energy directly to consumers in the area of supply for which a licence was already granted.

This Court held that a licensee supplying electrical energy in an area has no monopoly under its licence; but the Notification issued by the U.P.

Govemment directing the State Electricity Board to supply energy directly to H a consumer at a rate lower than the rate at which it was supplied to the licensee Company amounted to discrimination between that

(2) A.LR. 1968 S.C. 1099

consumer and the other consumers and also between the consumer and the licensee and the Notification on that account was invalid.

Counsel for the Company says that the question which falls to be determined in the present appeal is concluded by the judgment in The Western U.P. Electrical Power and Supply Company's case('), for the Court in that case held that the Notification of the Government of U.P. directing the State Elvctricity Board to supply energy directly to certain concerns at a rate lower than the rate at which energy was supplied to the licensee Company amounts to discrimination between those concerns on the one hand and the other consumers on the other, and also between the concerns and the Company.

Article 14 of the Constitution ensures equality among equals: its aim is to protect persons similarly placed against discriminatory treatment. It does not however operate against rational classification. A person setting up a grievance of denial of equal treatment by law must establish that between persons similarly circumstanced, some were treated to their prejudice and the differential treatme, nt had no reasonable relation to the object sought to be achieved by the law. In the present case there is no evidence about the rate charged for energy supplied by the

State Electricity Board to the Company on December 26. 1961. nor is there any evidence on the record about the rates charged for electrical energy supplied to the consumers by the Company.

The plea of discrimination has to be considered from two different points of view-(1) the discrimination between Hind Lamps and the other consumers within the area of supply in re,- l'ect of which the Company held the licence; and (2) discrimination in the rates of supply charged by the State Electricity B:>ard, to the Company and to Hind Lamps.

There is no evi

ence on the record about the operative rates on the date of the impugned order. Again Hind Lamps was a consumer of electrical energy and so were the other consumers within the area of

mpply in respect of which the Company held the licence. But on that account it does not follow that they belong to the same class.

In one case energy is being supplied by the Company and in the other by the State Electricity Board. Again, there is no grievance made by any consumer of energy that he is by the grant of preferential rates to Hind Lamps prejudicially treated.

Other consumers of energy and Hind Lamps therefore do not belong to the same class,· and there is no grievance by any consumer of any prejudicial treatment accorded to him.

There is aiso no evidence that the rates charged by the State Electricity Board to Hind Lamps were lower than the rates charg-

0> A.l.R. 1968 S.C. 1099.

ed to the Company.

The Company and Hind Lamps again do not belong to the same class.

The Company is a distributor of electrical energy, whereas Hind Lamps is a consumer. If the State Government charged different rates from persons belonging to the same class, in the absence of any rational basis for that treatment, the plea of discrimination founded on differential rates may probably have some force.

But the Company and Hind Lamps did not belong to the same class, and there is no evidence that for energy supplied different rates were charged. In The Western U.P. Electric Power and Supply Co. Ltd. v. The State of U.P.(') the position was different.

That case was decided on the footing that the consumer and the Western U.P. Electric Power and Supply Co. Ltd. belonged to the same class, and the Board charged higher rates from the distributing Company than the rate charged from the third respondent in that case. The Court observed in that case :

" ...... the notification and the Government's direction to the Board therein results in clear discrimination. If the Board were to supply energy directly to the 3rd rspondent it has to do so at rates lower than' the rates at which electricity is supplied by it to the petitioner

comp.ny. The petitioner company being thus cliargect at higher rates from its other consumers with tile result that the 3rd respondent would get energy at substantially lower rates than other consumers including other industrial establishments in the area.

The notification thus results in discrimination between the 3rd respondent on the one hand and the other consumer on the other as also between the 3rd respondent and the petitioner company." The first contention was, therefore, rightly negatived by the High Court.

By the amendment made by U.P. Act 30 of 1961 electrical energy may be -supplied by the State Government or the State Electricity Board within the same area in respect of which a licence is granted only if the State Government deems such sup ply "necessary in public interest". The High Court observed that "the State Government was the sole Judge of the question whether direct supply of energy to Hind Lamps was or was not in the pub!lc _interest.

The test is of a subjective nature, no objective test bemg contemplated.

Thus it is not open to this Court to exan1ine whether it was necessary in the public interest. The subjective opinion of the Government is final in the matter, and the same is not justiciable or subject to judicial scrutiny as to the sufficiency of the grounds on which the State 0-overnment has_ rmed its op_h1ion. In other words the Legislature has left

(I)

A.LR. 1968 S.C. 1099.

it to the sole discretion of the State Government to decide whether a direct supply of energy was in the public interest".

We are unable to agree with that view.

By s. 3(2)(e) as amended by the U.P. Act 30 of 1961, the Government is authorised to supply energy to consumers within the area of the license in certain conditions : exercise of the power is conditioned by the Government deeming it necessary in public interest to make such supply. If challenged, the Goverllffient must show that exercise of the power was necessary in public interest. The Court is thereby not intended to sit in appeal over the satisfaction of the Government. If there be prima facie evidence on which a reasonable body of persons may hold that it -is in the public interest to supply energy directly to the consumers, th~ requirements of the statute are fulfilled. Normally a licensee of electrical energy, though he has no monopoly, is the person through whom electrical energy would be distribuied within the area of supply, since the licensee has to lay down electric supplylines for transmission of energy and to maintain its establishment.

An inroad may be made in that right in the conditions which are statutorily prescribed.

In our judgment, the satisfaction of the Government that the supply is necessary in the public interest is in appropriate cases not excluded from judicial review.

But the decision of the High Court must still be maintained.

The order issued by the Government recited :

"The Governor is satisfied that it is necessary in the public interest for the State Electricity Board to make the supply of electricity direct to the industry (Hind Lamps Private Ltd.) and is, therefore, pleased to order in exercise of the powers vested in him under section 3(2)(e)(ii) of the Indian Electricity Act, 1910 (Act No.

IV of 1910) as amended by the Indian Electricity (Uttar Pradesh Sanshodhan) Adhiniyam, 1961 (U.P. Act No.

XXX of 1961) that the U.P. State Electricity Board make the supply of electricity direct to the Hind Lamps Ltd., Shikohabad."

There is ample evidence on the record to prove that uninterrupted

upply of electrical energy to Hind Lamps was necessary in public mterest, and the Company was unable to ensure it.

