HINDUSTAN LEVER LTD., BOMBAY A v. "

THE

MONOPOLIES &

RESTRICTIVE TRADE

PRACTICES

COMMISSION, NEW DELHI & ORS.

April 7, 1977

[M. H. BEG C.J., AND A. C. GUPTA J.)

AfonopoTies & Restrictive Trade Practices Act, 1969 s. 2(o) and 2(u)-Scope of-Stipulation in tht• agree1nent that the stockist "shall purchase and .accept

frotn the contpany such stock as the co1npa11y at its discretion send" and as to 1he quantity of goods to be purchased by the stockist-If amounts to restrictive trade practice.

Complaint to the Commission-Who could lodge.

According to s. 2(o) of the fonopolies & Restrictive Trade Practices Act a C "restrictive trade practice" means inter alia a trade practice which has, or may have, the effect of preventing, distorting or restricting competition in any manner.

The appellant, who was a manufacturer of consumer goods such as soaps and toilet preparations, entered into agreements with redistribution stockists for the wholesale distribution of its products. Clause 5 of the agreement, inter alia, provides that a stockist shall keep and maintain adequate stocks and shall carry out instructions and directions given by the appellant. He is prohibited from charging anything more than the stipulated maximum resale price. 'rhe last part of the clause provides that "the redistribution stockist shal1 purchase and accept from the company such stock as the company shall, at its discretion, send to the redistribution st1)ckist for fulfilling its obligations under this agreement".

Clause 9 prohibits the redistribution stockist from re-booking or in any way conveying, transporting or despatching parts of stocks of the products received by him outside the town except when he was so expressly directed in writing by the appellant. He shall also, whenever so required by the appeJlant, make available from the stocks such part as the appellant directs him to do.

E . ''"! , On a complaint made to the Monopolies & Restrictive Trade Practices Commission by one of the stockists the Commission, after examining els. 5 and 9 of the impugned agreement, held that the practice of resale price n1aintenance and full line forcing to \vhic:h the origin'al cl, 5 related, shall be discontinued and shall not be repeated. It directed deletion of the last sentence of cl. 5 and declared cl. 9 as void.

Dismissing the appeal to this Court.

HELD : The Commission was right in reframin.e: cl. 5 in the way it did.

Deletion of the ]ast sentence of cl. 5 was essential to prevent possible misuse of the appe1Iant's power so as to regulate the prices contrary to the express provisions in the clause. [465 B; G]

1 (a) The last part of cl. 5 placed the redistribution stockist at the mercy of the appellant which could dictate to him what amounts of various commodities he "shaH purchase and accept from the company". It also empowered the appellant to allocate send to the redistribution stockist only what it "shall, at its discretion, send to the redistribution stockist for fulfilling its obligations" under the agreement. [464 GJ

(b) The word "shall" used in the clause did not bind down the exercise of the appellant's discretion by reference to any requirements of the consumers in a particular area in which .the stockist might sell. The stockist was bound to accept and carry out the appellant's decisions. [464 H]

2(a) The contention that though the clauses gave power to the appellant to regulate trade. in practice they did not operate as restrictions is not well-founded.

It is not possible to isolate the terms of a contract from ' the practice. The appellant did not intend that the clauses in the agreement would be treated as

dead letter. Although the practice of imposing restrictions under such clauses and the practice of introducing such clauses are separate practices, introduction of a clause like cl. 5 is itself a trade ptactice.

Moreover, even if the power given in such wide terms was not meant to be exercised unreasonably, its presence in the agreement was a needless surplusage which could be used to impede freedom of competition and trade and this made it objectionable. [465 A]

(b) Inasmuch as the introduction of clauses in an agreement, taken by itself. is a practice it would be specious reasoning to separate the clauses in the agreement from action under the agreement and then urge that the clauses are innocuous and should not be modified. {460 H; 461 A]

3. From the definition of "restrictive trade practice" it is clear that if the introduction of the clause in itself is a trade practice and could be used to prevent, distort or restrict competition "in any manner'', it could be struck down.

The definition of "trade practice· is wide enough to include any "trade practice· if it is in relation to the carrying on of a trade. If the result of introduction of a clause is to restrict trade it would be struck by lhe provisions of the Act.

[461 E-G]

4(a) Each type of business has its peculiarities, its own mode of operation, the special features relating to the market for it and the requirements of distribution of particular goods, to secure a just ancl equitable distribution consistently with the maintenance of freedom of competition so that prices are not artificially pushed up. [ 462 G]

(b) The Te/co case is distinguishable. from the present on the ground that in that case the manufacturer who had the monopoly of special quality trucks, had to provide specially trained and skilled personnel with special equipment and tools for their maintenance and running. Therefore, the agreements did not restrict trade or curtail competition. [462 H]

( c) In the instant case, the appellant couJd compel the stockist to buy the goods manufactured by it irrespective of whether the stockist wanted the goods or not. The appellant was under no obligation to render any service for the maintenance of the goods supplied.

Secondly, the present is not a case in which the terms of the agreement were required to be explained by the facts to which they were meant to be applied. [ 463 C-D]

Tata Engineering & Locon1ot1\'e Co., Ltd. v. The Registrar of Restrlctive Trade ARree111e111s [1977] 2 S.C.R. 685 distinguished.

5. If it was clear fron1 the agreement that prices lower than the "maximum re-sale price stipulated"' might be charged by the stockist, then, there was no reason why it \Vas necessary to clarify by circulars, what the stockist was free to do under the agreement.

Even if the appellant's practice of issuing circulars was established, it did not justify retention of cl. 5 in a form which could be used to compel the stockist to act at the appellant's behests. [ 46.5 F] 6(a) The last part of cl. 5 made it necessary for the stockist to purchase such goods and in such combination as the appellant might decide.

Hence it would be struck bys. 33(1)(b) of the Act. [465 C]

(b) Inasmuch as the original cl. 5 gave the stockist the discretion to sell at lower than maximum resale prices the agreement was not struck bys. 33(1)(b).

But, the deletion of the sentence. was essential to prevent possible misuse of the

ppellant's power by resort to it. [465 G]

The Co1nn1ission was justified in declaring cl. 9 as void and inoperative.

[465 HJ

7(a) The power to impose restrictions falling under s. 38 had to be justified by the appellant by actual proof of public interest which could not be better served without it [466 A].

(b) Clause 9 gave the appellant an unreasonably wide power of deciding what is actually fair and equitable distribution \Vhich is more a part of the duty of governmental authorities entrusted with powers of rationing such consumer goods in public interest.

Before any question of reasonableness of a power to

ration any goods is entrusted to any person r authority hoe goods must be A shown to be scarce or in short supply and evidence estabhshrng such a need has not been shown to exist in this case. [466 F-G]

(c) The appellant was wrong in its contention that in holdin£ cl. 9 to be invalid, the purpose of "equitable distribution" was overlooked by the COlt:IJl!iSsion.

This supposed limitation did not restrict the appellant's power to decide what to distribute. The appellant was left to itself to decide what is "equitable distribution". The clause conferred too wide a power and is unreasonable.

B -

[469 HJ

9. Under s. 55 an appeal lies to the Supreme Court only on one of the grounds mentioned in s. JOO, C.P.C. It is ncessary for the parties to formulate questions of law that arise for decision. [467 A]

JO(a) The plea against use of "per s, e" rule referred to by the appellant means that on the assumption that a restriction is illegal in itself should not be made without examining its impact upon the particular trade involved. On the C other hand the "rule of reason" envisages consideration of facti of each case so as to determine the context in which the restraint was imposed. [468 C]

Board of Trade of .1/ie City of Chica{:o v. United States of A1nerica 62 Law Ed 231.

(b) Jn Telco case this Court accepted the correctness of the approach that no bald or simple test should be adopted in judging the legality of a ri; straint upon trade. Such a view has nothing to do with rules Jelating to interpretation of documents used in finding out the effect and intent of words used in a docu~ ment. \Vhenever a court dtermines the meaning and effect of the words of a D

rule or a clause in an agreement it does not adopt what is termed as "per se" rule. All that the court does in such a case is to interpret the clause, the effect of which may become obvious on a bare determinatiOn of the meaning or may be seen fromother evidence. Where that effect is not obvious, evidence may be Jed to show how the language used is actually applied to the facts to which it was meant to apply. [ 468 D-F]

In the instant case, the Commission has correctly arrived at the conclusion that the clauses were unreasonable and illegal after taking into account the relevant factors.

The rules of reason applicable to a case like the present are

(i) the meaning of the impugned clause or clauses in an agreement must be determined according to law and (ii) the possible effects of such a clause upon competition in the trade to be regulated must be determined. [469 B-C]

( c) Consideration of extraneous evidence is not required at all when the practice complained of is the introduction of clauses conferring wide powers, which may be used to irnpose restrictions contrary to the Act. In Such a case the introduction of clauses constitute restrictive practice. Evidence of what is actually practised could only be relevant for purposes other than a determination of the meaning and the effect which follows logically or reasonably from such determination. [469 F-G]

(d) No oral evidence could be led to adduce the me; tning of the clauses in the agreement in view of ss. 91 and 92 of the Evidence Act. Section 92 proviso (6) is not a.-pplicable to the present case. [464 CJ

(e) It is unnecessary to admit extraneous evidence as to the absence of distortion of competition. The probability of the effect is only part of the rule of reason to be applied where extraneous evidence is admissible. [470 B]

(f) It is not possible to assume public benefit from a mere declaration of intention to exercise a power so as to benefit the public.

