TIRLOK SINGH & CO.

DISTRICT MAGISTRATE, LUCKNOW & ORS.

March 29, 1976

[Y. V. (JiANDRACHUD AND V. R. KRISHNA IYER, JJ.]

Right to be . heard-Lawful occupant of a building has no right to beheard at tl1e stage of ''notifying the vacc!llcy'' bv the District Maoislrate b1.fore passing an order of allot1nent or 1elease-U.P. Urban Building~ (Reguluion of Letting, Re111 and Eviction) Act, 13, 1972, S. 16 read with Rule 8 af U.P.

Urban Buildings (Regulf1tlon of Letting, Rent and Eviction) Rules 1972- Scope of.

Under section 12 of the U.P. Rent Act boh the landlord and the tenant ar'! required to intimate a vacancy to the Distr:ct Magistrate, as and when a vacancy is deemed to have occurred in the circumstances specified therein. ()n the in!i1n;1tion of a vacancy, the District Mag:.Strate may under section 16 pasc; eithr an order allottin~ the premises to a person specified by him or he can release the vacancy in favour of the landlofd on being satisfied that i he requires the pre.mi.<les for the purposes mentioned in sectio'n 16(2). Sµch an order can however be passed only after "ascertainment of vacancy" under Rule 8 of U.P. Rent Rules 1972, through the Rent Inspector and after "notifying the vacancy" by display oh the notice board of the Di3trict !\1agistrate for a period of three days from the date of such notificat, ion.

For the purposes of disposal of an application made by respondents 2 and 3 n/s 16(1)(b) of the Act for the "release" of certain residential premises of' which the appellants claim to be their tenants, the District Magistrate passed an order on May 20th 1974 viz. "Let the vacahcy be notified" admi.ttedly without granting any hearing tO' the appellants, which the appellants challenged as violative of the principle of "Audi Alteram Partem" in the Allahabad High Court. The High Court, though it granted an interim stay, after show cause notice rejected the Writ Petition summarily with a brief speakingorder oh the fi:TOund that the petition was premature and that the proper remedy lay to them u/s 16(5)(a) of the Act for review of the order directing that the vacancy be notified. Aggrieved by the said order the appellants filed a petition for special leave in this Court.

During its pendency, the respondent No. 1 issued a notice to the appellants that the release applic1tion filed h'

rcspond"nts 2 and 3 would be takeh up for hearing on May 19th 1975 and on May 20th 1975 passed an order of release, after refusing to stay further proceedings.

On May 30th 1975, the appellants filed an appeal against the release order to the District Judge Lucknow, v..110 hasi stayed further proceeding.o; and t11e appeal is pending. The question is whether the flrder dated Ma,. 20th 1974 "\\'as illegal for the reasoh that it was passetl "''ithont affording a hearing to the appellants.

Dismissing the appeals the Court, HELD : ( 1) A study of the scheme of the Act and its provisions how the untenability of the contention as reQ:ards the illegalitv of the order passed by respondent No. I. [945A]

(ii) The Act does not provide for a hearing at the stage when the District Magistrate passes an order of allotment or release.

[945-CJ (iii-1A'n order passed under rule 8(2) of the -q.P: Rent Rules for. "ascertainnt of va{; ancy" is what is meant by "notifying the vacancy'. 'The I>istrict Maistratc need not hear the parties before notifying the vacancy because under the scheme of the U.P. Rent Act an order notifying the vacancy does no injury and causes no prejudice to the interests of any party. A notification of the vacancy is a step-in-aid of an order of l1otn1ent or release a'n.--t

it ic; onlv v.'hen such an order of a1lotment or release ts passed that the landlord or the tenant a~ the case may be have a grievance.

Orders of allotpie?t and reJeae are in the first instahce reviewable. u/s 16(5)(a.) by the D1stnct

Magistrate himself and an order passed u/s 16 is appealahle u/s 18.

The Ao..:t thus conten1plates successive opportunities being afforded to persons 'Yh~e interests are likely to be affucted by an order passed oy the Dlstnct Magistrate. [945F-G, 946A, Cl

(iv) In the instant case, the Writ Petition was premature in the sense th~~ the order impugned thereby did not affect the appellants' interest in the particular pren1ises.

The appellants have since fil~ an appeal agaist the order of release to the District Judge and that appeal 1s pending. That is the proper forum for adjudicating on the rival claims. [946Ej

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1093 of 1975.

Appeal by Special Leave from the Judgment and Order dated 7th August 1974 of the Allahabad High Court (Lucknow Bench) in Writ Petition No. 673/74.

S. C. Malik, S. K. Mehta, K. R. Nagaraja and P. N. Puri for the C Appellant. t S. T. Desai and M. L. Verma for Respondents 2 and 3.

The Judgment of the Court was delivered by

CHANORACHUD, J. This appeal by special leave raises a short, though important question under the U.P. Urban Buildings (Regulation of D Letting, Rent and Eviction) Act, 13 of 1972.

Respondents 2 and 3 filed an application under section 16(1)(b) of the Act for the 'release' of certain residential premises of which the appellants claim to be their tenants. Respondent 1, acting as a Rent Controller, directed a Senior Inspector to inspect thepremises and make a report. Accordingly, the Senior Inspector inspected the pre- E mises and submitted a report on April 9, 1974 stating : "After hearing the parties it would be proper to take further action". The Senior Inspector seems to have found that the premises were in occupation of 3 persons two of whom claimed to be partners of the appellant-firm M/s.

Tirlok Singh & Co. On receipt of the report respondent 1 passed the impugned order, "Let the vacancy be notified", admittedly without granting any bearing to the appellants.

On May 23, 1974 the appellants filed a writ petition in the High Court of Allahabad challenging the aforesaid order on the ground that it was passed in violation of the principles of natural justice. Pending admission of the writ petition the High Court stayed further proceedings consequent on the order. On August 7, 1974. a Division Bench of the High Court rejected the writ petition summarily, with a brief speaking G order. It felt that the writ petition was premature and that the proper remedy for the appellants was to approach respondent 1 under section 16 ( 5) (a) of the Act for review of the order directing that the vacancy be notified.

In Ap'.il, 1975 the appellants filed a petition for special leaw in this Court a~mst the order of he High Court but during the pendency of that petitton, respondent 1 issued a notice to the appellants stating that the relesc application filed by respondents 2 and 3 would be taken up for heanng on May 19. On May 21, 1975 respondent 1 passed a release

A order and, though moved in that behalf by the appellants, refused to slay further proceedings.

On May 30., 1.975 the appellants filed an, appeal against the release order to the D1st~1ct Jud, ge, Lucknow who has "- , stayed further proceedings. That appeal 1s pendmg.

The narrow question for determination is whether the order passe" by respondent 1 on May 20, 1974 directing that the vacancy be notified is illegal for the reason that it was passed without affording a hearing to the appellants. This question incidentally involves an inquiry into the correctness of the view expressed by the High Court that the writ petition filed by the appellants was premature.

It is necessary for a proper appreciation of the controversy involved in this appeal to understand the scheme of the U. P. Rent Act, 13 of

1972. Chapter III entitled "Regulation of Letting" proyides by section 12(1) that a landlord or tenant of a building shall be deemed to have ceased to occupy the bu>lding or a part thereof if (a) he has substantially removed his effects therefrom, or (b) he has allowed it to be '1 occupied by any person who is not a member of his family, or (c) in the case of a residential building, he as well as members of pis family have taken up residence not being temporary residence, elsewhere. By sction 12 ( 4), any building or part of a building which a .landlord or a tenant has ceased to occupy shall be deemed to be vacant. By section 13, where a landlord or a tenant ceases to occupy a bu\lding no person can occupy it otherwise than under an order of allotment or release passed under section 16. Section 15 imposes an obligation on every landlord to give notice of the vacancy to the District Magistrate whenever a building falls vacant.

Section 16 which deals with allotment and release of vacant buildings -.., provides by sub-section (1 )(a) that the District Magistrate may by order require the landlord to let any vacant building to any person specified in the order, to be called an allotment order. Section 16( 1) (h) empowers the District Magistrate to pass a release order directing that the whole or any part of such building may be released in favour of the landlord. By reason of section 16 (2), no release order can be passed under section 16 ( 1 )(b) unless the District Magistrate is satisfied that the building is required by the landlord -bona fide for occupation by himself or any member of his family or for any of the purposes specified in the sub-section. By section 16(5)(a), where the!andlord or any other person claiming to be a lawful occupant of the building comprised in the order of allotment or release satisfies the District Magistrate that such an order was not made in accordance with clause (a) or clause

(b) of section 16 (1), the District Magistrate may review the order. If / the District Magistrate on review sets aside or modifies the order of allotment or release, he is empowered under section 16(5)(b) to put the applicant, if already evicted, back into possession. Section 18 which provides for an appeal against an order of allotment or release says that any person aggrieved by an order of allotment or release passed under section 16 may prefer an appeal to the District Jndge. If the order of allotment or release is varied or rescinded by the-District Jncl 00 the District Magistrate under section 18(2) has the power to place the

parties back in the position which they would have occupied but for such order.

A study of these provisions shows the untenability of the appellant's contention as reoards the illegality of the order passed by respondent.