The only averment made in the petition filed by the Company before the

Rig~ Court was that "the giving of the supply to Hind Lamps

(Private) Ltd. could not be said to be in public interest as required by section 3(2)(e)(ii) of the Indian Electricity Act, 1910

s amended by Indian Electricity (U.P. Amendment) Act XXX of 1961". No particulars were furnished in the petition. In the affidavit filed on behalf of the State Electricity Board it was affirmed that Hind Lamps was engaged in the manufacture of electric bulbs fluorescent tubes etc. and the process required uninterupted spply; that it was one of the major industries of the State and was the only industry of its kind in the State; that as a result of the defective supply by the Company, the Hind Lamps felt dissatisfied and informed the Government that if the supply position was not improved it would be forced to shift its factory from the State to some other State; that the industry gave employment to a number of people in the State and saved a large amount of foreign exchange and on that account the State Government was keen to give it fair and due protection that it deserved; that the total supply of electricity to the Company was 1700 K.W. and even if the entire supply under the agreement was made available by the Company to Hind Lamps it would fall short of its requirements. It was, therefore, in public interest that direct supply of energy should be made available to Hind Lamps. An affidavit containing similar averments was also filed on behalf of the State of Uttar Pradesh.

There is no evidence on behalf of the Company to the contrary.

For maintaining effective working of a large industry which gave scope for employment to the local population and earned foreign exchange, if it was necessary to give direct supply of electrical energy to Hind Lamps, the order to the Electricity Board to make direct supply of electrical energy to Hind Lamps was unquestionably in public interest within the meaning of s. 3(2)(e) (ii) of the Act.

There is no substance in the contention that by the issue of the order dated December 26, 1961, there was compulsory acquisition of the property of the Company without providing for compensation. By the grant of a licence under Act 9 of 191 O no monopoly was created i.n favour of the Company. ~The statute

expresly reserves the nght of the State to authorise supply of electncal energy through another licensee in the same area or to a

onsumer directly through the State Electricity Board.

Assummg tat the right to supply. e.lectrical energy is property (on that 9ues1I?n e express no opmmn), we are of the view that there 1s.no.1nfnngement of the guarantee under Art. 3lr2) of the Cons1Itut10n.

Clause (2) of Art. 31 as-amended by the Constitution (Fourth Amendment) Act, 1955, insofar as it is material provides : '

"No proper!)'. shall be compulsorily acquired . . . save for a ubhc purpose and save by authority of a law which provides for compensation for the property so cquired and either fixes the amount of the compensation or specifies the principles on which, and

the manner in which, the compensation is to be determined and given. . , . . . "

Clause (2A) in substance defines compulsory acquisition or requisitioning of property within the meaning of cl. (2). It provides:

"Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acquisition or requisitioning of poperty, notwithstanding that it deprives any person of his property."

By cl. (2A) there is no compulsory acquisition or requisitioning of property, unless ownership or right to possession of the property stands transferred to the State or a corporation owned or controlled by the State.

By the order granting direct supply of electrical energy ownership of property or right to possession o4' property was not transferred to the State or to a corporation owned or controlled by the State, and on that limited ground it must be held that Art. 31(2) has no application. The Company may, it may be assumed, as a result of direct supply of electrical energy to Hind Lamps, suffer loss; but Art. 31(2) does not guarantee protection against that loss.

The Company was afforded sufficient opportunity to make its representation before and after the impugned order was passed.

Hind Lamps had submitted several representations to the Government of U.P. regarding inadequate and irregular supply of electrical energy.

The Company was informed about the complaints made by Hind Lamps. Meetings were held in which certain steps to be taken by the Company to make the supply regular were agreed upon, but they were not carried out, presumably because the Company had not the requisite equipment for that purpose. The Company was asked to supply electrical energy as released in favour of Jiind Lamps; it failed to do so. Representations made by_ the Company, after the order was passed, requesting that the order dated December 26, 1961, be withdrawn, were also considered by the Government and rejected.

Adequate opportunity of making a representation was afforded to the Company to satisfy the State Government that it was not in the public interest to supply electrical energy directly to Hind Lamps. ·

The appeal fails and is dismissed with costs.

G.C.

Appeal dismissed.

STATE OF U.P. & ANR

March 7, 1969

C. SHAH

Indian Electricity Act

ss. 3(1) and 3(2)(e)(ii)

Constitution of India

Arts. 14 and 31(1)

s. 3

Electricity Act

s. 3(2)(e)

s. 3

s. 3(1)

Indian Electricity Act, 1910

s. 3(2)(e)

Indian Electricity Act, 1910

Art. 14

s. 3(2)(e)(ii)

Article 14

Art. 14

s. 3(2)(e)

s. 3(2)

Art. 31(2)

Art. 31

Art. 31(2)

Allahabad High Court

Muhan Behari Lal

O. P. Rana

C. K. Daphtary

B. R. L. Iyengar

Bishambar Lal

H. K.

Puri

Shah

s. 3(1)

Electricity Act

Htnd Lamps Private Ltd.

Hind Lamps

HinaLamps

Government of U.P.

December 26, 1961

s. 3(2)(e)(ii)

Indian Electricity Act, 1910

High Court of Allahabad

R. S. Pathak

U.P. Government

April 24/28, 1962

1st July, 1962

December 25, 1961

ecember 26, 1961

Electricity Act

s. 3

Act or the Electricity Supply Act, 1948

Section 3(2)(e)

September 21, 1966

U.P.

Article 14

December 26. 1961

s. 3(2)(e)

Hind Lamps Private Ltd.

section 3(2)(e)(ii)

Indian Electricity Act, 1910

U.P. State Electricity Board

Hind Lamps Ltd.,

Shikohabad

Hind Lamps

(Private) Ltd.

section 3(2)(e)(ii)

Indian Electricity Act, 1910

Uttar Pradesh

s. 3(2)(e)

Art. 3

Art. 31

Art. 31(2)

Art. 31(2)

Jiind Lamps


V. P. GOPALA RAO

PUBLIC PROSECUTOR, ANDHRA PRADESH

March 7, 1969

[S. M. SIKRI, R. S. BACHAWAT AND K. S. HEGDE, JJ.]

87 5

F"ctories Act (63 of 1948), ss. 2(k) (i), 2(1)-'Manufacturing proces~· and "workers'-Meaning of.

The appellant who was the manager-cum-occupier. of a company's establishment at Elum was prosecuted for operating a factory without obtaining a licence as required by the Factories Act, 1948 and the Andhra Pradesh Factory Rules, 1950.

The company had its main fact<>ry at Bombay.

In the company's Eluru premises, sun-cu'red tobacco leave~ purc:hased from local producers were subjected to the processes of moistening, stripping and packing.

The tobacco leaves were moistened so that they could be handled without breakage. The moistening was done for IO to 14 days by sprinkling water on stacks of tobacco and shifting the top and bottom layers. The stalks were stripped from the leavs. The Thukku (wholly spoilt) and Pagu (partly spoilt) leaves were separated.