On the evidence adduced it was not shown that this power was necessary so as to benefit the public. [470 DJ

(g) Actual benefit to the public is a question of fact on which findinos cannot be reopened unless some error of law is revealed. No error of law i; assessing evidence was disclosfd. [470 E]

(h) The confusion which may be created by using such terms as "per se"

rule which could be applied to describe practices developed in other countries \Vith different statutory provisions, should be avoided. [469 D-E]

10. Proceedings before the Commissionare maititainable at the instance of a complainant 'vhose motives in making the complaint are quite irrelevant All that the Commission, and, on appeal, this Court, has-to examine is whether a practice by a company of introducing clauses complained of in the agrements

\vith the stockists, an1ounted to a restrictive trade practice. [460 D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 680 of 1976.

From the Judgment and Order dated the 17th March, 1976 of the Mouopolies and Restrictive Trade Practices Commission, New Delhi in R.T.P. Enquiry No. 11 of 1974.

L. M. Singhvi, Ravinder Narain, Talat Ansari and Shri Narain for the Appellant.

L. N. Sinha, Sol. General, B. Datta and Gb'ish Chandra for Respondents Nos. 1 and 2.

G. A. Shali and N. Netlar for Respondent No. 13

The Judgment of the Court was delivered by-

BEG, C. J.-This is an appeal under section 55 of the Monopolies . & Restrictive Trade Practices Act, 1969 (hereinafter referred to as 'the Act') against the order and judgment of the Monopolies & Restrictive Trade Practices Commission, New Delhi (hereinafter referred to as the 'Commission'), in proceedings started under section lO(a)

(iv) of the Act against the appellant M/s. Hindustan Lever Ltd. (hereinafter referred to as 'the Company'), upqn information furnished by Bhogilal Manila! Shah of M/s. Shah Manila! Motichand & Sons of Poona (hereinafter referred to as the 'informant').

The informant was a redistribution stockist of the appellant company carrying on business regulated by the terms of an agreement, known as the redistribution stockists' agreement of the company, found in a standard printed form, entered into with each stockist. Ti1e agreement has 23 terms or clauses in it.

The clauses complained of are 5 a, id 9, which may be reproduced here :

"5. The Redistribution Stockist shall use his best endeavours to maintain and increase the trade of the Products in the said town and for this purpose he shall at all times keep and maintain adequate stocks of the Products in all its packings and he shall carry out all instructions and directions including those as to the maximum r,,,; a]e price which may from time to time be given by the Company or by the Company's accredited representatives in respect of the sale or resale or disposal by the Redistribution Stockist of stocks of the Products supplied to him in pursuance of this Agreement.

The Redistribution Stockist is prohibited from charging in excess of the maximum resale prices slipulated by the Company, but he may, at his discretion, charge prices lower than the said maximum resale prices.

The Redistribution

) ..

Stockist shall purchase and accept from the Company such A stock as the Compa, ny shall at its discretion send to the Redistribution Stockist for fulfilling its obligations under this Ageement."

"9. In order to ensure equitable and reasonable distribution of stocks at fair prices, the Redistribution Stockist shall not rebook or in any way convey, transport or despatch B parts of stocks of the products received by him o_utside the aforesaid town except when he is so expressly directed n writing by the Company.

He shall also whenever so required by the Company make available from the stocks of Company's merchandise purchased by him such part as the Company directs him to do for purposes of resale on his behalf by the Company's employee." c It is alleged that I.he two clauses, set out above found in identical agreements entered into by the Company with its stockists, whose number is quite large, constitute or authorise restrictions which are unreasonable and illegal.

He, nce, it was submitted by the respondents that it must be struck down or modified so as to make the business and trade of the appellant company and its stockists conform to the requirements of law.

The Commission had accepted the case brought to its notice by the informant and made the following order :-

"(1). Clause 5 of the Agreement (Exhibit F) shall sta, nd modified so that the following shall be substituted in place thereof :

"5. The Redistribution Stockists shall use his best endeavours to maintain and increase the trade of the products in the said town and for this purpose he shall at all times keep and maintain adequate stocks of the products in al! its packings and he shall carry out the instructions and directions including those as to maximum resale price which may from time to time be given by the Company or by the Company's accredited representatives in respect of the sale or resale or disposal by the Redistribution Stockist of stocks of the products supplied to him in pursuance of this Agreement.

The Redistribution Stockist is prohibited from charging in excess of the maximum resale prices stipulated by the Company but he may at his discretion charge prices lower than the said maximum resale prices".

"(2). The practices of resale price maintenance and full line forcing to which original clause 5 of the agreement related, shall be discontinued and shall not be repeated.

(3) Clause 9 of the Agreement (Exhibit F) shall be void.

( 4) The practice of area allocation to which clause 9 H of the Agreement (Exhibit F) related, shall be discontinued and shall not be repeated.

(5) In all future price circulars or lists to be issued by the Respndents, it shall be clearly stated that the prices therein mentioned are maximum prices and that prices lower than those prices may be charged.

( 6) This order shall come into force with effect from 1st July, 1976.

On or before the said date, the Respondents shall intimate all Redistribution Stockists of the modifications in Clauses 5 of the Agreement (Exhibit F) and the voidity of clause 9 of the Agreement (Exhibit F) ''.

There was some argument before us on the question whether proceedi1ngs before the Commission were maintainable at the instance of a "complainant" who had reasons to nurse a grievance against the Company and whose motives could be questioned.

It was pointed out that the agreement of the company with the informant had been terminated.

The version of the informant was that this had been done because his firm had sold Vanaspati at the rate of Rs. 127/- per tin which was below the price of Rs. 129.05 per tin fixed by the Company.

The informant stockist said that the price, had to be reduced by him to remove public discontent.

We think that the motives of the informant are quite irrelevant in such a case.

All that the Commission, and, on appeal, this Court has to examine is whether what would undoubtedly be a "practice" by the appellant company, of introducing the two clauses complained of, in its agreements with its stockists, amounted to a restrictive trade practice.

The distinction sought to be made on behalf of the appellant, between a practice and clauses in a contract which give a company E the power to regulate trade in a manner which may constitute a restriction, appears to be inconsequential here.

We do not think that we can isolate the terms of a contract from the actual practice of the company. It is not the case of the company anywhere that the clauses in its agreement with its stockists are to be treated as deadletter.

Its case is that they do not operate as restrictions.

The introduction of such clauses in so many agreements meant to regulate F relations, either between a principal and an agent or the seller and the stockist who acquires complete proprietary rights in the stock of goods purchased, is itself a trade practice.

The simple question before us is : Can powers conferred upon the company under such clauses be exercised in such a way as to constitute restrictive trade practices?

It is true that the practice of imposing restrictions u, nder such clauses is one thing and the practice of introducing such clause• is quite another thing.

Both may constitute separate practices. Nevertheless, the introduction of such c1auses into an agreement between the manufacturer and the seller who purchases and stocks his goods is in itself something practised.

It is immaterial that the use of powers under such clauses may constitute another set of practices which depend upon the existence of such clauses as sources or springs. Inasmuch as the introduction of clauses in 5uch an agreement is a practice,

taken by itself, the question whether such a practice amounts to a restrictive trade practice or not could only be decided by considering

) -l

whether the clauses could be so used as to unjustifiably restrict trade?

A It would be specious reasoning, in such a case, to separate the clauses in the agreement from action under the agreement and then to urge that, as evidence of action under the clauses is meagre or even absent, the clauses are i, n:nocuous and shou; d not be modified or struck down because we are only concerned with what is actually being practised under them or with the use that is being made of such clauses and not with what is permissible or possible under the clauses of the agree- B ment of the kind before us.

This argnment seems to us to overlook the definition of "restrictive trade practice" contained in section 2 ( o) of the Act which lays down :

" ( o) "restrictive trade practice" mea, ns a trade practice which has, or may have, the effect of preventing distorting or restricting competition in any manner and in particular-

( i) which tends to obstruct the flow of capital or resources. into the stream of production, or

(ii) which tends to bring about manipulation of prices, or conditions of delivery or to affect the tlow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions."

It is clear from a bare perusal of the abov<>-mentioned definition that it is not only the actual practice of a restriction under a clause which is struck by the provisions of the Act, but also a "trade practice" which "may have" the effect of restrictions falling within the mi'schief provided for.

In other words, if the introduction of the clause in itself is a trade practice and could be used to prevent, distort or restrict competition "in any manner" it may be struck down. A trade practice is defined by section 2(u) of the Act as follows :- ·

"(u) "trade practice" means any practice relating to the carrying on of any trade, and includes-

(i) anything done by any person which controls or affects the price charged by, or the method of trading of, any trader or any class of traders.

(ii) a single or isolated action of any person in relation to any trade".

This definition is wide enough to include any "trade practice" if it G is in relation to the carrying on of a trade. It cannot be argned that the introduction of the clauses complained of does not amount to an action hich relates to the carrying on of a trade. If the result of that action or what could reasonably flow from it is to re8trict trade

i~ the manner indicated, it will, undoubtedly, be struck by the provisions of the Act.

Reliance was sought to be placed by learned counsel for the

appeant company ?n a recent decision of this Court in Tata Engineering & Locomotive Co. Ltd. v. The Registrar of the Restrictive

3-502 SCI /77

A Tr(]de Agreements, New Delhi(1 ) (hereinafter referred to as the "Telco" ease) where it was held :

"The definition of restrictive. trade practice is an exhaustive and not an inclusive one. The decision whether trade . practice is restrictive or not has to be arrived at by applying the rule of reason and not on the doctrine that any restriction as to area or price will per se be a restrictive trade practice.