1. Chapter III otthe U .P. Rent Act casts an obligation both on the landlord and the tenant to intimate a vacancy to the District Magistrate. A vacancy is to be deemed to have occurred in the circnmstances specified in section 12. On the intimation of a vacancy or otherwise, the District Magistrate may under section 16 pass either an order a11otting the premises to a person specified by him or he can release the vacancy in favour of the landlord on being satisfied that he requires the premises for the purposes mentioned in section 16(2). The Act does not provide for a hearing at the stage when the District Magistrate passes an order of allotment or release. But any person aggrieved by such an order is entitled under section 16(5)(a) to ask the District Magistrate to review his order. II, in the meanwhile, any person in possession of the premises has been evicted the District Magistrate bas the power, iJ; be sets aside or modifies the order of allotment or release, to pnt the applicant back in possession. Fnrther, an order passed under section. 16 is appealable under section 18 which means that a person aggrieved by an order of allotment or release bas at aleast a two-fold opportunity to challenge an order affecting his interest.

The order dated May 20, 1974 passed by respondent 1 to. the effect "Let tbe vacancy be notified" is not by itself and without more calculated to injure or effect the appellant's interest. As a sequel to that order and after the High Court rejected the appellants' writ petition, respondent 1 served a notice on the appellants stating that the proceeding would be taken up for hearing on May 19, 1975. The release order was eventually passed on May 21 after hearing the appellants and they have filed an appeal against that order before the.'District Judge who is entitled to examine the legality and propriety of the order.

Thus, in the first place, it was unnecessary for respondent 1 to hea~ F the appellants before notifying the vacancy because under the scheme of the U.P. Rent Act, an order notifying the vacancy does no injury and causes no prejudice to the interests of any party. A notification of the vacancy is a step-in-aid of an order of allotment or release and it is only when such an order of allotment or release is passed that' the landlord or the tenant, as the case may be,. can have a grievance. Orders

of allotment and release arc, in the first instance, reviewable by the G District Magistrate himself and an order passed by the District Magistrate under section 16 is appealable under section 18.

A reference to the Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Rules, 1972 would be relevant and useful, in this behalf. Rnle 8(1) called "Ascertainment of Vacancy" enjoins the District Magistrate, before making an order of allotment or release H in respect of any building which is alleged to be vacant, to obtain a rep1:rt fron_i the Rnt Control In.spctor. Under rnle 8(2), the Inspector 1s reqmred to mspect the bmldmg as far as possible in the presence

of the parties and submit the report to the District Magistrate after eliciting the necessary facts.

Rule 8(2) requires that the conclusion contained in the Inspector's report must be posted on the Notice Board of the District Magistrate's office for the information of the general public.

This is what is JW'ant by "notifying the vacancy" and this. explains the order passed by the District Magistrate : "Let the vacancy be notified".

The existence of the vacancy, by being displayed on the District Magistrate's notice board, is notified to the general public in order that persons interested in the allotment of the vacancy may apply to the District Magistrate in that behalf. Under Rule 8(2), an order of aHotment can be passed not before the expiration of 3 days from the date on which the vacancy is notified and if in the meantime any objection is received, not before the disposal of such objection. Under rule 8 ( 3), an objection to the notification of the vacancy has to be decided after considering any evrdence that the objector or any other person may adduce.

The Act thus contemplates successive opportunities being afforded i to persons whose interests are likely to be affected by any order passed by !he District Magistrate.

Putting it briefly, an order notifying the vacancy can be objected to and the objection has to be decided after considering the evidence that the objector or any other person concerned may adduce. Secondly, if an order of allotment or release is passed under section 16, following upon the notification of a vacancy, the aggrieved person can fil~ a review application. Thirdly, as against aa order passed under section 16, there is a right of appeal under section 18.

The High Court was therefore right in expressing the view that the

appeants' writ petition was prmature. The writ petition was premature 111 !11.e sense at the or?er 1mpugn7d thereby did not affect the ap- "' pellants 111terest 111 the particular premises. The appellants have since filed an appl aganst the orer of release to the District Judge and that appeal rs pendmg. That rs the proper forum for adjudicating on the rival claims of the appellants on one hand and respondents 2 and 3 on the other.

The appeal is accordingly dismissed with costs.

S.R.

Appeal dismissed. ..

TIRLOK SINGH & CO

DISTRICT MAGISTRATE, LUCKNOW & ORS

V. R. KRISHNA IYER, JJ.

S. 16

section 12

section 16

Rent Rules 1972

s 16(1)(b)

May 20th 1974

Allahabad High Court

s 16(5)(a)

May 30th 1975

s 16(5)(a.)

s 16

s 18

CIVIL APPELLATE JURISDICTION

Allahabad High Court (Lucknow Bench)

S. C. Malik

S. K. Mehta

K. R. Nagaraja

P. N. Puri

S. T. Desai

M. L. Verma

CHANORACHUD

section 16(1)(b)

April 9, 1974

May 23, 1974

High Court of Allahabad

August 7, 1974

section 16

May 30., 1.975

May 20, 1974

section 12(1)

section 13

section 16

Section 15

Section 16

Section 16( 1)

section 16

section 16

section 16(5)(a)

section 16

section 16(5)(b)

Section 18

section 16

section 18(2)

section 12

section 16

section 16(2)

section 16(5)(a)

section 18

May 19, 1975

section 16

section 18

section 16

section 16

section 18


YOGIRAJ CHARITY TRUST

COMMISSIONER OF INCOME-TAX, NEW DELHI

March 30, 1976

[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]

Exen1ption from /ncome-tax-Rejigious and charitable purposes .. -I ndian l11co1ne-tax Act, 1922-Section 4(3)(i)-Intent-Test for treaing a Trust incuJnt' as of a charitable 1wture and for entitlenient to exe111rti(!n u11Jer s. 4(3)

(i) ibid.

Charitable purposes under s. 4(3) of the Income Act includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) and (ii) of s. 4(3) applies and shall operate to exempt from the provisions of the Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure for the benefit of the public.

,'\ii the six income-tax references made by the Income-tax Appellate_ Tribunal, Delhi Bench under s. 66(1) of the Indian Income-tax Act, 1922 as to ''\vbether on the facts and in the circumstances of the case the income of the

tirust whic.h was spent on the religious and charitable purp6ses within the taxable territories was exempt under s. 4(3) (i) of the Indian Income Tax Act.

1922" \Vere answered in the negative and in favour of Revenue, by the Division Bench of the Delhi High Court holding "that the property of the trust cannot be held to be v.·holly for religious or charitable purposes".

The terms of the trust deeds in all the cases are similar and the pattern of financial dealing of the various trusts is also the same as could be seen from the objects of the trusts particularly clauses (5) (a), which are, inter alia, as follows :-

(i) To open, found, construct, establish takes over, equip, promote, conduct, maintain, support, subsidise, grant aids and make dona- E tions to schools, colleges, Pathshalas, boarding houses. reading clubs, libraries, art, music or literary societies and other institution~, educational or otherwise, w; sociations, printing presses, journals, newspapers, periodicals, and other religious, commercial, industrial, legal, medical, engineering scientific or other knowledge or training.

(ii) To give stipends. scholarships, travelling expenses allowances and monetary aids to students and scholars in India and abroad engaged F in any of the pursuits referred to in sub-clause {i).

(iii) To found, construct, maintain, support, assit_; t or grant aids or subscriµions to temples, prayer or congregational halls or other buildings for cultural, social or religious discourses.

(iv) To open, found conduct, maintain, or contribute to the opening and maintaining of such institutions where work at living wageS can be provided to poor and deserving people and also be conducive - to the development of industries and benefit of the poor.

(v) To open, found, establish, equip, finance assist, maintain or contribute to religious commercial technical industrial or commercial concerns, institutions, associations or bodies imparting any type of traiiaing or providing employment to persons.

(vi) To give donations. subscriptions or contributions to anv other Charitable Trust in Jaipur State or outside. -

Clauses 11 and 16 of the deed give an uncontrolled discretion to the trustees to spend the whole of the trust fund on any of the non-charitable obiects of the trust. The non-charitable obJects authorise the opening and maintaining of commercial institutions where work at Jiving waes can be orovided to the

A poor and also to contribute to commercial, technical, industfial or commercial concerns, institutions associations or bodies imparting any type of training .or providing ep1ployment to persons.

Dismissing the appeals by Special Leave, the Court held :-

( 1) In order to claim the benefit of exemption under s. 4(3)(i) of the Act the property must be held under trust or other legal obligation wholly for religious or charitable purposes.

The only relaxation is that all the primary objects of the trust must be of religious and charitable nature and the existence of any ancillary or secondary object which is not of a religious or charitable nature but which is intended to subserve the religious and charitable objects may not prevent the grant of an exemption.

This is because such an ancillary or secondary obje1:t even though not of a religious or charitable nature is intended to effectuate the main and primary objects of the trust.

A clear distinction n1ust be draw'n between the object ot' a trust and the pOWers conferred upon the trustees as incidental to the carrying out of the object.

Mere application of income to charity 'on the other hand will not avail to secure ex.emption if under the terms of the will or deed the income is applicable in the first instance to non-charitable objects and only the residue will go to charity. [953-A-B, C, DJ

Conunissioner of Tnconie Tax v.