The leaves were tied up in bundles and stored in the premises. From time to time they were packed in gunny bags and exported to the company's factory at Bombay where they were used for manufacturing cigarettes.

The appellant's defence was that it was not necessary to obtain the licence or permission because (i) no manufacturing process was carried on in the premises; and (ii) the persons who worked in the premises we're not workers as they were employed by independent contractors. The Magistrate accepted the defence contentions, and -acquitted the appellant.

But the High Court convicted the appellant.

Dismissing the appeal, this Court:-

HELD : The con1pany's premises at Eluru were a factory.

(i) Manufacturing processes as defined in s. 2(k) (i) of the Factories Act were carried on in the premises.

Under s. 2(k) (i) manufadturing precess means any process for 'making. altering, repairing ornamenting, finishing. packing. oiling, \\'ashing. cleaning. breaking up, demolishing or other,\ise treating or adapting any article or substance with a view to its use. sale, transport. delivery or disposal." The definition is widely worded.

The moistening \vas an adaptation of the tobacco leaves. The stalks were stripped by breaking them up.

The leaves were packed by bundling them up rind putting them into gunny bags.

The breaking up, the adaptation and the pn.cking of the tobacco leaves were done with a view to their use and transport.

All these proce'ises a're manufacturing process within s. 2<kJ(i). [878 BJ

State of Kenda v. V. M. Patel,

[1961) I L.L.J. 549, Sardar C. S.

Anwe v. The State, I.LR. [1965) 15 Raj. 117, referred to.

(ii) The persons employed were workers as defined in s. 2 (I) of the Facto'ries Act.

More than 20 persons worked in the premises regularly every day. There was the positive evidence of P.W.s that the work of stripping stalks from the tobacco leaves was done under the supervision

.of the management.

There was nu evidence to show that the other work in the premises was not done under like supervision. The prosecution adduced prima facie evidence showin2 that the relationship of master and servant existed between the workmen and the management. The appellant <lid not produce any rebutting evidence. In the cross-examination of P. W.

I, it was suggested that the workmen were employed by independent contracts, but the suggestion was not borne out by the materials on the record. [881 B-EJ

Sri ChintQman Rao & Anr. v. State of Madhva Pradesh, [1958] S.C.R. 1340, 1349, Short v. J. W. Henderson Ltd., [1946] S.C. (H.L.) 24, 33-34.

Dharangadhara Chemical Works v. State of Saurashtra, [1957] S.C.R. 152, State of Kera/a v. V. M. Patel [1961] 1 L.L.J. 549, Shankar Ba/aji Waje

v. State of Maharashtra, [19621 1 Lab. L.J. 119, Bridhichand Sharma v.

First Civil Judge, Na11vur, [1961] 2 Lab. L.J. 86, and D. C. Dell'all Mohinder Saheb & Sons v, United Bidi Workers' Union, [19641

2 L.L.J. 638, referred to.

CRIMINAL APPELLATE JURISDICTION : Criminal Appeal No. 271 of 1968.

Appeal by special leave .from the judgment and order dated July 3, 1968 of the Aindhra Pradesh High Court in Criminal Appeal No. 883 of 1966.

M. C. Setalvad, J. M. Mukhi and G. S. Rama Rao, for the appe!lant.

P. Ram Reddy and A. V. V. Nair, for the respondent.

The Judgment of the Court was delivered by

Bachawat, J.

M/s. Golden Tobacco Co., Private Ltd. have their head office and main factory at Bombay where they manufacture cigarettes.

The appellant is ttie occupier-cum: manager of the company's premises at Eluru in Andhra Pradesh where sun-cured country tobacco purchased from the local producers is collected, processed and stored and then transported to the company's factory at Bombay. The prosecution case is that the aforesaid premises are a factory.

The appellant was prosecuted and tried for contravention of s. 6( 1) of the Factories Act 1948 and rules 3 and 5(3) of the Andhra Pradesh Factory Rules 1950 for operating the factory without obtaining a licence from the Chief Inspector of Factories and his previous permission approving the plans of the building.

The appellant's defence was that the premises did not constitute a factory and it was not necessary for him to obfain the licence or permission. The 2nd Addi. Munsif Magistrate, Eluru, accepted the defence contention and acquitted the appellant.

According to the Magistrate the prosecution failed to establish that the premises were a factory <lr that any manufacturing process was carried on or that any worker was working therein.

The Public Prosecutor filed an

appeal against the order.

The Andhra Pradesh High Court allowed the appeal, convicted the appellant under s. 92 for con travention of s. 6 ( 1) and rules 3 and 5 ( 3) and sentenced him to pay a fine of Rs.· 50 under each count. The present appeal has been filed by the appellant after obtaining special leave.

The question in this appeal is whether the company's premises at Eluru constitute a factory.

Section 2(m) defines factory.

Under s. 2(m) factory means any premises including the precincts thereof "whereon twenty or more workers are working, or 'were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on." It is not disputed that more than 20 persons were working on the premises. The points in issue are : (I ) whether those persons were

"workers";' and (2) whether any manufacturing process was being carried on therein.

For the purpose of proving the prosecution case the respondent relied upon the following materials : (I) the testimony of PW I A. Subbarao, the Assistant Inspector of Factories; (2) his report of inspection of the premises on December 20, 1965; (Ex.

Pl); (3,) the show cause notice Ex. P3, and the appellant's reply dated January 15, 1966; (Ex. p5); (4) the testimony of PW 2 B. P. Chandrareddi, the Provident r'und Inspector; and ( 5) si'I returns (Exs. P7 to Pl2), submitted by the Eluru establishment, to the Regional Provident Fund Commissioner.

The materials on the record show that in the company's Eluru premises, sun-cured tobacco leaves bought from the growers were subjected to the processes of moistening, stripping and packing.

The tobacco leaves were moistened so that they may be handled without breakage. The moistening was done for 10 to 14 days by sprinkling water on stacks of tobacco and shifting the top and bottom layers.

The stalks were stripped from the leaves.

The Thukku (wholly spoilt) and Pagu (partly spoilt) leaves were separated. The leaves were tied up in bundles and stored in the premises.

From time to time they were packed in gunny bags and exported to the company's factory at Bombay where they wer.e used for manufacturing cigarettes. All these processes are carried o~. in the tobacco industry. In Encyclopaedia Britannica, 1965 edition, Vol. 22, page 265 under the heading "tobacco

indstry'' j~ is stted ; "After curing, only during humid periods or m special m01stenmg cellars can the leaf be handled without

breakae. It is remoed from the stalks or sticks and graded accordmg to colour, size, soundness and other recognizable elements of quality. It is tied nto hands, or bundles, of 15 to 30

leaves by means of a tobacco leaf wrapped securely around the stem end of the leaves.