Every trade agreement restrains or binds persons or plac~ or prices. The question is whether the restraint is such as regulates and thereby promotes competition or whether it fa such as may suppress or even destroy competition. To determine this question three matters are to be considered. First, what facts are peculiar to the business to which the restraint is applied. Second, what was the condition before and after the restraint was imposed. Third, what is the nature of the restraint and what is its actual or probable effect".

It was also held there : • "The question of competition cannot be considered in vacuo. or in a doctrinaire spirit. The concept of competition is to be understood in a commercial sense. Territorial restriction will promote competition whereas the removal of territorial restriction would reduce competition. As a result of territorial restriction there is in each part of India open competition among the four manufacturers. If the territorial restriction is removed there will be pockets without any competition in certain parts of India. If. the dealer in Kashmir is allowed to sell anywhere in India wealthy cities like Delhi, Bombay,. Calcutta will buy up trucks allocated for Kashmir and the buyer in Kashmir will not be able to get the trucks. The other three manufacturers whose trucks are not in equal demand will have Kashmir as an open field to them without competition by Telco.

Therefore, competition will be reduced in Kashmir by the successful competitO( being put out of the field".

It is evident that in the Telco ease this Court was considering the territorial restrictions placed upon the stockists of Telco in the light of the special facts and circumstances of that particular case. Each type of business has, undoubtedly, its peculiarities, its own mode of operation, the special features relating to the market for it, and the requirements of distribution of particular goods which may be the

-~ subject matter of an agreement so as to seciire a just and equitable distribution consistently with maintenance of freedom of competition so that prices are not artificially pushed up. In the TeJco ease, the subject matter of the agreement was sale of trucks of a type in which the Telco had a monopoly inasmuch as no other firm produced trucks which were of such special quality and specifications.

Hence, there was great demand for these trucks, which were in short supply. Again, for the maintenance and running of those especially desil!Iled trucks the manufacturer had to provide especially trained and skilled personnel and snecial equipment and tools so as to enable stockists to service

and repair trucks distributed. Unless the manufacturers were able to impose restrictions upon sales outside the areas in which they had

{I) (1977] 2 S.C.R. 685.

----··

IIINDUSTAN LEVER LTD. v. M.R.T.P. COMMISSION (Beg, CJ.) 463

established their stockist-cum-servicing suppliers, they could not at all render the kind of service they were giving in _addition to selling.

In other words, it was a mixed practice for purchase of trucks and provision of specialised service to the consumers, through the stockists.

On the peculiar facts and circumstances of that case, it was found that the agreements did not, on the whole, result in restricting trade or. curtailing competition.

The facts of the case before us are entirely diffrent. We are con- cerned here with a manufacturer of mixed consumer goods of different varieties.

The appellant company produces dehydrogenated oil (known in the market as "Vanaspati"), toilet preparations of various kinds such as. soaps, shaving creams, . toothpastes, and baby milk powder, and animal feeds.

The soaps manufactured by it are undoubtedly the main type of goods supplied. But, it manufactures other type of gocds too.

It can, therefore, compel stockists to by them, whether .stockists want these other goods or not, if the terms of the agreement are to be held to be binding and enforceable. The manufacturer is under no obligation to render any service in relation to maintenance of the goods supplied. The whole trade is completely unlike that of manufacture anJ sale of motor trucks for which the stockists, sellin~ to the actual consumers, had to, as already pointed . out, also have the services of the manufacturer's trained personnel for the purpascs cf maintenance' and repair of the vehicles supplied. It wculd amount to an application of the law in a thoroughly doctrinaire fashion if we were to deduce some general principles, from the very di!Terent facts of the Telco case and attempt to apply them to those of the case now before us.

Thus, the contention advanced on behalf of the appellant, against a doctrinaire approach in such cases, really weighs against the appellant comp:iny.

In the Telco case, the agreement could not be understood without reference to the actual facts to which they were sought to be ann'ied.

Those facts explained the nature of the spec; al agreements for re"riction or distribution of areas.

In the case before us. the nrf"blern is entirely different.

This is. not a ce>e in which certain terms rf the agreement require to be explained by the facts to which they were mennt to be anolied. It is a clear case in which the me"n; nos of the clauses are decisive.

If these clauses are caoable of being so used, on the meanings which aooear unambiguously from them. as to undoubtedly restrict trade, the intention to so use them to restrict trade could reasonably be inferred without any difficu1tv.

Otherwise. why have them ? No oral evidence c0uld be led to deduce their rnc"nin~ or to vary it in view of the. provisions oi sections 91 anrl CJ2 rf the Evidence Act. the princinles nf \Vhich \Vere. \Ve think. ricrhtlv nn1ied bv the Commission. The Telco case. on •he other hand, was one in \Vhi_ch cxfr:'lne('!us eviclence coulrl he led uncler ectinn_ Q?... nrnvic;:n (6) of the Evidence Act which may be set out here with Section 92

"92. When the terms of anv such contract, grant or 0ther disnnc:ition f\f Uff\oertv or anv matter reauired bv la\V to be reduced to the form of a document, have been proved

according to the last section, no evidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives-in-interest, for the purpose of contradicting, varying, adding to or subtracting from, its terms :

Proviso (6)-Any fact may be proved which shows in B what manner the language of a document is related to existing fact".

The principle embodied in s. 92(6) of the Evidence Act, which was applicable in Telco case (supra), is not, for the reasons given above, applicable in the case now before us.

Indeed, no attempt has been made by reference to any case law apart from the Telco case (supra), which we have distinguished above, to show that extraneous evidence could have been led here in order to apply s. 92 proviso (6) of the Evidence Act. In the Telco case this provision was not directly referred to, but, we think, that it could have been applied there. Thus, we think that the basic difficulty, placed before us by learned counsel for the appellant, in the way of examining the plain meaning and effect of clauses 5 and 9 of the Distribution Stockists' agreement, does not exist at all in the case now under consideration. We must, therefore, proceed to examine the meanings of these clauses from the point of view of what could be done by the Company under them. If what may be done under these clauses could be a restrictive practice as defined by the Act, it was enough to vitiate them. A clause having been introduced in an agreement entered into, as a part of the settled practice of the company, could be struck by the provisions of s. 2 ( o) of the Act, set out above, quite apart from what is actually done under it.

We ilo not think that any other question is really relevant or need be considered by us at all in 'such a case. It is not a case in which we could be taken through the oral evidence, as has been attempted to be done, because that is shut out by an application of provisions of ss. 91 and 92 of the Evidence Act if all we need do is to interpret the agreement. We are unable to see why these provisions do not apply here.

Not much argument appears to n's to be needed o demonstrate that the last sentence in paragraph 5 of the above mentioned clause places the redistribution stockist at the mercy of the company which can dictate to him what amounts of various commodities he "shall purchase and accept from the company" in the form of a total Jot supplied to him.

The company need only send to the redistribution stockist's what it "shall at its discretion send to the Redistribution Stockists for fulfilling its obligations under this Agreement".

The meaning and effect are obvious here.

The introduction of the word "shall" does not bind down the exercise of the discretion by reference to any requirements of the consnmers in a particular area which the stockists may convey to the company.

Hence, if the stockists want to remain on the list of the redistribution stockists of the company. the stockist is bound to accept and carry out the decision of the company. Even if, in view of some other practice adopted by the company.

IIINDUSTAN LEVER LTD. v. M.R.T.P. COMMISSION (Beg, C.J.) 465

a power given in such wide terms was not meant to be exercised unreasonably, ifs presence in the agreement would be a needless surplusage which could, whenever the company wanted it, be used to impede freedom of competition and trade.

This result was enough to make it quite objectionable. We, therefore, think that the Commission was quite right in reframing clause 5 in the way it did. We are unable to find any flaw in the detailed reasons given by the Commission for doing th_at. ·

. The Commission rightly points out that, among agreements the registration of which is compulsory according to the provisions of

ChaJ?tr V of the Act is, under section 33 ( ! )(b) is "any agreement requmng a purchaser of goods, as a condihon of such purchase, to purchase some_ other goods". : The last part of clause 5, as we have observed, clearly makes it necessary for the stockist to purchase such goods and in such combination as the company may decide. Hence, it would be struck by section 33(1) (b) of the Act. It has not been shown to have been registered under the Act.

It is also submitted on behalf of the respondent that clause 5 of the agreement infringes s. 33(l)(f) of the Act which requires registration of :

"any agreement to sell goods on condition that the prices to be charged on resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged".

The Cmmis"sion held that cluse 5 of the agreement meant provision for "prices stipulated" and that it had been so treated. by the company in its circulars stating that prices lower than the "maximum resale price stipulated" by the company may be charged. If that was so clear, there was no reason why the company should have attempted to clarify by means of its circulars what, according to it, the stockist is free to do under the agreement. Even if the practice of the company by issuing circulars is established, .it does not justify the retention of clause 5 in a form which can be used to compel stockists to act on the company's behests whether reasonable or not. On the other hand, it justifies its clarification by an alteration of it in the manner directed by the Commission so as to make the clause covering price rel!lllation also very clear.

The order of the Commission modifying clause. 5 only makes the position crystal clear.