Andhra Chamber of Commerce ( 1965) --.+ 55 I. T.R. 722 applied.

Sole Trustee Loka Sl1ikshana Trust v. Conunissioner of Income-tax, Mysore [19761 1 SCR 461; All India Spinner's Association v. Commissioner of lncometax (1944) 12 l.T.R. 482; C.l.T,

v. Krishna Warriar

[1964] 8 SCR 36; Conunissioner of lnco111e Tax v. Bengal Home Industries Association 48 I.T.R. 181; Hyderabad Stock Exchange Ltd. v. C.I.T. 66 I.T.R. 195; and Commissioner of /ncouze Tax v. Radhaswami Satsang Sabha 25 I.T.R. 472. discucd and distinguished.

(ii) The test is that if one of the obiects of the trust deed is not of a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption under s. 4(3) (i) of the Act is not available to the assessee.

[955DJ

Laksluni Narain Nath Trust v. Commissioner of Income Tax (1969) 73 I.T.R. 402, followed.

(iii) Where there are several objects of trusts some of which are charitable and some non-charitable and the trustees in their discretion are to apply the income to any of the objects, the \Vhole trust fails and no part of the income

is exe1npt from the tax.

Where the objects are distributive. each and every one of the objects nlust be charitable in order that the trust might be upheld as a valid charity. Tf no definite part of the property or its income is allocated to charitable purposes and it would be open to the trustees to apply the whole incon1e to any of the non-charitable objects no exemption can be claimed [952F-H]

Ea.\f l11dta Industries (Madras) Pvt. Ltd. v. Conunissioner of Income Tax

(1967) 65 T.T.R. 611 and Moha1nn1ed Ibrahin1 Riza v. C.l.T. 57 I.A .. 260 applied.

(iv) In the instant case the various industrial and commercial concerns were , not st~Jrted by Ram Krishna Da1mia in furtherance of the objects of truts. _.,, The concerns \Vere started for the purpose of earning profits which were to be distributed to the share holders who had invested share money in those concen1s.

The trust property could not be said to be wholly for religiouti or charitable purposes \1.'ithin the meaning of s. 4(3) (i) of the Act. f954G-H,

955-CJ

Argun1ents for tlze avvellant:

(1) The Trus'~ is entitled! to claim exemption under s. _4(3)(i) of the Act because the t.rust 'is for religious and charitable purposes only.

(2) .!\.s 10 clauses which confer power on the trustees to establish any A business, undertaking or industry the inco-!11~ derived fro!? uch commercial concern is to be spent \Vholly for the reltg1ous and chantab1e purposes and

,,_ "' therefore exemption is permissible under s. 4(3)(i) oi the Act.

(3) The dominant purpose of the founder of the trust as expressed in the forefront of the Deed is religious or charitable and even if money be spent on non-charitable purposes it should not be held that the trust is meant for non-charitable purposes and the founder has expressly provided in Clause

30 of the Trust deed that the deed should not become invalid for the reason that. some object might be considered unla\vful.

(4) lf any income fron1 the tn1st is utilised <ind <tpplied \\'holly in carrying out the primary purposes of the trust. the Tn1st is entitled to claim exemption under proviso (b) to section 4(3) (i) of the Act and there was no bar on the trust to carry on business under the Act provided the profits of business were utilised only for charitable purposes.

A rg111ne11ts {nr thl' respondents:

(1) The Trust \Vas not entitled to claim exemption under s. 4(3)(i) of the Indian Income-tax Act, 1922 for the simple reason that some of the object of tthe Trust gave a discretion to the Trustees to apply the funds of the Trust to purporses which could not be regarded charitable in the eye of la\v,

<2) If out of several objects of the Trllst some of them were found to be

non-charitable, the '\vhole trust would fail and no part of its income \vould be D exempt from tax.

( 3) It was not a genuine charitable trust as claimed by the assessee but its creation and existence were a camouflage and \\'ere meant only as a device for the benefit of the settlor Shri Ram Krishna Dalrnia and the industrial and commercial concerns controJled by him.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 937 to 966 of 1971

Bishamber Lal, D. N. Banerjee, Pramod Dayal and M. Iyengar, for the appellant.

• Hardyal Hardy (In CA 937 /71), S. P. Nayar (In CAs. 938-966) for the respondent.

The Judgment of the Court was delivered by

RAY. CJ.

These appeals by special leave are from the judgment dated 26 May, 1970 of the High Court of Delhi.

The question referred to the High Court under section 66 (1) of the Income Tax Act, 1922 referred to as the Act was as follows :

"Whether on the facts and in the circumstances of the case the income of the trust which was spent on the religious and chantable purposes within the taxable territories was exempt under section 4 (3) (i) of the Indian Income Tax Act, 1922".

The main judgment was delivered in Income Tax Reference No. 40 of 1965.

The High Court answered the question in the negative.

The trust in Income Tax Reference No. 40 of 1965 was taken as typical of all the cases.

The deed of trust dated 12 April, 1948

A was made by Ramkrishna Dalmia.

The trust was called "Jaipur Charitable Trust". In Jaipur Charitable Trust Rs. 10,000 was given on trust on the terms and conditions set out in the deed.

'°' I

The objects of the trust in clause 5 (a) are, inter alia, as follows :

(i) To open, found, construct, establish, take over, equip, promote, conduct, maintain, support, subsidise, grant aids and make donations to schools, colleges, Pathshalas, boarding houses, reading clubs, libraries, art, music or literary societies and other institutions, educational or otherwise, associations, printing presses, journals, newspapers, periodicals, and other publications for imparting or developing religious, commercial, industrial, legal" medical, engineering scientific or other knowledge or training.

(ii) To give stipends, scholarships, travelling expenses allowances and monetary aids to students and scholars in India and abroad, engaged in any of the pursuits referred to in sub-clause (i).

(iii) To found, construct, maintain, support, assist or grant aids or subscriptions to temples, prayer or congregational halls or other buildings for cultural, social or religious discourses.

(iv) To open, found conduct, maintain, or contribute to the opening and maintaining of such institutions where work at living wages can be provided to poor and deserving; people and also be conducive to the development of industries and benefit of the poor. ( v) To open, found, establish, equip, finance, assist, maintaia or contribute to religious, commercial technical, industrial, or comn1ercial concerns, institutions, associations or bodies imparting any type of training or providing employment to persons.

(vi) To give donations, subscriptions or contributions to any other Charitable Trust in Jaipur State or outside.

There are other objects to help widows, orphans, lunatics, indigent persons and to give relier to the poor and distressed, to build, equip, tak.e over, conduct, maintain and grant aids to dispensaries, maternity homes, hospitals, lunatic asylums, to construct. erect and maintain bridges, ghats, to give relief by subscription or otherwise during famines, flood, earthquake, pestilence, to help or maintain institutions for .the cultural,, social or economic advancement of any country or countries.

For the purpose of carrying out the trust the trustees are empowered in clause 5 (b), inter alia, (a) to purchase oc otherwise acquire any H property, rights leases, concession; (b) to purchase or acquire, start establish, equip or close any business undertaking or industry; ( c) purchase, acquire or undertake the whole or any part of property and liabilities on any person, firm or company.

~ (

The property of the Trust is vested in the trustees. Clause (9) A of the Trust Deed provides that the Trustees shall carry out the aforesaid objec'.s from out of the net income of the Trust left after meeting the expenses of management and all charges and outgoings so far as such income shall permit, and shall not utllize the income or any portion thereof for any other objects or purpose.

Section 4(3) (il of the Act is as follows :- g

"Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving then1;

(i) Subject to the provisions of clause (c) of sub-section (!) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto :

Provided that such income shall be included in the total income.

(a) xx xx xx

(b) in the case of income derived from business, carried on behalf of a religious or charitable institution, unless the

income is appljed wholly for the purpose of the institutions E and either- ( i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution, or

(ii) the work in connection with the business is mainly carried on by beneficiaries of the institution.

(iii) any income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purposes."

Charitable purpose under section 4(3) of the Act includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) of section 4(3) applies and shall operate to exempt from the provisions of the Act that part of the income from property held under tmst or other legal obligation for private religious purposes which does not ensure for the benefit of the public.

The terms of the Trust Deeds in all the cases are similar.

The pattern of financial dealings of the various Trusts is also the same.

The appellant contends that Trust is entitled to claim exemption H under section 4(3) (i) of the Act because the trust is for religious and charitable purposes only.

As to clauses which confer power on trustees to establish any business, undertaking or industry it is said by

the appellant that the income derived from such commercial concern is to be spent wholly for the religious and charitable purposes and therefore exemption is permissible.

The appellant contends that the dominant purpose of the founder of the trust as expressed in the forefront of the Deed is religious or charitable and even if money be spent on non-charitable purposes it should not be held that the trust is meant for non-charitable purpose. The appellant also relies on clause

30 of the trust deed where it is said that the deed should not become invalid for the reason that some object might be considered unlawful.

The Revenue denies the claim for exemption on the ground that some objects are non-charitable and the trustees are given an unfettered discretion with regard to the utilisation of the income.

Some of the objects of the Trust according to the Revenue give absolute discretion to the Trustees to apply the funds of the Trust for purposes which cannot be regarded charitable in the eye of law.