After grading the leaf is ready for the market."

In our opinion, manufacturing processes as defined in s. 2

(k) (i) were carried on in the premises .. Under s. 2(k) (i) manufacturing process means any process for "making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal." The definition is widely worded.

The moistening was an adaptation -0f the tobacco leaves. The stalks were stripped by breaking them up.

The leaves were packed by bundling them up and putting them into gunny bags.

The breaking up, the adaptation and the packing of the tobacco leaves were done with a view to their use and transport.

All these processes are manufacturing processes within s. 2(k) (i).

The reported cases are of little help in deciding whether a particular process is a manufacturing process as defined in s. 2

(k) (i). In State of Kera/av. V. M. Patel(') the Court held that the work of garbling pepper by winnowing, cleaning, washing and drying it on concrete floor and a similar process of curing ginger dipped in lime and laid out to dry in a warehouse were manufacturing processes.

With regard to the decision in Col.

Sardar C. S. Angre v. The State(') it is sufficient to say that the work of sorting and drying potatoes and packing and re-packing them into bags was held not to be a manufacturing process as the work was done for the purpose of. cold storage only and not for any of the purposes mentioned in s. 2(k) (i).

The next question is whether 20 or more persons worked on the premises. On behalf of the appellant it is admitted that more than 20 persons work there, but his contention is that they are employed by independent contractors and are not workers as defined in s. 2(1).

Section 2(1) reads :-"worker" means a person employed, directly or through any agency, whether for wages or not, in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with, the manufacturing process, or the subject of the manufacturing process;"

In Sri Chintaman Rao & anr. v. State of Madhya Pradesh(') the Court gave a restricted meaning to the words "directly or

(!) [1961] I L.L.J. 549.

(2) I.LR. [1%5] 15 Raj. 117.

(3) [195RJ s.c.R .. 1340. 1349.

A through an agency" in s. 2 ( 1) and held that a worker was a person employed by the management and that there must be a contract of service and a relationship of master and servant between them.

On the facts of that case the Court held that certain Sattedars were independent contractors and that they and

the coolies engaged by them for rolling bidis were not "workers".

It is a question of fact in each case whether the relationship of master and servant exists between the management and the workmen.

The relationship is characterized by contract of service between them. In Short v. J. W. Henderson Limited(') Lord Thankerton recapitulated four indicia of a contract of service. As stated in Halsbury's Laws of England, 3rd ed. vol. 25, p. 448, Art. 872 :

"The following have been stated to be the indicia of a contract of service, namely, ( 1) the master's power of selection of his servant; (2) the payment of wages or other remuneration; ( 3) the master's right to control the method of doing the work; and ( 4) the master's right of suspension or dismissal (Sharl v. J. and W.

Henderson Ltd. ( 1946 S. C. (H. L.) 24, at p~. 33, 34, Could v. Minister of National Insurance, [1951) I. K. B. 731 at p. 734; [1951) All E. R. 368 at p. 371; Pauley v.

Ke1111ldo Ltd. [1953] I All. E. R. 226, C. A., at p. 228) ; but modern industrial conditions have so affected the freedom of the master that it may be necessary at some future time to restate the indicia; e.g., heads (1), (2) and (4) and probably also head (3), are affected by statutory provisions (Short v.

J. W. Henderson Ltd., supra at p. 34."

In Dharangadlwra Chemical Works v. Stille of Saurashtra( 2 ) the Court held that the critical test of the relationship of master and servant is the master's right of superintendence and control of the method of doing the work.

Applying this test workmen rolling bidis were found to be employees o[ independent contractors and not workers within s. 2 (I), in State of Kera/a v.

Patel V. M.(') and Shankar Balaji Waje v. State of Maharashtra(') while they were found to be workers within s. 2 ( 1) in Bridhichand Sharma v. First Civil Judge, Nagpur(') and workmen within the meaning of s. 2 ( s) of the Industrial Disputes Act in D. C. Dewan Mohinder Saheb & Sons v. United Bidi Workers'

Union(').

(I) [1946] S.C. (H.L.) 24, 33-34.

(3) [1961] l L.L.J. 549.

(5) [1961] 2 Lab. LJ 86.

(2) [1957] S.C.R. 152.

(4) [1962] 1 Lab. L.J. 119.

16) [1964] 2 Lab. L. J, 638.

There is no abstract a priori test of. the work control required for establishing a contract of service. In Short v. J. N. Henderson Ltd.(') Lord Thankerton quoting Lord Justice Clerk's dicta in an earlier case said that the principal requirement of a contract of service was the right of the master "in some reasonable sense" to control the method of doing the work. As pointed out in Bridhichand's case(') the fact that tlie workmen have to work in the factory imply a certain. amount of supervision by the mainagement. The CoUrt held that the nature and extent of control varied in different industries and that when the operation was of a simple nature the control could be exercised at the end of the day by the method of rejecting the bidis which did not come up to the proper standard.

In the present case, the prosecution relied on ( 1) Bx. P7 to P 12, (2) the testimony of PW! and (3) Bxs. Pl and P5 to prove that the. persons working at the company's premises at Eluru were employed by the management.

Exhibits P7 to P12 are monthly returns for July to December 1966 submitted by the company's Bluru establishment to the Regional Provident Fund Commissioner under paragraph 38(2) of the Employees Provident Fund Scheme, 1952. The returns disclosed the number and names of about 200 persons employed every month and the recoveries from the wages and the company's contributions on account of the provident fund of each employee. At the top of each return it was stated that the employees were contract employees.

Section 2 ( f) of the Employees Provident Fund Act 1952 defines "employee" as including any person employed by or through a contractor. Paragraphs 20 and 30 of the Employees , Provident Fund Scheme 1952 shows that the employer is required to pay contributions in respect of all such employees.

Paragraph 26 of the Scheme shows that employees who have actually worked for not less than 12 months or less in the factory or establishment is eptitled and required to become a member of the Fund. In view of the fact that the returns are in respect of all persons employed in the establishment either by the management or by or through a contractor they are not of much help in determining whether the employees were employed by the management or were employed by the contractors.

They only show that in the months of July to December 1966, 200 workers had been working in the establishment for not less than 240 days.

The testimony of PWl, A. Subbarao, the Assistant Inspector of Factories shows that on December 20, 1965 he found 120 workmen working in the premises.

He is corroborated by his inspection report Bx. Pl. In his reply Bx. P-5 the appellant did not dispute the fact that 120 persons were working there. PW 1

(I) [1946] S.C. (H.L.) 24.

(2) (1961] 2 L.L.J. 86.