Inasmuch as clause 5, even before deletion of the last sentence of it by the Commission, expressly gives the stockist the discretion to sell at lower than maximum resale prices stipulated, the agreement was not struck by s .. 33(1) (b). of the Act. But, the deletion of the last sentence was essential to prevent possible misuse of the company's powers, by resort to it, so as to even . regulate prices contrary to express provisions found earlier in the clause.

Turning now to clause 9 of the agreement, we" think that the Commission was right in reiecting the arrumenl that evidence led on behalf of the company was enough to establish that .clause 9 fell within one

of the "gateways" provided by section 38 of the Act.

A power to, impose restrictions falling under this provision had to be justified by the company by actual proof of a public interest which could not be better served without it.

The submission that section 38 could be applied here amounts at least to a concession that a clause conferring such wide power upon the manufacturer may be so used as to amount to a restrictive practice. It is the practice of putting in such a clause which has to be justified.

The power given to the company under clause 9 is very wide. The manufacturer can compel the redistribution stockists to make available to the company any stocks purchased by the stocki'st. It also compels the stockist to take .the permission of. the company for conveying, transporting, or despatching parts of stocks of the products received by him outside a specified town except when he is so expre'ssly directed in writing by the company. It directly prevents him from doing so without the company's permission. If the stockist violates this cond:- tion the whole agreement can be revoked by the company so that the stockist loses his right to carry on business under the agreement. lf what had to be justified is not how this power is actually used, but the practice of conferring such powers upon the company by placing the stockist t the mercy of the company, the evidence of facts showing how the power is exercised could be relevant only very indirectly.

However,.if it could be shown that 'some facts did exist which make it imperative to confer such a power on the company for the benefit of the public, that may be relevant to establish the existence of a "gateway" under s. 38. But, it could certainly not be used to determine the meaning of a clause for which it is not necessary here to go beyond the language of the clause involved.

We are primarily concerned in this case, as we have repeatedly emphasized, with the clear meanings of the two clause's.

As the Commission pointed out, it is immaterial that a purchaser from outside may be able to get round clause 9 by purchasing across the counter from the stockist inside a town. The clause itself, however. gives to the company an unrca'sonably wide power of deciding what is actually fair and equitable distribution.

The Commission very rightly points out that th; s is more properly a part of the duty of governmental authorities which may be entrusted with powers of rationing such consumers' goods if this is found to be necessary in public interest.

However, before any auestion of reasonableness of a power to ration any goods is entrusted by any method to any person or authority those goods must be shown to be scarce or in short supply.

That was the position in the Telco case (supra).

Evidence establishing such a need has not been shown to exist.

And, in any case. it hcs to be a very exceptional set of facts indeed which could justify lo•hng of such a power in the manufacturer. The Commi'ssion has dooll with a good deal of evidence to iustify its conclusion that the need to iustify the lodging of such a power in the company has not been established. We see no reason to disturb it.

Under the provisions of section 55 of the Act, an appeal lies to this Court only on one of the grounds mentioned in section 100 of the

Code of Civil Procedure. It is, therefore, necessary in all such cases A for counsel to clearly formulate and direct our attention to only questions of law which arise so that these may be decided. It is uot permissible to go over the whole range of evidence led as was attempted before us.

Learned counsel for the appellant when asked by us to formulate the questions of law which arise mentioned the following questions : B

Firstly, whether the Commission was right in applying what he described as the "per se" rule as opposed to "the rule of reason". It was submitted that the correct rule which should have been applied is stated in Board of Trade of the City of Chicago v. United States of America, as follows (at p. 237) :

"Every agreement concerning trade, every regulation of trade, restrains. To bind to restrain, is of their very essence.

The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition, or whether it is such as may suppress or even destroy competition.

To determine that question the Court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint, and its effect, actual or probable.

The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts.

This is not because a good intention will save an otherwise objectionable regulation, or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences".

We find no objection whatsoever in adopting the rule indicated above in cases to which it applies. That was a case in which a rule adopted

by the Board of Trade of the City of Chicago (supra) prohibiting F offers to purchase during the period between the close of the call and the opening of the session on the next business day for sales of wheat, corn, oats, or rye at a price other than at the closing bid, was challenged.

Hence, questions relating to effects of the rnle arose so as to determine its reasonableness. Such questions could not be determined without examining evidence of facts to which the rule was meant to apply and findings as to how it operated.

The issue was whether G the rule, having regard to the facts to which it was to be applied, offended against the Anti-trust law's.

The Government's case was thus stated by Mr. Justice Brandeis (at p. 237) :-

"The Government proved the existence of the rule and described its application and the change in business practice involved.

It made no attempt to show that the , rule was H designed to or that it had the effect of limiting the amount of

(I) 62 L •w. Ed. p. 131.

grain shipped to Chicago; or of retarding or accelerating shipment; or of raising or depressing prices; or of discriminating against any part of the public; or that it resulted in hardship to anyone.

The case was rested upon the bald proposition that a rule or agreement by which men occupying positiom of strength iu any branch of trade fixed prices at which they could buy or sell during an important part of the business day is an illegal restraint of trade under the Anti-trust Law. But the legality of an agreement or regulation cannot be determined by so simple a test as whether it restrains competition".

Apparently, Dr. Singhvi means, by his plea against the use of a "per se rule'', nothing more than an assumption, that a restriction is illegal in itself, should not be made without examining its impact upon the particular trade involved.

As contrasted with any such assumption what the learned counsel describes as "the rule of reason" was stated in the earlier passage quoted above giving the naure of facts to be considered so as to determine the context in which the restraint was imposed.

This Court accepted the correctness, in the Telco case (supra), of the approach that no bald or simple test, divorced from the context or surrounding circumstances, should be adopted in judging the legality of a restraint upon trade. Such a view, applicable to actual restriction's imposed, has really nothing to do with the rules relating to interpretation of documents which are used in finding out the effect and intent of words used in a document. It is after a difficulty of interpretation, if any, is resolved and a rule or a clause in an agreement is found to have either a clear meaning or to be ambiguous that its effect can be considered.

No doubt that effect has to be examined to determine how a restraint actually imposed affects trade.

It i's one thing to say that the impact of the restraint imposed on trade should be considered with reference to the nature of the trade or business to be regulated.

It is quite another to say that the effect cannot be gauged, sometimes, even by a bare examination of the meaning of a clause giving power to impose restraints apart from other evidence of what its actual effects are or may be.

In some case's, the

effet itself is given primarily by the clear meaning of the language useci in the clause which is alleged to infringe the law.

We do not think that any "per se rule", if we may use this somewhat quaint expressi9n, is adopted whenever a Court determines the meaning and effects of the words of a rule or a clause in an agreement.

All that the Court does in such a case is simply to interpret the clause, the effect of which may become obviou's on a bare determination of the meaning or may be seen from other evidence too.

Where that effect is not obvious, as we have already indicated, evidence may be led ID show how the language used is actually applied to the facts to which it was meant to apply.

That is also a recognised rule of interpretation. It is the function of Courts to indicate and explain the varying facts and circumstances to which different rules of interpretation may apply.

Where meaning and intent of language used is given by the words used nothing more is needed.

) -1

_,.-

Furthermore, the Commission held that, taking into account the A nature of goods or the business to be regulated by the agreement under consideration, the clauses, as they stood, were not permissible. It had applied the rule of reason in arriving at the conclusion that, upon the facts of a business in commonly used consumer goods of several varieties, which are not shown to be scarce, clauses under consideration having the obvious meaning and effect which their language carried with. them, are unreasonable and illegal. We are unable to see how any B law laid down in American decisions, dealing with Anti-trust laws, or in English cases, dealing with agreements in restraint of trade, lay down rules of reason at variance with the ones we are applying here.

The rules of reason applicable to a case like the one before us may be simply stated as follows : Firstly, the meaning of the impugned clause or clauses in an agreement said to offend the law must be determined according to law; secondly, the possible effects of such a clause C upon competition in the trade to be regulated must be determined.

We think that the Commission had rightly applied these rules and found the clauses to be capable of misuse.

We think that this was enough to vitiate the impugned clauses.

We would like to make it clear that we are really concerned only with the law as we find it in our own statute and can only examine D evidence in the light of our own law of evidence. We think that the confusion which may be created by using terms-such as "per se'' rule-which could perhaps be more usefully applied to indicate doc· trines or to de'scrihe practices developed under very different sets of circumstances in other countries with statutory provisions couched in language which differs from that before us, should be avoided so i:ir as possible.

Secondly, it was submitted that we should look at evidence of what takes place in the trade under consideration rather than clauses 5 and 9 of the agreement we have considered. We have already indirntect the correct procedure in such cases as the one before us. Indeed, we think that a consideration of extraneous evidence is not required at all when the practice complained of is the introduction of clauses F conferring wide powers which may be used to impose restrictions contrary to the Act.

In such a case, the introduction of clauses constitutes the restrictive practice.

Hence, their interpretation is all that we are really concerned with here in accordance with our law. Evidence of what is actually practised could only be relevant for purposes other than a determination of the meaning and the effect wr. ich follows logically or reasonably from such determination.

Thirdly, it was submitted that, in holding clause 9 to be invalid, the purpose of "equitable distribution", which imposes a limit on the powers of the company, was overlooked by the Commission. For the reasons already. given, we do not think that this supposed limitation reasonably restncts the company's power to decide what to distribute. ":he. coi:ip~?Y is left entirely to itself to decide what is "equitable H

d1tnbut10n . An mterpretat10n of a document, according to well established rul, s, canot be ?ispensed wth by labelling it as an application of a per se doctrme.