The R.evenue contends that if out of several objects of the Trust some are found to be noncharitable, the whole trust will fail.

The Revenue also contends that it is uot a genuine charitable trust bnt its creation and existence are a camoullage and are meant only as a device for the benefit of the settlor and the industrial and commercial concerns controlled by him.

Clauses 11 and 16 of the deed give an uncontrolled discretion to the trustees to spend the whole of the trust fund on any of the noncharitable objects of the trust.

The non-charitable objects authorise the opening and maintaining of commercial institutions where work at living wages can be provided to the poor and also to contribute to co1nmercia1, tchnical, industrial or commercial concerns, institutions, associations or bodies imparting any type of training or providing employment to persons. The Revenue contends that these clause~ are clearly non-charitable.

Each clause is independent and distinct, According to the Revenue it is neither ancillary nor secondary to the primary dominant purpose of the trust nor can it be said that these clauses subservc the main object of the trust. Engagement in commercial institutions giving employment on wages cannot be said to be F charitable object. Some of the objects of the trust are non-charitable.

The trustees have been authorised to utilize the income of the trust for any purpose mentioned in the Trusi Deed.

The question is whether exemption can be granted where some objects are charitable and some non-charitable.

Where there are several objects of a trust, some of which are charitable and some noncharitable, and the trustees in their discretion are to apply the income to any of the objects, the whole trust fails and no part of the income is exempt from tax.

Where the objects are distributive, each and every one of the objects must be charitable in order that the. trust might be upheld as a valid charity.

If no definite part of the property or of its income is allocated to charitable purposes and it would be open to the trustees to apply the whole income to any of the noncharitable objects no exemption can be claimed. (See East India Industries (Madras) Pvt Ltd. v. Commissioner of Income tax(') and Mohammad Ibrahim Riza v. C.l.T.(')

(1) (1967) 65 1.T.R. 611.

(2) 57 I.A. 260.

. ,,

,,.

ln order to claim the benefit of the exemption under section 4(3) A

(i) of the Act the property must be held under trust or other legal obligation wholly for religious or charitable purposes. The only relaxation which may arise in some cases is that all the primary objects of the trust must be of a religious and charitable nature and the existence of any ancillary or secondary object which is not ot a religious or charitable nature but which is intended to subserve the religious and charitable objects may not prevent the grant of an exemption.

This is B because such an ancillary or secondary object even though not of a re!iQious or charitable nature is intended to effectuate the main and primary objects of the trust.

If the primary or dominant purpose of a trust is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent c the trust from being a valid charity. A clear distinction must be drawn between the object of a trust and the powers conferred upon the trustees as incidental to the carrying out of the object. If the only object of a turst is the construction and maintenance of a swimming bath which is a purpose of general public utility, the fact that the trustees are given the power to supply or sell refreshments to persons. who resort to the bath would not make the trust any of the less charitable.

D Mere application of income to charity on the other hand will not avail to secure exemption if under the terms of the will or deed the income is applicable in the first instance to non-charitable objects and only the residue will go to charity. (See Commissioner of Income Tax v.

A ndhra Chamber of Commerce (1).

The appellant contended that if any income from the Trust is, uti\i- E sed and applied wholly in carrying out the primary purposes of the Trust, the Trust is entitled to claim exemption under proviso ( b) '.o section 4(3) (i) of the Act. The appellant relied on the recent decision of this Court in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore(').

The Loka Shikshana Trust was engaged in the business of printing and publication of newspaper and journals and the further fact that the activity yielded profit and there F were no restrictions on the trust earning profits in the course of its business went to show that the purpose of the trust did not satisfy the requirement that it was one not involving the carrying on of any activity for profit. This Court relied on the decision in All India Spinners' Association v. Commissioner of Income Tax(') namely, that the charitable purposes exclude objects of private gain.

The appellant contended that there was no bar on the trust to carry on business under the Act provided the profits of business were utilized only for charitable purpose. The appellant relied on the decision of this Court in C.l.T. v. Krishna Warriar(') In Krishna Warriar's case the trustees,, were directed to apply 60 per cent of the income of the business vested in the trustees to charitable purposes and 40 per cent for the benefit of the family.

The question was whether 60 per cent of the

(!) (1965) 55 I.T.R. 722.

(3) (1944) 12 l.T.R. 482.

(2) [1976] I SCR 461.

(4) [1964] 8 S.C.R. 36.

income was liable to tax under proviso (b) to section 4(3) (i) of the Act on the ground that the entire income was not applied for charitable purposes. The question that arose in that case dealt with the meaning of the expression "part" as used in section 4(3) (i) of the Act that "in the case of profit so held in part oly _for such purposes the income applied or finally set apart for application thereto shall not be included in the total income of the person receiving'.

Krishna Warriar's

(supra) case does not deal with the effect of a deed which has charitable as well as non-charitable objects and the trustees have been given the power to apply the whole of the trust fund for non-charitable objects excluding charitable object.s.

The decision in C.l.T. v. Bengal Home Industries Association(') Hyderabad Stock Exchange Ltd. v. C.l.T.(') C.l.T. v. Radhaswmni

Satsang Sabha(') on which the appellant relied are all applications of the ruling in All India Spinners' Association (supra) case that what has to be found out is whether the object clause has any non-charitable object. In the Bengal Home Industries (supra) case, the object was to promote and develop home industries, arts and crafts. The income of the Association was to be applied solely towards the promotion of and carrying out of its objects. No portion of the income could be paid or transferred directly or indirectly by way of dividends to the members.

In the case of winding up the surplus could not be distributed to the members but were to be transferred to the institution.

In the Hyderabad Stock Exchange (supra) case, the aims and objects were not only to further the interests of brokars and dealers but also to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to discharge and suppress mal-practices to settle disputes and decide all question of usage, custom or courtesy in the conduct of trade or business. The objects were found beneficial to a section of the public and of general public utility. The profit were not to be distributed to the members but were to be utilized for the promotion of the objects of the Exchange.

Therefore, the object was charitable and the income was applied wholly for charitable purposes.

In Radl1aswami Satsang Sabha (supra), case several industrial and commercial concerns were started for the benefit of the Satsanghis.

Those were not run for individual profits nor were the profits distributed among the members.

The concerns were started in furtherance of its objects of religious and charitable nature.

In the present case, the Income Tax Authorities found that the various industrial and commercial concerns were not started by Ram Krishna Dahnia in furtherance of the objects of the_ trusts. The concerns were started for the purpose of earning profits which were to be distributed to the share-holders who had invested share money in those concerns. ---- ----

(I) 48 J.T.R. 181.

(2) 661.T.R. 195.

(3) 25 l.T.R. 472.

This Court in East India Industries (Madras) Privale Limited v.

C.l.T.(') found that one of the objeots of the trust was not for charitable or religious purposes.

The object was to manufacture. buy, sell and distribute a pharmaceutical medicinal, chemical and other preparations.

The other objects were charitable in nature. The Trust Deed in East India Industries (Madras) Pvt. Limited (supra) case conferred power on the trustees to apply the whole or any part of the trust property or fund for all or any other purposes of the trust.

This Court found that there was no special trust and no particular item of property had been bumdened with the performance of any specific object of the trust.

It was open to the trustees to utilize the income for any one of the objects of the trust to the exclusion of all other objects.

It would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations.

This Court held that the trust property could not be said to be wholly for religious or charitable purposes within the meaning of section 4(3) (i) of the Act.

The present appeals are all of the type of East lndia Industries (Madras) Private Limited (supra) case and fall within the ruling in that case.

The test is that if one of the objects of the trust deed is not of D a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption under section 4(3)

(i) of the Act is not available to the assessee. (See Lakshmi Narain Nath Trust v. Commissioner of Income Tax(').

For these reasons the appeals are dismissed.

In view of the fact E that the High Court directed that the parties will bear their own costs, the same order is made as to costs.

S.R.

(l) {1967) 65!. T.R. 611.

(2) (1969) 73 I.T.R. 402.

Appeals dismissed.

YOGIRAJ CHARITY TRUST

COMMISSIONER OF INCOME-TAX, NEW DELHI

March 30, 1976

A. N. RAY, C.J.

M. H. BEG

JASWANT SINGH, JJ.

Section 4(3)(i)

s. 4(3)

s. 4(3)

s. 4(3)

s. 66(1)

Indian Income-tax Act, 1922

s. 4(3)

India

Jaipur State

s. 4(3)(i)

[1964] 8 SCR 36

s. 4(3)

Ram Krishna Da1mia

s. 4(3)

s 10

s. 4(3)(i)

Clause

30

section 4(3)

s. 4(3)(i)

Indian Income-tax Act, 1922

Ram Krishna Dalrnia

Bishamber Lal

D. N. Banerjee

Pramod Dayal

M. Iyengar

Hardyal Hardy

S. P. Nayar

26 May, 1970

High Court of Delhi

section 66

Income Tax Act, 1922

section 4

Indian Income Tax Act, 1922

12 April, 1948

Ramkrishna Dalmia

Jaipur Charitable Trust

clause 5

clause 5

Section 4(3)

section 16

section 4(3)

section 4(3)

section 4(3)

clause

30

section 4(3)

section 4(3)

Loka Shikshana Trust

Krishna Warriar

[1964] 8 S.C.R. 36

section 4(3)

section 4(3)

All India Spinners' Association

Bengal Home Industries

Hyderabad Stock Exchange

Radl1aswami Satsang Sabha

Satsanghis

Ram Krishna Dahnia

section 4(3)

section 4(3)


A INCOME TAX OFFICER, l WARD, DIST. VI, CALC.UTTA & ORS.