£ound workinen doing the work of stripping stalks from the tobacco leaves.

The work of stripping was being done under the supervision of the management's clerk J. Satyanarain Rao.

At the end of the day the clerk collected the stripped tobacco and noted the quantity of work done in the work sheet allotted to the worker.

PWl found some workmen doing other work.

The onus of proving that the workmen were emp!Oyed by the management was on the prosecution. We think that the prosecution has discharged this onus. It is not disputed that more than

20 persons worked in the premises regularly every day. 'rhere is the positive evidence of PWl that the work of stripping stalks from the tobacco leaves was done under the supervision of the management. There is no evidence to show that the other work in the premises was not done under the like supervision.

The prosecution adduced prima facie evidence showing that the relationship of master and servant existed between the workmen and the management.

The appellant did not produce any rebutting evidence. In the cross-examination of PWl, it was suggested that the workmen were employed by independent contractors, but the suggestion is not borne out by the materials on the record. We hold that the persons employed are workers as defined in s. 2 (1). The High Court rightly held that the company's premises at EJuru were a factory.

In the Courts below the appellant produced ( 1 ) an order of the Chief Inspector of Factories, Madras, and (2) a letter of Superintendent of Central Excise I.D.O., Vijayawada.

Mr.

Setalvad conceded, and i:n our opinion: rightly, that these documents throw no. light on the qljtStion whether in 1966 the pr~ mises were a factory within tb, e meaning of s. 2(m). We, therefore say nothing more with regard to these documents.

In the .result, the appeal is dismissed.

Y.P.

Appeal dismissed.

RAO

PUBLIC PROSECUTOR, ANDHRA PRADESH

March 7, 1969

S. M. SIKRI

R. S. BACHAWAT

K. S. HEGDE, JJ.

ss. 2(k)

Factories Act, 1948

Andhra Pradesh Factory Rules, 1950

Bombay

Eluru

s. 2(k)

Factories Act

s. 2(k)

s. 2

s. 2

M. C. Setalvad

J. M. Mukhi

G. S. Rama Rao

P. Ram Reddy

A. V. V. Nair

Bachawat

Golden Tobacco Co., Private Ltd.

Andhra Pradesh

s. 6( 1)

Factories Act 1948

Andhra Pradesh Factory Rules 1950

2nd Addi. Munsif Magistrate, Eluru

Andhra Pradesh High Court

s. 92

s. 6

Section 2(m)

s. 2(m)

I A. Subbarao

December 20, 1965

January 15, 1966

B. P. Chandrareddi

s. 2

s. 2(k)

s. 2(k)

s. 2

s. 2(k)

s. 2(1)

Section 2(1)

s. 2

Sattedars

Thankerton

England

Art. 872

s. 2

s. 2

s. 2

Industrial Disputes Act

Clerk

Bridhichand

Section 2

Employees Provident Fund Act 1952

A. Subbarao

J. Satyanarain Rao

s. 2

EJuru

Madras

Setalvad

s. 2(m)


N. y. NARENDRANATH

COMMISSIONER OF WEALTH TAX, ANDHRA PRADESH,

HYDERABAD

March 7, 1969

(J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.j

Wel4.Jth Tax Act, '1957, section 3-Family consisting of sole surviving . Hindu coparcener, his wife and daughters, whether assessable as Hindu Undivided Family or as individual-Assessee receiving property from r.oparcenary on partition-Character of.

In respect of his assessment to wealth tax for the assessment years 1957-58, 1958-59 and 1959-60, the appellant filed returns in the status , of a Hindu Undivided Family. His family at the material time consisted of himself, his wife and two minor daughte'rs.

Jbe appellant claimed to be assessed in. the status of a Hindu Undivided Family inasmuch as the wealth returned consisted of ancestral property received or deemed to have been received by him on Partition with his father and b1others. The Wealth Tax Officer did not accept the contention of the appellant and assessed him as an individu.al.

The Appellate Assistant Commissioner confirmed this view.

However, the Appellate Tribunal held that the appellant should be assessed in the status of Hindu Undivided Family but the High Court, upon a referen~, disagreed with the view of the Appellate Tribunal and held that as the appellant family did not have aay

other male coparcener, all the assets forming the subject matter of the returns filed by the appellant belonged to him as an individual and not to a Hindu Undivided Family.

On appeal to this Court,

HELD : Allowing the appeal :

The status of the appellant was rightly determined as that of a Hindu Undivided Family by the Appellate Tribunal.

The expression "Hindu Undivided Family" in the Wealth Tax Act is used in the sense in which a Hindu joint family is understood in the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth Tax Act to suggest that a Hindu Undivided Family as an assessable unit must consist of at least two male members. [886 C]

Under s. 3 of the Wealth Tax Act not a Hindu coparcenary but a Hindu Undhided Family is one of the assessable legal entities. A Hindu joint family consists of all persons lineally descended from a common an cestor, and includes their wives and unma'rried daughters. A Hindu coparcenary is a much narrower body than the Hindu joint family; it includes only those persons who acquire by birth an interest in the joint or coparcenary property, these being the sons, grand-sons and great grandsons of the holder of the joint property for the time bein2. [885 F-H]

Kalyanji Vitholdas v. Commissioner of Income Tax, 5 Commissioner of Income Tex v. Gomedalli Lakshminara, van T.R. 367 considered.

I.T.R. 90,

[1935] 3

Commissioner of Income Tax v. A. P. Swam.v Gomedalli'. 5 l.T.R. 416, Attorney General of Ceylon v. A.R. Arunachal/am Chettwr [1957] A.C. 540, Gowali Buddanna's [1960] 6 1.T.R. 203 referred to.

T. s. Srinivasan v. Commissioner of Income lax 60, l.T.R. 36 !tstinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1477 to 1479 of 1968.

Appeals from the judgment and order dated November 30, 1964 of the Andhra Pradesh High Court in Case Referred No. 49 of 1962. s. T. Desai and K. Jayaram, for the appellant (in aH the appeals).

D. Narsaraju, G. C. Sharma, R. N. Sachthey and B. D. Sharma, for the respondent (in all the appeals).

The Judgment of the Court was delivered by

Ramaswami, J.

These appeals are brought by certificate from the judgment of the Andhra. Pradesh High Court, dated 30th November, 1964 in Reference Case No. 49 of 1962.

N. V. Rangarao; the father of the appellant, was the holder of an impartible estate called the "Munagala Estate" in the Krishna District in the State of Andhra Pradesh.

This estate was abolished under the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, and compensation under section 45 of the Act was paid severally to the appellant, his father and his brothers. Other properties belonging to the joint family of the appellant, his father and brothers were also partitioned between them from time to time.