We thmk that the clause, as it stands,

confers too wide a power and has to be struck down wh.olly as unreasonable on that ground .

. Fourthly, our attention was sought to be drawn to the absence of evidence of distortion of competition and the presence of evidence that competition prevails in the market ckspitc these clauses.

We have already !ield such oral evidence to be really unnecessary for judging the possible effects of the clauses. The probability of the effect is only part of the rule of reason to be applied where extraneous evidence is admissible. In the instant case we are only, as already indicated above. concerned with a reasonable and natural interpretation of the clauses of the agreement and their reasonably possible effects.

Fifthly, it was submitted that there was clear evidence of public benefit from an equitable distribution in actual practice so that the requirements of a "gateway" under s. 38 were satisfied.

We cannot assume public benefit from a mere declaration of intention to exercise a power so as to benefit the public. We are not satisfied, on the evidence actually adduced and placed before us, that this power was necessary so as to benefit the public.

Furtherfore, we cannot reassess evidence.

Actual benefit to the public is a question of fact on which findings cannot be reopened unkss some error of law is revealed. No error of law in assessing evidence is disclosed.

This is an additional reason for not disturbing the findings of fact recorded by the Commission.

Sixthly, it was submitted that the Commission had ignored the last sentence of clause 9 in interpreting it.

We have, however, con'sidered it and find that, far from making clause 9 more acceptable and reasonable. the last part of it makes it more objectionable and unreasonable inasmuch as it enhances the powers of the Company. . ·

Learned counsel for the appellant conipany has pointed out that the order of the Commission was to come into force from 1 July 1976. so that the appellant company had nearly four months to rewrite the agreements which are over four thousands in number.

He prays for extension of time for six months from today for executing fresh agreements. It is not really necessary for us to fix any particular time within which the company will print or get new agreements executed on freshly printed forms in accordance with law.

That is a matter for parties themselves to each agreement to decide and work out.

All that we need make clear is that all agreements which are operative and binding between parties will be so interoreted now as if clause 9 was not there at all and clause 5 was there only in the modified form which omits the last sentence from clause 5 as it originally stood.

However, if the company wants to complete anv formalities for bringing each individual agreement into line with the law as declared by this Court it may do so; and. it will file. within six months from today an affidavit showing that it has done this.

The requirement to fifo

) -1

HINUUSTAN LEVER LTD. r. M.R_T.P. COMMISSION (Beg, C.J.) 471

such an affidavit showing compliance will ensure that the company A has taken due steps to inform each stockist of the correct legal position.

The time given for doing this will not, however, authorise it to act under those parts of the agreement which this Court has declared to be illegal.

Subject to the observations made above we uphold the Commission's order and dismiss this appeal with costs.

P B.R.

Appeal dismissed.

HINDUSTAN LEVER LTD., BOMBAY

M. H. BEG C.J.

A. C. GUPTA J.

Restrictive Trade Practices Act, 1969

s. 2(o) and 2(u)

s. 2(o)

Restrictive Trade Practices Act

Clause 5

Clause 9

cl. 5

cl. 9

cl. 5

cl. 5

cl. 5

cl. 5

[1977] 2 S.C.R. 685

cl. 5

cl. 5

cl. 5

cl. 9

s. 38

Clause 9

cl. 9

s. 55

Supreme Court

C.P.C

ss. 91 and 92

Section 92

L. M. Singhvi

Ravinder Narain

Talat Ansari

Narain for the Appellant.

L. N. Sinha

B. Datta

Gb'ish Chandra

G. A. Shali

N. Netlar

BEG

section 55

Restrictive Trade Practices Act, 1969

Hindustan Lever Ltd.

Clause 5

clause 5

Clause 9

clause 9

1st July, 1976

clause 9

section 2

section 2(u)

India

Kashmir

Delhi

Bombay

Calcutta

Telco

TeJco

(1977] 2 S.C.R. 685

sections 91

Section 92

s. 92(6)

Telco

s. 92

s. 2

ss. 91 and 92

clause 5

section 33

clause 5

section 33(1)

clause 5

s. 33(l)(f)

clause 5

clause. 5

clause 5

clause 9

clause 9

section 38

section 38

clause 9

s. 38

clause 9

section 55

section 100

Code of Civil Procedure

Chicago

Brandeis

Singhvi

clause 9

s. 38

clause 9

clause 9

1 July 1976

clause 9

clause 5

clause 5

HINUUSTAN LEVER LTD


UNION OF INDIA AND ORS.

GUJARAT WOOLLEN FELT MILLS

April 7, 1977

[M. H. BEG, C.J., A. C. GUPTA AND P. S. KAILASAM, JJ.]

Central Excises and Salt Act, 1944-Schedule I Entry 21-Non-woven felts 1nan1.:'faptured out of v.oollen fibres by machine pressing, whether "woollen (cbncs' for the purpose of levy of excise duty-Rule of interpretat!on of items 111 a statute.

1 An excise duty o~ Rs. 550~~.87 was. levied and collected from tl?-e responuent-firm by the Excise authont1es treating the non-woven felts manufactured by hem as "'••oollen fabrics" covered by entry 21 in Schedule I to the Central Excises and Salt Act, 1944. The Gujarat High. Court allowed the writ petition filed by the respondent and held that the respondent's products were not "woollen fabrics" and directed the refund of th~ entire sum collected as excise duty.

Dismissing the appeal by certificate to this Court,

JIELD : ( 1) The well-known rule in interpreting items in statutes is that resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, their commercial sense. [474 A-B]

 Commissioner of Sales Tax, .Madhya Pradesh, Indore v. M/s. lalwant Singh . Charan Singh, AIR 1967 SC -1454, applied. .

(2) Fabric means woven mater'ial. Entries 19 to 22 in the Schedule de31 v; ith fabrics. Entry 21 describes woollen fabrics as meaning all varieties of fabrics manufactured out of \Vool, barring the exceptions mentioned, including blankets, lohis, rugs, shawls and embroidery in the piece in strips or in motifs.

The word ••fabric" in entry 21 has been used to mean woven material in \Vhich

s1nse it is popularly understood._ The term "woollen fabrics" in that sense was not wide. enough to cover non-woven material which is \VOOl-based.

Blankets. rugs and sha·.vls etc. have been spccifica11y included in the entry out of abundant caution to indicate that '\vooTJen fabrics" in entry 21 means not only woo11en garments but also woollen mter'.al used as covering or for similar other purposes. [473 H, 474 F-GJ

(3) It is plain from entry 21 inSchedule I to the -Central EXcises and Salt Act, 1944 that the respondent's products did no_t fall within it as they are non- \\'Oven felts from wooUen fibres. [474 C] ' CIVIL APPELLATE- JURISDICTION : Civil Appeal No. 1037 of 1971. (From thei Judgment and Order dated the 17th June, 1971 of the Gujarat High Court in Special Civil Application No. 112/67).

V. P. Raman, Addi. Sol.

Genl. and Girish Chandra, for the appellants.

G. N. Dikshit and R. N. Dikshit, for the respondent.

. The Judgment of the Court was delivered by GUPTA, J.-The respondent is a partnership firm manufacturing II non-woven felts from woollen fibres which -are utilised for the purpose of filtration in heavy industries. Between August 25, 1965 and January 5. 1967 the Excise authorities compelled the re'spondent to pay Rs. 55,055/87 p. as excise duty o_n its products. The respondent

. .""

) .I

UNION V. GUJARAT WOOLLEN FELT MILLS (GUPTA, J.) 473

filed a writ petition in the High Court of Gujarat at Ahmedabad for A quashing the order levying excise duty on the felts manufactured by the respondent treating them as 'woollen fabrics' covered by entry 21 in Schedule I to the Central Excises and Salt Act, 1944 (hereinafter referred to as the Act).

The High Court allowed the writ petition holding . that the respondent's products were not 'woollen fabrics' and directed refund of the sum of Rs. 55,055/87 p. collected as excise duty from the firm.

The Union of India has preferred this B appeal on certificate of fitness granted by the High Court questioning the correctness of the decision.

The only question in the appeal is whether the felts manufactured by the respondent are "woollen fabrics" within the meaning of entry 2 I in the first schedule to the Act.

The writ petition describes the process of manufacture and states that the thickness of the felts produced varies from 1 mm. to 50 mms. according to the specification of the customers and that these are really machine pressed raw woolwaste. It is stated further that the felts manufactured _by the process described are neither sheets nor fabrics, they arc not material from which garments could be prepared nor they could be used as covering

or for similar other purposes. Entry 21 in the first schedule to the Act reads :

"21. WOOLLEN FABRICS-

"Woollen fabrics" means all varieties of fabrics manufactured wholly of wool or which contain 40 per cent, or more by weight of wool and includes blankets, !obis, rugs, shawls and embroidery in the piece, in strips or in motifs :

Provided that in the case of embroidery in the piece, in strip9 or in motifs, the percentage referred to above shall be in relation to the base fabrics which are embroidered- (!) Woollen fabrics, other than Ten percent. embroidery in the piece, in ad valorem. strips or in motifs. ----

(2) Embroidery in the piece in The duty for strips or in motifs, in or in the time being relation to the manufacture leviable on the of which any process is ordbase fabrics, inarily carried on with the if not already aid of power. paid, plus twenty percent. ad valorem.

Exp/ana(ion.-"Base fabrics" means fabrics falling under sub-item ( 1) of this Item which are subjected to the process of embroidery."