LAKHMANI MEW AL DAS

March 30, 1976

[H. R. KHAN"fA AND P. K. GOSWAMI, JJ.]

/nconie Tax Act, 1961--, S. 148-Scope of-Words & Phrases-"Reason to believe" meaning of 'ratio11al nexus'-What postulates.

Jn March 1967, a[ter obtaining the satisfaction of the Commissioner !he appel1ant issued a notice under s. 148 of the lnoe Tax Act. 1961 stating that he had reason to believe that the respondents income chargeable to t~ for the assessment year 1958-59 had escaped assessment. The respondent rephed that the I.T.0. had no competence or jurisdiction to reopen the assessment under s. 147 of the Act on a mere change of opinion.

Since there \vas no reply from the appellant, the respondent moved the High Cou!t for . a . wit.

The High Court held that the conditions precedent for the exercISe of 1und1c -1 tion by the Income Tax Officer were not fulfilled because the report subm1ted by the Income Tax Officer to the Commissioner under s. 147(a) was defective.

On appeal to this Court it was contended tha' the High c_; ourt was not right in holding that the Income Tax Officer"s report was defective.

Dismissing the appeal,

HELD : The High Court was right in holding that the material before the Income Tax Officer could not have led to the formation of the belief that the income of the assessee had escaped assessment because of his failure or omission to disclose fully and truly all material facts. [965Hl

1. (a) The two conditions required to be satisfied before the Income Tax Officer issued a notice under s. 148 of the Income Tax Act are that he must have reason to believe (i) that the income chargeable to tax bad escaped assessment and (ii) that such income had escaped assessment by reason of the omission or failure on the part of assessee, to disclose fully and truly material facts necessary for assessment for that year. Both these conditions must coexist in order to confer jurisdiction on the Income Tax Officer.

Further the Income Tax Officer should record his reasons before initiating proceedings under s. 148(2); before issuing the notice after the expiry of four years from the end of the relevant assessment year, the Commissioner should be satisfied on the reasons recorded by the Income Tax Officer that it was a fit case for the issue of such notice. [962C-Dl

(b) The duty cast upon the assessee does not extend beyond making a true and full disclosure of the primary facts. It is then for the Income Tax Officer to draw the correct inference from the primary facts.

Where his inference s'ubsequently appears to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment.

[962F-G] ·

( c) The grounds or reasons leading to the formation of the belief under s. 147(a) must have a material bearing on the question of escaPement of income.

Once there exist reasonable grounds for the Income Tax Officer to form the above belief. that would be sufficient to clothe him with jurisdiction to issue notice. While the sufficiency of grounds which induce the Income Tax Officer to act is not justiciable, it is open to the assessee to contend that the Income Tax Officer did not hold the belief that there was such non-

isclos1;1re. _The expression .. reason to believe" does not mean a purely subjective satisfaction on the part of the Income-Tax Officer.

It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or relevant bearing on the formation of the belief arid are not extraneous or irrelevant for the purpose of the sectrion.

[962H] _

Chlrugamal Rajpal v. S. P. Chaliha 79 I.T.R. 603, Calcutta Discount Co. Lt~.

v. Income-Tax Officer, 41 I.T.R. 191 and S. Narayanappa & Ors. v. Commissioner of Income Tax 63 I.T.R. 219 followed.

~ ,,, In the instant case the grounds given by the Income Tax Officer for reopening the assessment were (i) that the three persons whose names were mentioned in the list of creditors, were known name lenders and (ii) that another person shown as a creditor of the assessee had since confessed that he was doing only name lending.

The first ground mentioned by the Income Tax Officer could

not have led to the formation of the belief that the income of the respondent B had escaped assessment for that year because of his failure or omission to disclose fully and truly all material facts. The High Court was justified in excluding that ground from consideration. [963D-E]

As regards the second ground there is nothing to show that the confession of another person related to a Joan to the assessee and not to someone else.

There is no indication a.;; to when the confession \Vas made and whether it related to the assessment year sought to be .re-opened. To infer from that C confession that it related to the period of assessment and that it pertained to the loan shown to have been advanced to the assessee would be far-fetched. [964G}

2(a). Rational connection postulates that there rr1ust be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there had been escapement of income of the assessee from assessment in the particular year. It is not anv and every

material, -howsoever vague and indefinite or distant, remote and far-fetched whic.b \VOuld warrant the formation of the belief relating to escapement of the D income of the assessee from assessment. The fact that the words "definite information" in s. 34 of 1922 Act before its amendment in 1948 do not find a place in s. 147 would not lead to the conclusion that action could now be taken for reopening assessment even if the information was wholly vague, indef!ni1:e, far-fetched and remote.

[965B-DJ

(b) The powers of the Income Tax Officer to reopen assessn1ent. though wide, are not plenary. The words are "reason to believe". and not "reason to suspect". The provisions of the Act depart from the .normal rule that there E should be finality about orders made in judicial and quasi-judicial proceedings.

It is, therefore, essential that before such action is taken the requirement of the law should be satisfied.

[965E-F]

In the instant case the live link or close nexus bet.ween the material before the Income Tax Officer and the belief which he was to form regarding the

esca_pe1nent of the income was missing or at any rate the link was too tenuous to provide a legally sound basis for reopening the assessment. [GJ

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2526 of 1972.

Appeal from the Judgment and Order dated the 13th January, 1972 of the Calcutta High Court in Matter No. 326 of 1967.

G. C. Sharma and S. P. Nayar, for the Appellant.

D. Pal, B. Sen, (Mrs.) Leila Seth, P. K. Pal, S. R. Agarwala and G Parveen Kumar for the Respondent .

The Judgment of the Court was delivered by

KHANNA, J.

This appeal ou certificate is against the Full Bench Judgment of the Calcutta High Court whereby on petition under article 226 of the Constitution of India filed by the respondent that court by majority quashed notice under section 148 of the Income-tax Act 1961 (hereinafter referred to as the Act) issued by appeallant No. 2 (fucometax Officer E Ward, Hundi Circle, Calcutta) (hereinafter referred to

11-725 SC!/76

as the appellant) for the purpose of reopening assessment of the income of the respondent for the assessment year 1958-59.

The respondent was assessed for the assessment year 1958-59 ·"' • under section 23(3) of the Indian Income-tax Act, 1922 on June 14,

1960. His total income was assessed to be Rs. 37,872. While making the assessment the Income-tax Officer allowed deduction of a sum of Rs. 15,991 by way of expenses claimed by the respondent.

The expenses included Rs. 10,494/4 As/3 Pies by way of interest. According to the respondent, he produced through his authorised representative all books of accounts, bank statements and other necessary documents in connection with the return. On March 14, 1967 the respondent received notice dated March 8, 1967 issued by the . appellant under section 148 of the Act stating that the appellant had reason to believe that the respondent's income which was chargeable to tax for the assessment year 1958-59 had escaped assessment within the meaning of section 14 7_ of the Act and that the notice was being issued after obtaining the necessary satisfaction of the Commissioner of Income- -., tax. The respondent was called upon to submit within 30 days from the date of the service of the notice a return in the prescribed form of his income for the assessment year 1958-59.

On May 2,. 1967 the respondent through his lawyer stated that there was no material on which the appellant had reason to believe that the respondent's income had escaped assessment and, therefore, the condition precedent for the assumption of jurisdiction by the appellant had not been satisfied. The appellant was said to have no competence or jurisdiction to re-open the assessment under section 147 of the Act on a mere change of opinion.

The appellant was also called upon to furnish all the materials on which he had reason to believe that income had escaped assessment. As, according to the respondent, there was no satisfactory response from the appellant. he filed petition under article 226 of the :.._ Constitution for quashing the impugned notice.

It was denied in the affidavit on behalf of the appellant that all materials relevant and necessary for the assessment of the respondent's income for the assessment year 1958-59 had been produced before the Income-tax Officer at the time of the original assessment. It was further stated :

"Subsequent to the assessment for the assessment year 1958-59, it was discovered, inter alia, that some of the loans shown to have been taken and interests alleged to have been paid thereon by the petitioner during the relevant assessment G year were not genuine .. The Income-tax Officer had reason to believe and bona fide believed that the said alleged loans and the interest alleged to have been paid thereon are .,! not genuine. If necessary, I crave leave to produce before the hon'ble Judge hearing the application, the relevant records on the basis of which the said Income-tax Officer had reason to believe that the income of the petitioner escaped assessment H as aforesaid at the hearing of the application."

During the pendency of the proceedings the High Conrt directer. that a copy of the report made by the appellant to the Commissioner of

Income-tax for obtaining latter's sanction under section 147 be pro- A duced.