The assets forming the subject of reference to the High Court consisted of investments made from the compensation amount received by the appellant in securities; shares etc. and also other assets such as deposits in Banks.

The appellant filed returns for the assessment years 1957-58, 1958-59 and 1959-60 in the status of a Hindu Undivided Family. The appellant's family during the material time consisted of himself, his wife and his two minor daughters and there was no other male member. The appellant claimed to be assessed in the status of a Hindu Undivided Family inasmuch as the wealth returned consisted of ancestral property received or deemed to have been received by him on partition with his father and. brothers.

The Wealth Tax Officer did not accept the contention of the appellant and assessed him as an individual for the assessment years 1957-58, 1958-59 and 1959-60.

On appeal to the Appellate Assistant Commissioner of Wealth Tax the findmg that he must be assessed as an individual was confirmed.

L It Sup.CJ/69-7

The Income Tax Appellate Tribunal however on appeal by, the appellant held that he should be assessed in the status of a Hindu

Undivided Family.

Thereupon,, the Commissioner of Wealth Tax applied to the Tribunal to state a case to the High Court under section 27(1) of the Wealth Tax Act (Act No. 27 of

1957) (hereinafter called the Act). The Tribunal accordingly referred the following question of law for the opinion of the B High Court:

"Whether the status of the assessee was rightly determined as Hindu Undivided Family ?"

The High Court disagreed with the view of the Appellate Tribunal and held that as the appellaint's family did not have any . c other male coparcener all the assets forming the subject matte1 of the returns filed by the appellant belonged to him as an individual and not to a Hindu Undivided Family.

The High Court answered the question in favour of the appellant and against the Commissioner of Wealth Tax.

It is necessary at this stage to set out the relevant provisions D of the Act as they stood at the material time :-

"Section 2 : In this Act,· unless the context otherwise requires-

( e) "assets" includes property of every description, movable or immovable, but does not include- E

(i) agricultural land and growing crops, grass or standing trees on such land;

(ii) any building owned or occupied by a cultivator or receiver of rent or revenue out of agricultural land: p

(iii) animals;

(ix) a right to anY' annuity in any case of where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant; G

( v) any interest in property where the interest is available to an assessee for a period not exceeding six years;

(m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located,

belonging to the assessee on the valuation date, including assets required to be included in his net wealth a; on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than,-

(i) debts which under section 6 are not to be taken into account; and

(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this ct.

Section 3 : Charge of Wealth-tax : Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of every individual, Hindu Undivided Family and company at the rate or rates specified in the Schedule.

Section 5 : Exemption in respect of certain assets :

(i) Wealth-tax shall not be payable by an assessec in respect of the following assets and such assets shall not be included in the net wealth of the assessee-

(ii) the interest of the assessee in the coparcenary property of any Hindu Undivided Family of which he is a inember".

Under s. 3 of the Wealth Tax Act not a Hindu coparcenary but a Hindu Undivided Family is one of the assessable legal entities.

A Hindu joint family consists of all persons lineally descended from a common ancestor, and includes their wives and unmarried daughters. A Hindu coparcenary is a much nan-.Jwer body than the Hindu joint family; it includes only those prsons

who acquire by birth an interest in the joint or coparcnary property, these being the sons, grand-sons and great granc'-sons of the holder of the joint property for the time being.

In ;\:alyanji Vithaldas v. Commissioner of Income Tax, (1) Sir George Rankin observed : ~

"The phrase "Hindu Undivided Family" is used in the statute with reference, not to one school only of

(!) 5 J.T.R. 90.

SUPREM/B COURT REPORTS

[1969] 3 S.C.R.

Hindu law, but to all schools; and their Lordships think it a mistake in method to begin by pasting over the wider phrase of the Act the words "Hindu co-parcenary", all the more that it is not possible to say on the face of the Act that no female can be a member".

The first question involved in this case is whether the status of the appellant was that of a Hindu undivided family consisting of himself, his wife and his daughters. In our opinion, there is no warrant for the contention of the respondent that there must be at least two male members to form a Hindu Undivided Family as a taxable unit.

The expression "Hindu Undivided Family" in the Wealth Tax Act is used in the sense in which a Hindu joint family is understood in the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and his wife and daughters and there is nothing in the scheme of the Wealth Aax Act to suggest that a Hindu Undivided Family as an assessable unit must consist of at least two male members.

The next question is whether the assets which came lo the share of the appellant on partition ceased to bear the character of joint family properties and became the individual property in his hands. In this connection, a distinction must be drawn between two classes of cases where an assessee is sought lo be assessed in respect of ancestral property held by him : ( 1) where property not originally joint is received by the assessee and the question has to be asked whether it has acquired the character of a joint family property in the hands of the assessee and (2) where the property already impressed with the character of joint family properly comes into the hands of the assessee as a single coparcener and the question required to be considered is whether it has retlrined the character of joint family property in the hands of the assessee or is converted into absolute property of the assessee. In Kalyanji's(') case there were six appeals presented before the Judicial Committee by six partners of the firm of M/s.

Moolji Sicka and Co., viz., Moolji, Purshottam, Kalyanji, Chalurbhuj, Kanji and Sewdas. Moolji, Purshottam and Kalyanji each had a son or sons from whom he was not divided. It was found by the appellate tribunal that the capital supplied by them to the partnership business belonged to them in their individual capacities and was their self acquired property. Hence the income of the firm which had to be assessed to super-tax was the separate income of each of these partners.

Chaturbhuj had a wife and daughter but no son.

Kanji and Sewdas, sons of Moolji, were married men but neither had a son. It was found by the appellate tribunal that Chaturbhuj Kanji and Sewdas had

(J) 51.T.R. 90

received by gift from Moolji their respective share capital in the firm, that the share capital belonged to them in their individual capacities and was self acquired. The question at issue was whether the existence of a son and a wife or a wife and a daughter made the income of the partners the income of the Hindu Undivided Family rather than the income of the individual partner.

The Judicial Committee held that though the income was from an ancestral source, the fact that each partner had a wife or daughter did not make that income from ancestral source income of the Hindu Undivided Family of the partner, his wife and daughter.

Different considerations would be applicable, where property already impressed ; with the character of joint family property

omes into the hands of a single coparcener. The question to be asked in such a case is whether the property retains the character of joint family property or whether it sheds the character of joint family property and becomes the absolute property of the single coparcener.

In Commissioner of Income Tax v.

D Gomedalli Lakshminarayan, (') the property was ancestral in the hands of the father and the son had acquired an interest in it by birth.