Are the products of the respondent's factory woollen fabrics ?

Fabric means woven material.

The articles manufactured by the respondent, as already stated, are non-woven felfs from woollen fibres.

It is contended on behalf of the appellant, Union of India.

. .t74

SUPREME COURT REPORTS [1977] 3 s.c.R .

that in a technical sense the felts manufactured by the respondent would still be woollen fabrics.

The well-known rule in interpreting items in statutes like the one we are concerned with is that "resort should be had not to the scientific or the technical meaning of 'such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense".

(Commissioner of Sales Tax, Madhya Pradesh, Indore v.

M/s.

Jaswant Singh Charan Singh)(').

The High Court has held that a trader dealing in woollen fabrics would not regard the respondent's products as woollen fabrics, but it does not appear that there is any evidence on the record of the case to support the finding.

However, an inquiry regarding the meaning of the term woollen fabrics as commercially understood would be relevant only when there is doubt asto the sense in which the term has been used in entry 21; it seems to us plain from the entry read as a whole that the respondent's products did not fall within it. Entries 19 to 22 in the schedule all deal with fabrics.

Entry 19 dwls with cotton fabrics which is stated to cover, barring the exceptions specified, all varieties of fabrics manufactured either wholly or partly from cotton and includes, dhoties, sarees, chadders, bed-sheets, bed-spreads etc.

Entry 20 relates to slik fabrics which is said to mean all varieties of fabrics manufactured either wholly or partly from silk with certain exceptiom and includes embroidery in (he piece, in strips or in motifs. Entry 22 relates to rayon or artificial silk fabrics which also is said to mean all varieties of fabrics manufactured either wholly or partly from rayon or artificial silk with some exceptions and includes embroidery in the piece, in strips or in motifs etc. In this group, entry 21 describes woollen. fabrics as meaning all varieties of fabrics manufactured out of wool, barring the exceptions mentioned, including blankets,

lohi's, rurs, shawls and l'mbroidery in the piece, in strips or in motifs. If the term 'woollen fabrics' in this entry had been used in its technical or scientific sense and, if in that sense, it. was \Vidc enoun-h tO cover ro:n \Voven material \vhich js \Vool-based, then it is difficult to explain why the entry should specifically mention blankets, rugs and shawls as hein2 included within it. No one could possibly be in any doubt in respect of these few items if the term was so pervasive, and there was no reason for sinoling out these specific objects.

On the contrary, the mention of these items sugests that the word 'fabrics' in entry 21 has been used to mean woven material in which sense it is popularlv understood, and blankets, rugs and shawls etc. have been specifically included in the entry out of abundant caution to. indicate that 'woollen fabrics' in entry 21 means not only woollen garments but also woollen material used as covering or for similar other purposes. We therefore find no reason to take a view different from that taken by the Hirrh Court. .

The appeal is. dismissed with costs.

. .. . --1

S.R .

Appeal dismissed.

. (I) A.LR. 1967 S.C. 1454.

UNION OF INDIA AND ORS

GUJARAT WOOLLEN FELT MILLS

April 7, 1977

M. H. BEG, C.J.

A. C. GUPTA

P. S. KAILASAM, JJ.

Central Excises and Salt Act, 1944

Schedule I

Gujarat High. Court

Charan Singh

V. P. Raman

Girish Chandra

G. N. Dikshit

R. N. Dikshit

GUPTA

August 25, 1965

UNION V. GUJARAT WOOLLEN FELT MILLS

High Court of Gujarat at Ahmedabad

Union of India

Jaswant Singh Charan Singh

Hirrh Court


M/S. CARBORANDUM CO.

C.I.T., MADRAS April 11, 1977

{P. N. BIIAGWATI, N. L. UNTWALIA AND S. MURTAZA FAZAL ALI, JJ.]

/11con1e-tax Act, 1922-S. 4(1)(e)-Distinction between concept of actual accrual and notion on deenied accrual-Reference under lncome-tnx Act, 1922- New facts neither raised nor considered by the Tribunal cannot be entertailled by the Hij[h Court at reference s/af?e.

 Inco111e-tax Act, 1922-S. 42-Scope and applicab;!ity of 'business connection'.

The appellant a foreign company \vithin the Il1eaning of s. 2(5.·\) of Jncome Tax Act, entered into an agreement with 1\1/s. Carborandum UniversaJ Ltd., _..,,,- having its registered office at 1\Iadras on June 22, 1955 and rendered certain technical and knowhow services. In view of the said services it \vas to rece; ve from the Indian cornpany an annual service fee equal to 3 per centum of the net sale proceeds of the products manufactured by the latter.

During the year of account relevant to the assessment year 1957-58 the appellant company received a sum of Rs. 95,762/- from the Indian company as its service fee.

A £ood slab of it \va3 deducted at source on account of incometax and super-ax. The appellant con1pany filed its return of incoine for the year in question w:th an application for refund of the entire tax deducted at source.

The income tax officer took the view in his assessment order that sc;::, of the technical fee p3i<l to the American company was earned by it in India and only that small ..amount wns assessable to income-tax and directed the refun(J of rnajr; r portion of the tax deducted at sou"rce to the assessee company. The Commissioner of Income-tax in exercise of his revjsional p1; nvers under s. 33B of the Act took the view that at least 75% of the technical fee earn..:!d _by the assessing company during the year of account had accrued of arisen in Jr.dia even though

the technical information was supplied by the asseSsee company from outside India and the technical personnel furnished by the assessee company to the Indian company although worked under the control of and \vas pad for by the Jatl':r

inasmuch as the situ'i of the services so rendered was in India.

Treating the technical fee in the nature of royalty paid, it directed the Incomtax Officer to revise the ass:ssrnent on the basis that 75% of it should be taken as incnn1e accruing or 3-rising in Ind.a to the assessee company. On appeal, the Appe!Infe Tribunal set aside the said ordr and restored that of the Incometax Ofil:er even

though it was of the view that even 5% of the technical fee conlJ not be taken as income of_ the asses$ec COJDpany taxable under the Act. The Tribunal held

thnt Li.! u:::e of the tchn'.cal assistance and know-ho\v given by the American Company and made use of by the Indian Company in the taxable territor\' couid not make the former Fable to payment cf income tax on the amount of tec_hnical fee received by it nor \vas it any royalty. It also rejected a new stand t:iken by the Revenue that the assessee company must be deemed to be working in conjunction with the Indian Company in the manufacture of its rroducto;.

On reference under s. (€(1) of th~ Act the Revenue took another new plea that the agreement c1car1Y established a business connect£on between the two companies and as such techrlical fee received by the assssee comp:iny hnd-accrued or arose from such business connection a:ssessable to income-tax under s. 4(1) (c) rt>nd withs. 42 of the Act. "fhc objectiorl of the-assessce con1pany to the entertninment of the new Point at the reference stage that it did not arise out of the Tribunal's order was over-ruled bv the Hie:h Cntl't nn the ground that tte

1question referred to _was in general terms and comnrehensive en"ouzh to embrace

within its ambit the point of anniicability of s. 42f1) of thP. Act to th,,. trn., o:ic tions in question. Upholding the stand taken .on behalf: of the Revenue the Jlia:h

Court answered the qu"stion referred to it in it'I favour against the asscssce company. On appeal by certificate the appeliant contended :

(I) That th.e High Court could not go into the matter of business connection between the two companies when such a question was never raised or in issue at any earlier stage;

(2) That the High Court was wrong in founding the tax liability of the .asses&ee company on the basis of the alleged business connection. Its finding or view in that regard is wholly erroneous.

(3) That even assuming that the High Court was right in its view of basing the tax liability of the assessee company on the alleged

u:siness connection, it failed to examine the questioli of apport1omnent under a. 42(3) of the Act.

(4) That apportionment under s. 42(3) and determination of the

tax liability of the assessee company in pursuance thereof could not be more than the liability to pay tax on 5% of the totai technical fee as found by the Income-tax Officer and upheld by the Tribunal, HELD : ( 1) The technical service fee received by the assessee company fron1 the Indian company during the accounting year relevant to the assessment year 1957-58 did not accrue or arise in India. Since 5% of the technical service fee was brought to tax by the I.T.O. and no a.ppeal was filed against if on beh:ilf of the assessee compa-ny, the technical fee in excess of 5% was not taxable.

[484 B-D]

(2) The High Court did not keep in view the distinction between the concept of actual accrual and the notion of deemed accrual evidenced from s. 4(1)(c), & s. 42 but mixed the one with the other while answering the reference in question.

The income assessable to income tax u/s. 4(l)(c) is of two kinds viz. (1) accruing or arising in the taxable territories and (ii) deemed to accrue or arise to the non-resident in the taxable territory.

The concept of actual accrual or arising of income in the taxable territories, although not depending upon the receipt of the income in the taxable territories is quite distinct and apart from the notion of deemed accrual or arising of the income. [481 A-Bl

(3) The High Court was wrong in entertaining a! the reference stage on the basis of the alleged general and compendiom nature of the question referred to it by the Tribunal the iiCw poi_nt based upon the theory of business connection. which was neither raised before the Tribunal nor considered by it; nor did it arise on tho findings of fact recorded by it. [481 F-0]

Commissioner of lncon1e Tax, Bombay v. Scfndia Steani NaviRa.lion Co. Ltd. 42 ITR 589, followed.