The report was accordingly produced, and the same reads as under:

"There are hundi loau credits in the name of Narayansingh Nandalal, D. K. Naraindas, Bhagwandas Srichand, etc., who are known name-lenders, and also hundi loan credit in the name, Mohansingh Kanayalal, who has since confessed he was doing only name-lending. In the original assessment these credits were not investigated in detail. As the information regarding the bogus nature of these credits is since known, action under section 147 (a) is called for to reopen the assessment and assess these credits as th~ undisclosed income of the assessee. The assessee is still claiming that the credits are genuine in the assessment proceedings for 1962-

63. Commissioner's sanction is solicited to reopen the assessment for 1958-59, under section 147(a)."

All the three Judges who constituted the Full Bench found that the

assessee was not being charged with omission to disclose all facts : D he was charged for having made an un'.rue disclosure because the assessee had stated that he had received certain sums of money from certain persons as loans when, in fact, he had not received any sum at all from these persons. It was also stated by the assessee at the time of the original assessment that he had paid interest to certain persons when, in fact, he had not, if the information received later was true. The duty of the assessee, it was held, was not only to make a E full disclosure of all material facts, his duty was also to make a true disclosure of facts and not to mislead the assessing officer by disclosing certain things wmch did not represent facts. The High Court accordingly held that once an assessee infringes this rule, any subsequent discovery of fact by the assessing officer which would raise a resonable belief in his mind that the assessee had not made a true and correct disclosure of the facts and had thereby been responsible for F escapement of his income from assessment would attract section 147 of the Act. Two of the learned Judges, A. K. Mukherjea and S. K.

Mukherjea JJ., however, took the view that the conditions precedent for the exercise of jurisdiction by the Income-tax Officer under section 147 of the Income-tax Act were not fulfilled in the case as the report submitted by the Income-tax Officer to the Commissioner for sanction under section 147(a) was defective. The defects in the report, in the G opinion of the High Court, were the same as had been pointed out by this Court in the case of Chhugamal Rajpal v. S. P. Cltaliha.(') The Commissioner. while according permission for taking action under section 147, it was observed, acted mechanically because the Commissioner had not expressly stated that he was satisfied that this was a fit case for the issue of notice under section 148. As against the majority, Sabyasachi Mukherji J. held that notice under section 148 H of the Act was valid and did not suffer from any infirmity. It was

(1) 79 l.T.R. 603.

also observed that the Co=issioner of Income-tax had not acted improperly in giving sanction.

In the result, by majority the High Court quashed the notice issued by the appellant to the respondent.

In appeal before us Mr. Sharma on behalf of the appellants ha> assailed the judgment of the majority of the learned Judges in so far as they have held that the report submitted by the Income-tax Officer to the Commissfoner of Income-tax for sanction was defective. As against that, Dr. Pal on behalf of the assessee-respondent has canvassed for the correctness-of the view taken by the majority regarding the defective nature of the report. Dr. Pal has in his own turn assailed the finding of all the three learned Judges of the High Court in so far as they have held that the assessee was being charged with omission to disclose true facts. Contention has also been advanced by Dr. Pal that the material on the basis of which the Income-tax Officer initiated these proceedings for reopening the assessment did not have a rational connection with the formation of the belief that the assessee had not made a tru.e disclosure of the facts at the time of the original assessment.

Before dealing with the points of controversy, it would be useful to reproduce the relevant provisions of the Act.

Sections 14 7 and 148 which deal with income escaping assessment and issue of notice where income has escaped assessment read as under :·

"147. Income escaping assessment.-If-

(a) the Income-tax Officer has reason to believe that, by reason. of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year,. or

(b) notwithstanding that there has been no omisswn or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or ressess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereinafter in sections 148 to 153 referred to as the relevant assessment year).

Explanation 1.-For...!_tbe purposes of this section, the following shall also be deemed to be cases where income H chargeable to tax has escaped assessment, namely :-

(a) where income chargeable to tax has been under" assessed; or

(b) where such income has been assessed at too low a A 'fate; or

( c) where such income has been made the subject of excessive relief under this Act or under the Indian Incometax Act, 1922 (XI of 1922); or

( d) where excessive loss or depreciation allowance has been computed.

Explanation 2.-Production before the Income-tax Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to dis- 'Closure within the meruring of this section.

148. Issue of notice where income has escaped assessment.-

(1) Before making the assessment, reassessment or recomputation under section 147, the Income-tax Officer shall serve on the assessee a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 139; and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-sectidn.

( 2) The Income-tax Officer shall, before issuing any notice under this section, record his reason for doing so."

Sub-section ( 1) of section 149 prescribes the time limit for notice and E reads as under :

"(l) No notice under section 148 shall be issued,,

(a) in cases falling under clause (a) of section 14 7-

(i) for the relevant assessment year, if eight years have elapsed from the end of that year, unless the case falls under sub-clause (ii) ; F

(ii) for the relevant assessment year, where eight years, but not more than sixteen years, have elapsed from the end of that year, unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to ; rupees fity thous; ind or more for that year;

(b.) in cases falling under clause (b) of section 147, at any time after the expiry of four years from the end of the relevant assessment year." 'Section 151 pertains to the sanction for issue of notice and reads as under:

"151. Sanction for issue of notice.-(1) No notice shall be issuea under section 148 after the expiry of eight years from the end of the relevant assessment year, unless the Board is satisfied op. the reaSOl)S recorded by the Income-tax

{)fficer that it is a fit case for the issue of such notice.

(2) No notice shall be issued under section 148 after the expiry of four years from the end of the relevant assessment year, unless th.e Commissioner is satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice."

The provisions of sections 147 to 153 of the Act correspond to those of section 34 of the Indian Income-tax Act, 1922. There have been some points of departure from the old law, but it is not necessary for the purpose of the present case to refer to them.

It would appear from the perusal of the. provisions reproduced above that two conditions have to b6 satisfied before an Income-tax Officer acquires jurisdiction to issue notice nnder section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viZ., (1) the Incometax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that 'i

such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under section 139 for the assessment y'ar to the Income-tax Officer, or (bl to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessinent years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice.

We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Incometax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Incometax Officer will not necessarily amount to disclosure contemplated by law. . The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard .to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment.

The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omissio11..to disclose fully and trnly all material facts.

Once there exist reasonable grmfnds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The

. ,..

sufficiency of grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure.

The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income-tax Officer.

The reason must be held in good fai_th. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rationaLconnection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section.

To this limited extent, the action of the Income-tax Officer in &!arting proceedings in respect of income escaping assessment is open to challenge in a court of law [see observations of this Court in the cases of Calcutta Discount Co. Ltd. v. Income-tax Officer(') and S. Narayanappa & Ors. v. Commissioner of Incometax(2) while dealing with corresponding provisions of the Indian Income-tax Act, 1922].

Keeping the above principles in view, we may now turn our attention to the facts of the present case. Two grounds were mentioned in

the report made by the Income-tax Officer for reopening the assess- D men t of the assessee respondent with a view to show that his income had been under-assessed because of his failure to disclose fully and truly material facts necessary for the assessment.

One was that Mohansingh Kanayalal, who was shown to be one of the creditors of the asscssee, had since confessed that he was doing only name-lending.

The other ground was that Narayansingh Nandalal, D. K. Naraindas, Bhagwandas Srichand, etc., whose names too were mentioned in the E list of the creditors of ,\he assessee, were known name-lenders.

So far as the second ground is concerned, neither the majority of the Judges of the High Court nor the learned Judge who was in the minority relied upon that ground.

Regarding that ground, the learned Judge who was in the minority observed that no basis ha<i been indicated as to how it became known that those creditors wen:. known namelenders and when it was known. The majority while not relying upon F that ground placed reliance upon the case of Chhugamal Rajpal (supra). In that case the Income-tax Officer while submitting a report to the Commissioner of Income-tax for obtaining his sanction with a view to issue notice under section 148 of the Act stated :

"During the year the assessee bas shown to have taken Joans from various parties of Calcutta.

From D.I.'s Inv.

No. A/P/Misc. (5) D.I./63-64/5623 dated August 13, 1965, G forwarded to this office under C.I.T., Bihar and Orissa, Patna's letter No. Inv. (Inv.) 15/65-66/1953-2017 dated Patna September 24, 1965 it appears that these persons are name-lenders and the transactions are bogns. Hence, proper investigation regarding these loans is necessary. The names of some of the persons from whom money is alleged to have been ta'lcen on loan on hundis are : H

1. Seth Bhagwan Singh Sricharan

(l) 41 l.T.R. 191.

(2) 63 I. T. R. 219.

2. Lakha Singh Lal Singh

3. Radhakissen Sh yam Sunder

The amount of escapement iavolved amounts to Rs. 1,00,000."

In dealing with that report this Court observed :

"From the report submitted by the Income-tax Officer to the Commissioner, it is clear that he could not have had reasons to believe that by reason of the assessee's omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year, nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax has escaped assessment for that year. We are not satisfied that the Income-tax Officer had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147.

Therefore he could not have issued a notice under section 148".

Reference to the names 0£ Narayansingh Nandalal, D. K. Naraindas., Bhagwandas Srichand, etc., in the report of the Income-tax Officer to the Commissioner of Income-tax in the instant case does not stand on a better footing than the reference to the three names in the report made by the Income-tax Officer in the case of Chuugamal Rajpal.