There was a subsisting Hindu Undivided Family during the life-time of the father and that family did not come to an end on his death. On these facts, the Bombay High Court

held that the income received from the property was liable to super-tax as the income of the Hindu Undivided Family in the hands of the son who was the sole surviving male member of the Hindu Undivided Family in the year of assessment. The reasoning was that the property from which income accrued originally belonged to a Hindu Undivided Family and on the death of the father it did not cease to be property of that Hindu Undivided Family but continued to belong to that Hindu Undivided Family and its income in the hands of the son was, therefore, assessable as income of the Hindu Undivided Family.

There was .a Yitai distinction between the facts of this case and the facts in Kalymii!'s

case('). This distinction was not noticed by the Judicial Com mittee in Kalyanji's case.(') when it observed that the Bombay High Court "arrived too readily at the conclusion that the income was the income of the family".

Wh.-:n Gomeda/li's case(') was carried on appeal the Judicial Committee once again failed to notice the distinction and wrongly reversed the decision of the Bombay High Court holding that the facts of the case were not materially different from the facts in Kavanji's case(') [See the decisio, n of the Judicial Committee in Commissioner of lllcome Tax v. A. P. Swamy Gomedalli(')l.

(I) (1935) 3 l.T.R. 367.

(2) 5 1.T.R. 90.

(J) 5 I.T.R. 416.

SUPIU!ME COURT REPORTS [1970] I s.C.R

The recent decision of the Judicial Committee in Attorney General of Ceylon v. AR. Arunachalam Chettiar(') is important.

One Arunachalam-Nattukottai Chettiar-and his son constituted a joint family governed by the Mitakshara school of Hindu law. The father and son were domiciled in India and had trading and other interests in India, Ceylon and Far Eastern countries. The undivided son died in 1934 and Arunachalam became the sole surviving coparcener in the Hindu Undivided Family to which a number of female members belonged.

Arunachalam died in 1938 shortlv after the Estate Ordinance No. I of 1938 came into operation" in Ceylon. By section 73 of the Ordinance it was provided that property passing on the death of a member of the Hindu Undivided Family was exempt from payment of estate duty. On a clairn to estate duty in respect of Arunachalam's estate in Ceylon, the Judicial Committee held that Arunachalam was at his death a member of the Hindu Undivided Family, the same undivided family of which his son, when alive, was a mem-· ber and of whii:h the continuity was preserved after Arunachalam's death by adoptions made by the widows of the family and since the undivided Hindu family continued to persist, the property in the hands of Arunachalam as a single coparcener was the property of the Hindu Undivided Family. The Judicial Committee observed at page 543 of the Report :-

". . . . . . though it may be correct to speak of him as the 'owner', yet it is still correct to describe that which he owns as the joint family property.

For his ownership is such that upon the adoption of a son it assumes a different quality; it is such, too, that female members cf the family (whose members may increase) have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it.

And these are incidents which arise, notwithstanding his so-called cwnership, just because the property has been and has not ceased to be joint family property. Once again their Lordships quote from the judgment of Gratiaen, J. (') "To my mind it would make a mockery of the undivided family system if this temporary reduction of the coparcenary unit to a single individual were to convert what was previously joint property belonging to an undivided family into the separate property of the surviving coparcener".

To this it may be added that it would not appear reasonable to impart to the legislature the intention to discriminate, so long as the family itself rnbsists, between property in the hands of a single copar-

(I) (1957] A.C. 540.

(2) (1953) 55 C.N.L.R. 496-501.

cener and that in the hands of two or more coparceners".

The Judicial Committee rejected the contention of the appellant that since a single coparcener had full power over the property held by him, he must be held to be the absolute owner and observed that fact that he possesses a large power of alienation :

" . . . . . . . . appears to their Lordships to be an irrelevant consideration. Let it be assumed that his power of alienation is unassailable : that means no more than that he has in the circumstances the power to alienate joint family propeny. That is what it is until he alienates it and, if he does not alienate it, that is what it remains ...... It is only by analysing the nature of the rights cf the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family propeny can properly be described as 'joint propeny• of. the undivided family."(')

The basis of the decision was that the propeny which was the joint family propeny of the Hindu Undivided Family did not cease to be so because of the "temporary reduction of the coparcenary unit to a single individual". The character of the property, viz., that it was the joint propeny of a Hindu Undivided Family, remained the same.

The same principle was applied by this Court in Gowali Buddanna's(') case. In that case, one Buddappa; his wife, his two unmarried daughters and his unmarried son, Budanna, were members of a Hindu Undivided Family. Buddappa died and after his death the question arose whether the income of the propenies held by Buddanna as 'the sole surviving coparcener was assessable as the individual income of Buddanna or as the income of the Hindu Undivided Family. It was held by this Court that since the propeny which came into the hands of Buddanna as the sole surviving coparcener was originally joint family property, it did not cease to belong to the joint family and income from it was assessable in the hands cf Buddanna as income of the Hindu Undivided Family. In the course of the judgment Shah, J. speaking for the Court examined the decision of the Judicial Committee in Kalyanji's case(') and Gomedalli's(') and pointed out that there was a clear distinction between the two classes of cases :

"It may however be recalled that in Kalyanji Vithaldas's case(') the income assessed to tax belonged separately to four out of six partners; of the remaining two

(I) (1966) 60 l.T.R. 293.

(2) 601.T.R. 293.

{\) 51.T.R. 90.

(4) (!935) 3 1.T.R. 367.

it was from an ancestral source, but the fact that each such partner had a wife or daughter did not make that income from an ancestral source income of the undivided family of the partner, his wife and daughter. In Gomeda//i Lakshminarayan's case('), the property from which income accrued belonged to a Hindu Undivided Family and the effect of the death of the father, who was a manager, was merely to invest the rights of a manager upon the son.

The income from the property was and continued to remain the income of the undivided family.

This distinction, which had a vital bearin2 on the issue falling to be determined, was not given effect to by the Judicial Committee in A. P. Swami Gomedalli's case(').

At page 302 Shah, J. referred to the decision of the Judicial Committee in A runacha/am's (') case and concluded as follows:-

''Property of a joint family, therefore. does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may posesss. In the case in hand the property which yielded the income originally belonged to a Hindu Undivided Family. On the death of Budappa, the family which included a widow and females. born in the family was represented by Buddanna alone. but the property still continued to belong to that undivided family and income received therefrom was ; axable as income of the Hindu undivided family".

In the present case the property which is sought to be taxed in the hands of the appellant ori, gina!ly belonged to the Hindu Undivided Family belonging to the appellant, his father and his brothers.

There were joint family properties of that Hindi: Undivided Family when the partition took place between the appellant, his father and his brothers and these properties came to the share of the appellant and the question presented for determination is whether they ceased to bear the character of joint family properties and became the absolute properties of the appellant.