(4) The High Court went wrong in its.approach to the question raised before it and did not quite correctly appreciate the scope and applicability of s. 42 of the Act. On a plain reading of sub-sections (1) and (3) of section 42, it would appear that income accruing or arising from any business connection in the taxable territories-even thoua:h tho income rii:ay accrue or arise outside the t:uable territories-will be deemed to be income accrui~ or arising in such territory, provided operations in connection with such business, either <Jll or a part, are carried out in the taxable territory. If all such operations are carried out in the taxable territory, su_b-section ( 1) would apply and the entire income accruing or arising outside the taxable territory but as a result of the operations in connection with the business giving rise to the income would be deemed to accrue or arise in the taxable territories. If, however, all the operations nre not carried out in the taxable territories, the profits and gains of the businCss deemed to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories.

Thus comes in the question of apportionment llndr subsection (3) of s. 42. [482 C-F[

Co1nmissioner nf lnco1ne Tax. P1111iab v. R. D. Aggarwal & Co. and Anr. 56 ITR 20, referred to.

(5) In the instant case the High Court was wroni in its view that activities of the foreign personnel lent or deputed by the American company a!11ounted to a business activity carried on by that company in the taxable terntory. The service rendered by the American company in that connection was wholly and

' I

solely rendered in the foreign territory;, No part of the activity or operation could be said to have beep. carried on by-the American company in 'India, even if there was any business connection between the earning of the irico1ne in the shape of the technical fee by the American company and the affairs. of the Indian company. In the absence of such a sustainable finding, the provisions of s. 42 either of sub-section (1) or of sub-section (3)' .were not attracted at all.

In order to rope in the income of a non-resident under the deeming provision' it must be shown by the Department that some of the operations were carried out in India in respect of which the income is sought to be assessed. [483 E-H]

Conunissioner of lncotne Tax, Madras I v. Carborandun1 Co. 92 ITR 411 ,._, overruled. ' C.I.T. Bon1bay City I. v. Tata Che1nicals Ltd. 94 ITR 85, appr )Ved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 89 of 1975.

(From the Judgment and Order dated the 4!h May 1973 of the Madras High Court in Tax Case No. 183 of 1967).

N. A. Palkhivala, R. Balasubramanian, !. B. Dadacha.nji, A. C.

Moneses, Mrs. A. K. Verma, C. R. Dua, Ravinder Narain and 0. C.

Mathur, for the appellant.

R. M. Mehta, and R. N. Sachthey, for the respondent.

K. R. Ramamani and !. Ramamurthi, for the Intervener.

The Judgment of the Court was delivered by

UNTWALIA, J. This is "'11 appeal by certificate from the decision of the Madras High Court iu a Reference made by the Income-tax Appellate Tribunal under section 66(1) of the . Income Tax Act, 1922-hereinafter referred to as the Act.

M/s Carborandum Co. of the United States of America-hereinafter called the American Company or the Assessee Company, is the appellant. The Central Board of Revenue has declared it a, Company under sectiqn 2(5A) of the Act. It has specialized in the manu" facture of bonded abrasive and coated abrasive products.

For the improvement and advancement in the line of its manufacture, it has a Research Wing also.

The results of the research are incorporated in pamphlets prepared from time to time.

The Assessee Company e, ntered into an agreement dated June 22,' 1955 with M/s Carborandum Universal Ltd.-hereinaftcr called the Indian company, having its registered office at Madras.

As per the terms of the agreement the American Company was to render and did render to the India, n Company certain technical and know-how services of the following nature :-

(i) furnishing of technical information and know-how with respect to the manufacture of bonded abrasive and coated abrasive products;

(ii) providing tedhnical management including factory design and lay out, plant and equipment production, purcJiase of materials, manufacturing specifications and. quality. of product; ·

4-502 SCI/77

(iii) furnishing comprehensive technical information of all developments in the manufacture of the special products;

(iv) providing the Indian company with a resident factory manager for starting the plant and superi, ntending

B. its operations during its initial production stages, as also other techmcal personnel necessary for the operation of the plant;

( v) training Indian personinel to replace the foreign technical personnel as quick'ly as possible.

In lieu of all the services aforesaid, as per the agreement, the Americn company was to receive from the 1ndian company an annual service fee equal to 3 per centum on the net sale proceeds of !he products manufactured by the latter each year.

During the year of account relevant to the assessment year 1957- 58 the assessee company received a sum of Rs. 95,762/- from the Indian company as its service fee.

A good slab of it was deducted at source by the Indian company on account of income-tax and supertax payable .on \he said sum. The American company filed a Return of income for the year in question with an application for refund of the entire tax deducted at source. The Income-tax Officer took the view in his assessment order that 5 % of the technical fee paid to the American company was earned by it in India and Qnly that small amount was assessable to income-tax.

Consequently, he directed the refund of a major J\(lrtion of the tax dedqs:ted at source to the assessee company.

The Commissioner of Income-tax in exercise of his power under section 338 of the Act revised the order of the Income-tax Officer a, nd took the view that at least 7 5 % of the technical fee earned by the assessee company during the year of account 'had accured or arisen in India.

In the main, the basis of his order was that even though the tehnical information was supplied by the assessee company from outside India, the information received by the Indian company was put to use only in the taxable territory and the technical fee paid by it was mainly on account of such use.

The Commissioner was also of the view that the technical personnel furnished by the assessee company to the Indian company although worked under the control of and was paid for by the latter, the situs of the services so rendered was in India Treating the technical fee in the nature of royalty paid, it directed the Income-tax Officer to revise the assessment on the basis that 75% of it should be taken as income accruing or arising in India to the assessee company.

The Ainerican company went up in appeal to the Appellate Tribunal from tlae revisional order of the CommissiQner. The Tribunal set aside the said order and restored that of the Income-tax Officer, even though it seems to be of the view that even 5 % of the technical fee could not be taken as income of the assessee company taxable under the Act.

But since the assessee company had not gone in appeal because of the smallness of the amount of tax payable on the basis of 5 % , the Tribunal was obliged to maintain the order of the Income-tax Officer.

The Tribunal took some new materials into consideration at the A appellate stage in order to ascertain the true nature of the service rendered by the American company to the Indian compa, ny as per - the terms of the agreement and the place of rendering such service.

The findings of the Tribunal are :

(1) The American company rendered service to the Indian

compa, ny for the starting of the factory in India in the B shape of examination of the factory design and lay i out prepared by the latter and sending its advice by post.

These services were not proved to have been rendered in India.

(2) The pamphlets and bulletins incorporating the results of research made by the American company were c also furnished to the Indian company by post and

thu~ the said service was also rendered outside India. ,,; .

(3) That the services of the foreign technical personnel were made available to the Indian company by the American company outside the country.

The former employed such personnel in India on the basis of the various agreements of employment entered between D the Indian company and such personnel. They were the employees of the Indian company under its control for their day-today working.

(4) The training of the Indian personnel directly by the employees of the assessee compa.riy was unparted outside India.

The Tribu!!al did not agree with the views of the Commissioner that E the payment of the technical fee of 3 % was dependent upon the use of the information in India or on the volume and extent of such use.

The use of the technical assistance and know-'how given by the American Company and made use of by the Indian Company in the taxable territory could not make the former liable to payment of income tax on the amount of technical fee received by it nor was it any royalty.

F A new stand taken before the Tribunal on behalf of the Revenue that the asse'ssee company must be deemed to be working in conjunction with the Indian company in the manufacture of the products in question was also rejected.

I The Commissioner of Income-tax-the respondent in this appeal, asked for a reference and the Tribunal referred the following question ) of law for the opinion of the High Court : G

~ "Whether on the facts and in the circumstances of the case, the technical fee in excess of 5 per cent received by the assessee company from the Indian company during the account year relevant to the assessment year 1957-58 has accrued or arisen in India?"

Before the High Court on behalf of the Revenue the point of conjunction between the American company and the Indian company in the manufacture of abrasive products was put in the fore-front.

Finding this stand unsustainable in face 0£ the agreement between. the two companies and in absence of any other material in support of it, the High Court rejected this stand outright.

It, however, folt persuaded to permit the Revenue to change its stand even at the reference stage and to urge that the agreement clearly established a business connection between the two companies; the technical fee received by the assessee company •had accrued or arose from such business connection and hence it was assessable to income tax under sectio, n 4 (I) ( c) read with section 42 of the Act.

The objection of the assessee company to the entertaimnent of the new point at the reference stage that it did not arise oil! of the Tribunal's order was over-ruled by the High Court on the grou, nd that the question referred was in general terms and comprehensive enough to embrace within its ambit the point of applicability of section 42(1) of the Act to the transactions in questio.n.

Upholding this sta11d taken on behalf of the Revenue the High Court answered the question referred to it in its favour and against the assessee company. Hence this appeal.

Mr. N. A. Palkhivala, learned counsel for the appellant company urged the following fou~ points in support of .this appeal :-

( 1) That the High Court could not go into the matter of business connection between the two companies when such a question was never raised or in issue at

(2)

(3)

(4)

any earlier stage.

That the High Court was wro11g in founding the tax liability of the assessee company on the basis of the alleged business connection.

Its finding or view in that regard is wholly erroneous.

That even assuming that the High Court was right in its view of basing the tax liability of the assessee company on the alleged business con.nection, it failed to examine the question of apportionment under section 42(3) of the AcL That apportiomnent nuder section 42(3) and determination of the tax liability of the assessee company in pursuance thereof could not be more than the liability to pay tax on 5 % of the total technical fee as found by the Income-tax Officer and upheld by the Tribunal.