We would, therefore, hold that the second ground mentioned by the Income-tax Officer, i.e., reference to the names of Narayansingh Nandalal, D. K. Naraindas, Bhagwandas Srichand, etc., could not have led to the formation of the belief that the income of the respondent assessee chargeable to tax had escaped assessment for that year because of the failure or omission of the assessee to disclose fully and truly all material facts.

Alt the three learned Judges of the High Court, in our opinion, were justified in excluding the second ground from consideration.

We may now deal with the first ground mentioned in the report of the Income-tax Officer to the Commissioner of Income-tax.

This gmund relates to Mohansingh Kanayalal, against whose name there was an entry about the payment of Rs. 7 4 Annas 3 as interest in the books of the assessee, having ma<; le a confession that he was doing only name-lending.

There is nothing to show that the above confession related to a loan to the assessee and not to someone else, much less to the loan of Rs. 2,500 which was shown to have been advanced by that person--to the assessee-respondent. There is also no indication as to when that confession was made and whether it relates to the period from April l, 1957 to March 31, 1958 which is the subject-matter of the assessment sought to be reopened. The report was made on February 13, 1967. In the absence of the date of the alleged confession, it would not be unreasonable to assume that the confession was made a few weeks or months before the report. To infer from that confession that it relates to the period from April 1, _1957 to March

31, 1958 and that it pertains to the loan shown to have been advanced to the assessee, in onr opinion, would be rather far-fetched .

.._ As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be iaitiated for reopening assessment. At the same time we have lo bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the r assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action cannot be taken for reopening assessment even if the inform.ation is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.

The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after

the lapse of many years is a serious matter.

The Act, no doubt, E contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment.

The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, F finality about orders made in judicial and quasi-judicial proceedings.

It is, therefore, essential that before such action is taken the requirements of the law should be satisfied.

The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regard- . ing the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly G all material facts was missing in the case. In any event, the link was l too tenuous to provide .a legally sound basis for reovening the assess- ment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts.

We would, therefore, H uphold the view of the majority and dismiss 1!he appeal with costs.

P.B.R.

Appeal dismissed.

INCOME TAX OFFICER, I WARD, DIST. VI, CALCUTTA & ORS

LAKHMANI MEW AL DAS

P. K. GOSWAMI, JJ.

Tax Act, 1961

S. 148

s. 148

s. 147

s. 147(a)

s. 148

s. 148(2)

s. 147(a)

s. 34

s. 147

Calcutta High Court

G. C. Sharma

S. P. Nayar

D. Pal

Leila Seth

P. K. Pal

S. R. Agarwala

G Parveen Kumar

KHANNA

article 226

Constitution of India

section 148

Income-tax Act 1961

section 23(3)

Indian Income-tax Act, 1922

March 14, 1967

March 8, 1967

section 148

section 14

May 2,. 1967

section 147

article 226

section 147

Narayansingh Nandalal

D. K. Naraindas

Bhagwandas Srichand

Mohansingh Kanayalal

section 147

section 147(a)

section 147

A. K. Mukherjea

S. K.

Mukherjea

section 147

Income-tax Act

section 147(a)

section 147

section 148

Sabyasachi Mukherji

section 148

Sharma

Pal

Sections 14

section 139

section 148 to 153

sections 148 to 153

section 147

section 139

section 149

section 148

section 14

section 147

Section 151

section 148

section 148

sections 147 to 153

section 34

Indian Income-tax Act, 1922

section 148

section 139

section 148(2)

section 147(a)

Indian Income-tax Act, 1922

Mohansingh Kanayalal

Chhugamal Rajpal

section 148

Calcutta

Seth Bhagwan Singh Sricharan

Lakha Singh Lal Singh

Radhakissen Sh yam Sunder

section 147

section 148

Chuugamal Rajpal

April l, 1957

March 31, 1958

February 13, 1967

April 1, _1957

March

31, 1958

section 34

section 147


STATE OF ORISSA

M/S. DINABANDHU SAHU & SONS

March 30, 1976

[H. R. Kl!ANNA AND P. K. GoSWAMI, JJ.]

Central Sales Tax Act (74 of 1956), s. 14(vi)-Notification by conr; erned dep11rt1nent of Government of India including some seeds in 'oil seeds'-How far relevant in determining category of seeds.

Under s. 14(vi), Central Sales Tax Act, 1956. among goods declared to be of special importance in inter-State trade and commerce are menfio1J-ed oiJ_seeds, that is to say, seeds yielding non-volatile oils used for human consumption, or in industry, etc., or volatile oils used chiefly in medicines etc.

The Assistant Commissioner under the Orissa Sales Tax Act, the Tribunal, and the High Court on reference, held that jeera, dhania, panmohuri, methi and postak are oil-seeds within the meaning of s. 14(vi) and liable to a lesser rate of tax.

The High Court relied on ordinary and technical dictionaries and a notification -1 of the Ministry of Finance, Department of Economic Affairs, Government of India, dated January 3, 1959 for its conclusion.

Jn appeal to this Court under Art. 136, it was contended by the State, relying on State of Andhra Pradesh v. Kajjam Ramchandraiah Gari Anantaiah

(1961) 12 STC 795, that the Court should adopt the meaning given to these articles in common parlance by people who use them, that so understood they are spices and not oil-seeds, and that though they yield non-volatile oil to a certain extent, there is no evidence that they fall within the description in s. 14(vi).

Dismissing the -appeal,

HELD : It cannot be said that the Tribunal was not right, and so it is not a fit case for interference under Art. 136, When the High Court held that the Tribunal was right.

[970C-O, G] '

(a) Item 3, Schedule IV, A.P. General Sales Tax Act, 1957, is identical with s. 14(vi) of the Central Act. In Kaijam Ramachandriah's case, the Andhra Pradesh High Court held that dhania did not come within the definition. of oil-seeds relying on some letters from (i) Director, National Chemical_ Laboratory, Poona, and (ii) Central Food Technological Research Institute, Mysore. r96SF]

(b) The High Court was right iri the present case in holdiilg that tlie notification of the Government of India had no statutory force and wasnot binding on the Sales Tax Officer, but it cannot be said that the High Court and "I'ribunal were not right in preferring the opinion therein as good evidence for their conclusion to the opinions in the letters relied upon by the Andhra Pradesh IIigh Court. The Ministry of Finance, which issued the notification, is inti-• mately conversant not only with the policy of legislation for the purpose of implementation of the provisions of the Central Act. but is also fahiiliar with the nature and quality of the commodities and also their use from time to time.

[9700-F]

(c) Further, the letters of the Director, National Chemical Laboratory and the Central Food Technological Research Institute, do not indicate that the opinions expressed therein were firm or even final or whether an the uses men 4 tioned in the definition of oil-seeds were brought to their notice.

[970FJ

Commissioner of Sales Tax, Madhya Pradesh, Indore v . . Bakhat Rai and Co. (1966) 18 Sales Tax Cases 285 and The Deputy Commissioner -of Agricul 4 rural Jncome-tai and Sales Tax, Kozldkode v. S'reedharCI Shenoy ( 1973) 32 Sales Tax Cases 181, referred to.

? (

ORISSA v. D!NABANDHU SAHU & SONS (Goswami, J.) 967

C1v1L APPELLATE JuRISDICTION: Civil Appeal Nos. 917. to 916 of A 1971.

Appeals by Special Leave from the Judgment and Order dated the 2nd July 1969 of the Orissa High Court in Special Jurisdiction Cases Nos. 73, 74, 75 and 76 of 1964.

V. C. Mahajan and R. N. Sachthey : for Appellants (In CAs. fl. 912-13/71)

R. N. Sachthey; for Appellant in CAs. 914-16/71.

Gohind Das, amicus curiae for Respondent.

The Judgment of the Court was delivered by

GOSWAMI, J .-Five quarters of assessment of sales tax are involved in these fie appeals, by special leave, the period commencing .._ from January 1, 1959 to March 31, 1960. 11us judgment will I govern all these appeals involving a common question.

The Assistant Sales Tax Officer, Cuttack, included in the turnover of the respondent the sale price of jeera, dhania (coriander) , panmohuri, methi, postak and pipall and levied 5 per cent sales tax under the Orissa Sales Tax Act (briefly the State Act). On appeal the Assistant Commissioner of Sales Tax, Puri, allowed the claim of the respondent and held that the above items are oil-seeds within the meaning of section 14(vi) of the Central Sales Tax Act and gave the respondent the benefit of a lower tax of 2 per cent on the sale turnover of those goods instead of 5 per cent under the State Act.

On appeal by the State of Orissa to the Sales Tax Tribunal claiming 5 per cent on the sale turnover thereof under the provisions of the Central Sales Tax Act, the orders of the Assistant Commissioner were affirmed.

On application by the State for each of the five quarters, the Tribunal referred the following two common questions under section 24 of the State Act :

" ( 1) Whether in the facts and circumstances of the case, the Sales Tax Tribunal is right in holding that jeera, dhania, panmohuri, methi, postak and pipali are oil-seeds within the meaning of section 14 of the Central Act and the tax payable under the State Law in respect of the sale or purchase of these goods inside the State, cannot exceed 2 per cent of the sale or purchase price thereof.