As pointed out by the Judicial Committee in Arunachalam's case(") "it is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as "joint property of the undivided family".

Applying this test it is clear that. though in the absence of male issue the dividin~ coparcener may be properly described in a sense as the owner of the properties. that upon the adoption of a son or birth of a son to him. it would assume a different quality. It con -- --- -------

ll) (19.~'.i) .' 1.T.R. ~67. '.~) {1957] A.C. 5Hl

tinues to be ancestral property in his hands as regards his male issue for their rights had already attached upon fr and the partition only cuts off the claims of the dividing coparceners. The father and his male issue still remain joint. The same rule would apply even when a partition had been made before the birth of the male issue or before a son is adopted, for the share which is taken at a partition by one of the coparceners is taken by him as representing his branch. Again the ownership of the dividing coparcener is such

"that female members of the family may have a right to maintenance out of it and in some circumstances to a charge for maintenance upon if". (See Arunachalam's(') case). It is evident that these are the incidents which arise because the properties have been and have not been ceased to be joint family properties.

It is no doubt true that there was a partition between the assessee. his wife and minor daughters on the one hand and his father and brothers on the other hand.

But the effect of partition did not affect the character of these properties which did not cease t.: be joint family propl!rties in the hands of the appellant. Our conclusion is that when a coparcener having a wife and two minor daughters and no son receives his share of the joint family prop~ties on partition. such property in the hands of the coparcener be!cngs to the Hindu Undivided Family of himself, his wife and n:inor daughters and cannot be assessed as his individual property. It is clear that the present case fall> within the ratio of the decision of this Court in Gowa/i Buddanna's case(') and the Appellate Tribunal was right in holding that the status of the respondent was that of a Hindu Undivided Familv and not that of an individual. On behalf of the respondent reference was made to the decision of this Conrt in T. S. Srinivasan v.

Commissioner of 'Income Tax('), and it was contended that the decision proceeded

cm the basis that property received by the coparcener on partition cannot be regarded as property of a Hindu Undivided Family if he has merely a wife or daughter and no son.

It is therefore necessary to examine the material facts and find out what is the ratio decidendi of that case.

The appellant was a member of the Hindu Undivided family with his father and brothers. As a result of partial partition of properties beloncrin" to the Hindu Undivided Family the appellant received certai~ shares and with tsese shares as nucleus he acquired house nroperties. shares and deposits.

His first son was born on 11th December. 1952 and it was common ground that the conception of the child must have taken place some time in March. 1952.

For the assessment year 1953-54 the relevant accounting year being !he_ financialy_ea_i-_ 1st April 1952 to 31st March, 19S3. the

t 1 l jl957] A.C. 5!0.

I~) 60 1.T_R. :'!93. ()) 60 l.T.R. )<.

appellant claimed that the income from the assets should be assessed in the hands of the Hindu Undivided Family consisting of himself and his son which, according to him, had come into i:xistence in or about March, 1952 when the son was conceived.

The Income Tax Officer recognised the Hindu Undivided- Family only from the date of the birth of the son, viz., 1 lth December, 1952 and assessed the income till 11th Deci:mber, 1952 in the hands of the appellant as an individual.

The Appellate Assistant Commissioner and the Tribunal upheld this view on appeal.

Before the High Court the question debated was whether the Hindu Undivided Family came into existence in or about March, 1952 when the son was conceived and whether the assessei: could be assessed in the status of an individual for any part of the relevant accounting year.

The question was answi:red against the assessee by the High Court. The assessee appealed to this Court and the contention of the appellant was that according to the doctrine of Hindu law a son conceived is in the same position as a son actually in existence.

The argument was rejected by this Court which held that the Hindu Undivided Family did not come into existence on the conception of the son as claimed by the appellant, but came into being when the son was actually born. It was suggested on behalf of the respondent that the decisicn of this case must be taken to be implicitly, if not explicitly that there was no Hindu Undivided Family prior to the date of the. birth of the son. But we do not think that any such implication can be raised.

The case of the appellant throughout the course of the proceedings was that the Hindu Undivided Family came into existence for the first time in or about March, 1952 when the son was conceived and it was not his case at any time that a Hindu Undivided Family was in existence prior to the conception of the sop.

Indeed, it was common ground between the parties that there wa5 no Hindu Undivided Family in existence prior to the conception of the son. The only dispute was whe ther the Hindu Undivided Familv came into existence for the first itme when the son was conceived as claimed by the assessee or whether it came into existence when the son was born as claimed by the Income Tax Department.

The appellant relied on the doctrine of Hindu law that the son conceived is in the same position as the son born and the respondent contended that this doctrine was inapplicable.

That was the only question raised before this Court which. it was called upon to decide and which in fact it decided. The question whether there was in any event even without a son conceived or born, a Hindu Undivided Family consisting of the apoellant and his wife and whether the properties received on partition belonged to that Hindu Undivided Family was neither raised nor argued before this Court which had no occasion to consider it. The decision of T. S. Srinivasan's case(') has therefore no bearin1 on the question now presented for determination in the present case. for the reasons already. expressed we hold that the status of the appellant was rightly determined as that of a Hindu Undivided Family by the Income Tax Appellate Tribunal and the question of law referred to the High Court must be answered in the affirmative and against the Commissioner of Wealth Tax.

These appeals arc accordingly allowell with costs. One hearing fee.

R.K.P.S.

Appeals allowed.

(I) 60 l.T.R. 36.

N. y. NARENDRANATH

C. SHAH

V. RAMASWAMI

A. N. GROVER, JJ

Jth Tax Act

section 3

s. 3

T. Desai

K. Jayaram

D. Narsaraju

G. C. Sharma

R. N. Sachthey

B. D. Sharma

Ramaswami

N. V. Rangarao

section 45

Income Tax Appellate Tribunal

section 27(1)

Section 2

section 6

Section 3

Section 5

s. 3

Kalyanji

Moolji Sicka and Co.

Moolji

Purshottam

Chalurbhuj

Kanji

Sewdas. Moolji

Purshottam

Chaturbhuj

Kanji

Sewdas

Moolji

Chaturbhuj Kanji

Bombay High Court

Kalymii

Gomeda

Kavanji

Arunachalam-Nattukottai Chettiar

India

Ceylon

Arunachalam

section 73

Gratiaen

Gowali Buddanna

Buddappa

Budanna

Buddanna

Shah

Gomedalli

Kalyanji Vithaldas

Gomeda//i Lakshminarayan

A. P. Swami Gomedalli

Shah

Budappa

Gowa/i Buddanna

11th Deci:mber, 1952

Assistant Commissioner

T. S. Srinivasan