Certain other companies have intervened in this appeal and some argument was advanced on their behalf too in support of the main argument of Mr. Palkhivala.

Section 4 ( 1) of the Act provides :-

 "Subject to the provisions of this Act, the total infome of any previous year of any person includes all income, profits and gains from whatever source derived which-

(c} .................................... if such person is not resident in the taxable territories during such year, accrue or aiise or are deemed to accrue or arise to him in the taxable territories durinll such year : "

j l

CARBORANDUM co. v. C.I.T. (UntwaUa, !.) iii

The income assessable to income tax, therefore, is of two kinds viz .A

(i) accruing or arising in the taxable territories and (ii) deemed to accrue or arise to the non-resident in the taxable territory.

The concept of actual accrual or arising of income in the taxable territories, although not dependent upon the receipt of the income in the taxable territories, is quite distinct and apart from the notion of deemed accrual or arising of the income. The High Court does not appear to have kept this distinction in view and mixed the one with the other While B deciding the reference \n question. Section 42 of the Act concerns itself With a deemed accrual or arising of the income within the taxable territories.

Under sub-section (1) "All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories ................. . shall be deemed to be income accruing or arising Within the taxable territories, and where the person entitled to the income, profits or C gains is not resident in the taxable territories, shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax : " If the whole of the deemed income can be roped in for the levy of tax under section

(1) of section 42, no question of any apportionment arises. If not, sub-section (3) is attracted. It says :- D

"In the case of business of which all the operations are not carried out in the taxable territories, the profits and gains of the business deemed under this section to accrue or arise in the taxable territories shall be only such profits and gains

as are reasonably attributable to that part of the operations carried out in the taxable territories." E

In Comissioner of Income-Tax, Bombay v. Scindia Steam Navigation Co. Ltd. (1) it has been pointed out that when a question of law was neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it. In the instant case the question of law based upon the theory of business connection was neither raised E before the Tribunal nor considered by it, nor did it arise on the findings of fact recorded by it. The High Court, therefore, was wrong in entertaining this new point at the reference stage on the basis of the allegedly general and compendious nature of the question referred to it by the Tribunal. But we do not propose to rest our judgment only on this technical aspect of the matter as we find that even on merits the assessee company has a good case to succeed before us.

The High Court agreed with the Tribunal that the technical information furnished by the assessee company by post was a service which could not .be Said to have been rendered in India; putting it to use in India is not relevant as opined by the Commissioner. But fo regard to the fact of the foreign technicians ha\iing been employed by the H

(I) 42 I.T.R. 589.

lndia, n company on payment of salary in India, it took the view that the service was rendered in India as foreign technicians were deputed by the assessee company.

In the opinion of the High Court it did amount to some activity or service in India.

The, n the High Court proceeds to say : "Therefore, we are of the view that the assessee having rendered at least some services in India which arno_nnts to a business !lCtivity the technical fee should be taken to have accrued through or from its business connection in India." Even though, according rtor the High Court, the finding aforesaid was sufficient to rope in the entire receipts of the assessee company as income having accrued or arisen in India as a resnlt of its business connection. it felt obliged to make the apportionment to the extent of 75% because of the apportiomnent so made by the Commissioner. In our judgment the High Court went wrong in its approach to the question raised before it and did not quite correctly appreciate the scope and applicab!ity of section 42 of the Act.

On a plain reading of sub-sections (1) and (3) of section 42 it would appear that income accruing or arising from any business connection in the taxable territories-even though the. income may accrue or arise outside the taxable territories-will be deemed to be income accruing or arising in such territory provided operations in connection with such business, either all or a part, are carried out in the taxab1e territories.

If all such operations are carried out in the taxable territories, sub-section ( 1) would apply and the entire income accruing or arising 011tsi~ the taxable territories but as a result of .the operations in coMectiollj with the business giving rise to the income would be deemed to accrue or arise in the taxable territories. If, however, all the operations are not carried out in the taxable territories the profits and gains of the business deemed to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories.

Thus comes in the question of apportiomnent nuder sub-section (3) of section 42.

In Commis•ioner of Income-Tax Punjab v.

B. D. Aggarwal and Co. and another,(') Shah J, as he then was, speaking for this Court said at page 24 :

"A business connection in section 42 involves a relation between a business carried on by a non-resident which yields profits or gains and some activity in the taxable territories which contributes directly or indirectly to the earning of these profits or gains.

It predicates an element of continuit~ between the business of the non-resident and the activity in the taxable territories : a stray or isolated transaction is normally not to be regarded as aJ business connection.

Business connection may take several forms: it may include carrying on a part of the main business or activity incidental to the main business of the non-resident through an agent, or it may merely be a relation between the business of th~ nonresident and the activity in the taxable territories, which facilitates or' assists the carrying on of that business.

In each case the question whether there is a business connection

(!) S6 I.T.R. ,20.

from or through which iucome, profits or gains arise or accrue to non-resident must be determined upon the facts and circumstances of the case."

The learned Judge says further :

"A relation to be a "business connection" must be real and intimate, and through or from which income must accrue or arise whether directly or indirectly to the nonresident.

But it must in all cases be remembered that by section 42 income, profit or gain which accrues or arises to a non-resident outside the taxable territories is sought to be brought within the net of the income-tax law, and not income, profit or gain which accrues or arises or is deemed to accrue or arise within the taxable territories.

Income received or deemed to be received or accruing or arising or deemed to be accruing or arising within the taxable territories in the previous year is taxable by section 4(1) (a) and ( c) of the Act, whether the person earning is a resident or non-resident. If the agent of a non-resident receives that income or is entitled to receive that income, it may be taxed in the hands of the agent by the machinery provision enacted in section 40 (2). Income not taxable under section 4 of the Act of a non-resident becomes taxable under section 42

(1) if there subsists a connection between the activity in the taxable territories and the business of the non-resident, and

i~ through or from that connection income directly or indirectly arises." ·

The High Court was wrong in its view that activities of the foreign personnel lent or deputed. by the American company amounted to a business activity carried on by that company in the taxable territory.

The finding of the Tribunal in that regard was specific and clear and:

was unassailable in the reference in question. The American company has made the services of the foreign personnel available to tho Indian company outside the taxable territory.

The latter took them as their employees, paid their salary and they worked under the direct control of the Indian company.

The service rendered by the American company in that connection was wholly and solely rendered in the foreign territory.

Even assuming, however, that there was any business connection between the earning o~ the income in the shape of the technical fee by the American company and the affairs of the Indian company, yet no part of the activity or operation could be said to have been carried on by the American company in India.

And in absence of such a sustainable finding by the High Court the provision of section 42, either of sub-section (1) or of sub-section (3), were not attracted at all. The judgment of the High Court under appeal reported in Commissioner of Income-Tax, Madras-I, v. Carborandum Company(') is not correct. It has rightly) been pointed out by', the Bombay High Court in Commissioner of Income-Tax Bombay City I 'V. Tata Chemicals Ltd.(') with referenc~ to the similar or almost

( 9l I.T.R. 411.

94 I.T.R. 85

SUPREME COURT.REPORTS

(1977] 3 S.C.R.

identical provisions in section 9(1) of the Income-tax Act, 1961 that in order to rope in the income of a non-resident under the deeming provision it must be shown by the Department that some of the operations were carried out in India in respect of which the income is sought to be assessed.

The finding of fact recorded by the Tribunal being a, gainst the department in that connection the Bombay High Court refused to call for a reference.

For the reasons stated above we hold that on the facts and in the circumstances of the case the technical service fee received byi the Assessee company from the Indian company during the accounting year relevant to the assessment year 1957-58 did not accm~ or arise in India nor could it be deemed to have accrued or arisen in India.

But since 5 % of the technical service fee was brought to tax by the

IncOlme Tax Officer and no appeal was filed against it on behalf of the Assessee-Company, we cannot interfere with the addition of thi~ 5 % but it must be held that the technical fee in excess of 5 % was not taxable.

We accordingly allow the appeal, set aside the judgment of the High Court and answer the question referred by the Tribunal in favour of th~ assessee and against the Revenue.

The Commissioner will pay the costs of the appeal as also of thel reference to the assessee.

S.R.

Appeal allowed.

M/S. CARBORANDUM CO

C.I.T., MADRAS

April 11, 1977

N. L. UNTWALIA

S. MURTAZA FAZAL ALI, JJ.

S. 4(1)(e)

S. 42

s. 2(5.·\)

Jncome Tax Act

Carborandum UniversaJ Ltd.

India

s. 33B

s. 4(1)

s. 42

s. 42(3)

s. 4(1)(c)

s. 42

s. 4(l)(c)

s. 42

section 42

s. 42

s. 42

CIVIL APPELLATE JURISDICTION

N. A. Palkhivala

R. Balasubramanian

B. Dadacha.nji,

A. C.

Moneses

A. K. Verma

C. R. Dua

Ravinder Narain

. C.

Mathur

R. M. Mehta

R. N. Sachthey

K. R. Ramamani

UNTWALIA

section 66(1)

Income Tax Act, 1922

Central Board of Revenue

June 22,' 1955

Carborandum Universal Ltd.-hereinaftcr

Madras

section 338

section 42

section 42(1)

section 42(3)

section 42(3)

Palkhivala

Section 4

Section 42

section 42

lndia

section 42

section 42

section 42

Shah

section 42

section 42

section 4(1)

section 40

section 4

section 42

section 42

section 9(1)

Income-tax Act, 1961

Bombay High Court