(2) Whether the communication No. 4(8)-ST /57 dated 31st January, 1958. issued by the Government of India which is only an official communication having no statutory sanction behind it can have any legal effect to hold the !!oods

in question as oil-seeds as understood in common parlance and whether such an official communica1on is binding on the State. Government."

We are not concerned with 'pipali' in these appeals.

When these appeals came before us for hearing the respondent was not represented.

We, therefore, requested Mr. Gob ind Das to act as amicus curiae in .these appeals.

efore e may proceed further, we may immediately turn to sect10n 14(v1) of the Central Sales' Tax Act (briefly tbe Central Act) :

"14. Certain goods to be special importance in inter- State trade or commerce.

It is hereby declared that the followmg goods are of special importance in inter-State trade or commence:-

(vi) Oil-seeds, that is to say, seed; yielding non-volatile oils used for human consumption, or in industry, or in the manufacture of varnishes, soaps and the like, or in lubrication, and volatile oils used chiefly in medicines, perfumes cosmetics and the like". '

The above definition is an explanatory one and uses mentioned therein cover a wide range. If the particular items which are assessed under the State Act can be brought under the definition of "oil-seeds", as given in the above provision, the assessee will be entitled to a lower levy of sales tax.

Mr. Mahajan appearing on behalf of the appellant sumbits that the Court should adopt the meaning given to these items in common parlance and by the people who use the articles.

He chiefly relies upon a decision of the Andhra Pradesh High Court in Th~ State of Andhra Pradesh v. Kajjam Ramchandraiah Gari Anantaiah. (') In that case the High Court was dealing, inter alia, with an identical item, viz., dhania (coriander) under item 3 of Schedule IV of the Andhra Pradesh General Sales Tax Act, 1957. Item 3 is identical with item (vi) of section 14 of the Central Act giving the definition of "oil-seeds".

The Andhra Pradesh High Court relied upon a letter from the Director of the National Chemical Laboratory, Poona, dated January 29, 1959, addressed to the Secretary, Council of Scientific and Industrial Research, New Delhi, as also upon another letter from the Central Food Technological Research Institute, Mysore, dated February 18, 1959, and came to the conclusion that, amongst other things, dhania ( coriander) did not come "within the definition of oil seeds".

The High Court also held that it was not difficult to envisage with the increase in scientific knowledge and technological development that oil could be extracted from any seed which might not be known as an oil-seed in common parlance.

That Court also observed that there was no evidence to show that any oil was extracted in this country or that the oil extracted from the seeds concerned was used commercially or industrially or could be bought in the market.

In this view of the matter the Andhra Pradesh High Court held that dhania and other seeds which came up for consideration were not oil-seeds under item 3 of Schedule IV of the Andhra Pradesh Sales Tax Act.

It is interest dn!l that on this finding of that Court coriander escaped altogether from :assessment.

!!) (1961) 12 S.T.C. 795.

I /

ORISSA v. DINABANDHU SAHU & SONS (Goswami, l.) 969

In Commissioner of Sales Tax, Madhya Pradesh, Indore, v. Bakhat A Rai and Co.,(1) the Madhya Pradesh High Court also took 'the same view as that of the Andhra Pradesh High Court while dealing with item 3, Part II, Schedule 1 of the C.P. and Berar Sales Tax Act. In the Madhya Pradesh case, however, the term 'oil-seed' has not been defined under the Act.

The Court, therefore, held that since it was an item of every day use it must be construed in its popular meaning, that is to say, in that sense which people conversant with the subject matter B with which the statute was dealing would attribute to it.

The Division Bench of the Kerala High Court has also held in The Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kozikode v. V. Sreedhara Shenoy(') 1that dhania (corianrler) and methi are not oil-seeds under section 14(vi) of the Central Act.

Mr. Mahajan has strenuously submitted that the articles in ques- C: !ion arc spices to all indents and purposes and not "oil-seeds". He further submits that even if they are oil-seeds in the sense that these r yield non-volatile oil to a certain extent, no evidence has been produced by the assessee that these are used for human consumption or in industry or in the manufacture of varnishes, soaps and the like,. or in lubrication, or in medicines, perfumes, cosmetics and the like as mentioned in the definition.

Mr. Gobind Das, on the other hand, has drawn our attention to the fact that the High Court had before it the Condensed Chemical Dictionary (7th Edition) edited by Arther and Elizabeth Rose, from which the following informations regarding the seeds in question were available:-

"Dhania (coriander seed); botanical name coriandrum sativem.

Coriander oil is distilled from the coriander sativum

a colourless or slightly yellowish liquid having aromatic odour. ·

Jeera( cumin seed). Cumin oil is distilled from the cumin seed and ls used for medicine, flavouring and perfumery.

It is a colourless or yellowish, limpid liquid having characte- F ristic odour of cumin.

Postak (poppy seed); botanical name papover somniferum.

Poppy oil is a very pale, golden yellow liquid with • pleasant taste and odour extracted from the seeds and it is used as food oil, artist's colours, varnishes & lubrication.

Methi (Fenugreek); botanical name trigonella Foenum- G; , graecum ( vide p. 164, vol. 9 of the Encyclopaedia Britannica) "' It is staed inter alia therein that it bears a sickle-shaped pod, contammg from 10 to 20 seeds, from which 6% of a foetid fatty, and bitter oil can be extracted by ether". '

esides, the High Court also had before it the notification of the Min-

1st~ of Fmance, Department of Economic Affairs, Government of R.

India, dated January 3, 1959, wherein amongst other commodities

(1) (1966) 18 S.T.C. 285.

(2) (1973) 32 S.T.C.181.

A the following were stated to be included iu the term "oil-seeds" under item (vi) o! section 14 of the Central Act:

"(18) Poppy-seed (Posta-dana, Khaskhas); .._ .l,

(37) Aniseed (saunf); .( 42) Coriander-seeds (Dhania);

8 ( 44) Cuminseed ( J eera, Safed J eera) ; ( 49) Fenugreek-seeds (Methi) ".

Mr. Gobind Das also drew our attention to the Webster's Third International Dictionary where coriander seed is described as "the ripened dried fruit of coriander used for flavouring especially of pickels, curries, confectioneries, and liquors."

These appeals arise out of a decision in a reference under section 24 of the State Act under article 136 of the Constitution and we have to consider whether it is a fit case for-interference with the order of the High Court when it held that the Sales Tax Tribunal was right in 1 its conclusion.

It is true the High Court has rightly observed that the aforesaid notification of the Government of India has no statutory force and as such is not binding on the Sales Tax Officer. It cannot, however, be denied that the Ministry of Finance, Department of Economic Affairs, is intimately conversant not only with the policy of legislation for the purpose of implementation oL the provisions of the Central Act but"is also familiar with the nature and quality of the commodities as also their use from time to time.

If, therefore, such an authority issued a notification including certain commodities under the head of 'oil-seeds', as defiued under the Central Act, it cannot be said that the Tribunal and the High Court were not right in preferring such an opinion of the Government as good evidence for its conclusion, to the ' opinions relied upon by the Andhra Pradesh High Court on which great reliance bas been placed by the appellant.

A persual of the contents of the letters referred to in the judgment of the Audhra Pradesh High Court would indicate that the opinions cannot be said to be very firm or even final.

Apart from this, it is not known whether all the uses which are mentioned in the definition of "oil-seeds" were brought to the notice of the National Chemical Laboratory, Poona and of the Central Food Technological Research ln9titute, Mysore,, in rendering their opinions.

If, therefore, the Tribunal in the facts and circumstances of the case held that the particular commodities came within the definition of clause (vi) of section 14 of the Central Act, it is not possible to hold that it was not right.

The answer to the first question by the High Court is, therefore, rightly in the affirmative.

We do not also see anything wrong in the High Court's answering ) the second question in the way it did.

The appeals, therefore, fail and are dismissed.

There will be no order as to costs.

We are thankful to Mr. Gobind Das for assisting the Court as amicus curaie.

V.P.S.

Appeals dismissed.

STATE OF ORISSA

M/S. DINABANDHU SAHU & SONS

March 30, 1976

P. K. GoSWAMI, JJ.

Central Sales Tax Act

s. 14(vi)

s. 14(vi)

Central Sales Tax Act, 1956

s. 14(vi)

January 3, 1959

Art. 136

s. 14(vi)

Art. 136

Schedule IV

General Sales Tax Act, 1957

s. 14(vi)

Kaijam Ramachandriah

Andhra Pradesh High Court

National Chemical_ Laboratory, Poona

Government of India

Andhra Pradesh IIigh Court

Ministry of Finance

National Chemical Laboratory

V. C. Mahajan

R. N. Sachthey

Gohind Das

GOSWAMI

Assistant Sales Tax Officer, Cuttack

section 14(vi)

Central Sales Tax Act

State of Orissa

Central Sales Tax Act

section 24

section 14

31st January, 1958

Gob ind Das

Mahajan

section 14

National Chemical Laboratory, Poona

Madhya Pradesh High Court

Schedule 1

Berar Sales Tax Act

Kerala High Court

section 14(vi)

Gobind Das

Arther

Elizabeth Rose

section 14

section 24

article 136

Sales Tax Tribunal

Audhra Pradesh High Court

section 14