Febt-ua,..v. t'J

SUPREME COURT REPORTS [1960]

THE COMMISSIONER OF INCOME-TAX,

BOMBAY

CHANDULAL KESHA VLAL & CO., PETLAD (S. K. DAs, J. L. KAPUR and M. HrnAYATULLAH, JJ.)

Income-tax-Managing Agent relinquishing part of commission due from managed company-Whether amount relinquished is deductible as expenditure expended wholly and exclusively for purpose of his business-Finding, if one of fact-Indian Income-tax Act, I922 (XI of I922), s. ro(2) (xv).

The assessee was the Managing Agent of a company and for the accounting year 1950 its total commission was Rs. 3,09, n4.

At the oral request of the Directors of the Company made during the accounting year.the assessee agreed to accept Rs. l,00,000 only as its commission and relinquished the balance. The Income-tax Officer and the Appellate Assistant Commissioner held that the sum of Rs. 3,09, n4 had accrued to the respondent as commission and that the whole amount was taxable. On appeal the Appellate Tribunal held that out of the accrued commission the amount relinquished, i.e. Rs. 2,09,114, was allowable expenditure under s. 10(2) (xv) of the Income-tax Act. The Tribunal found that: (i) the financial condition of the managed company was unsatisfactory, (ii) in the past also the assessee had been remitting part or whole of its commission when the profits of the managed company were unsatisfactory, (iii) in the year of account the profits of the Compagy would have been Rs. 3,63,078 if the whole commission was deducted, which would be the lowest since 1940, (iv) it was not a bounty by the respondent to the managed company, (v) the business of the respondent was so linked up with the managed company that if the latter was put on a sounder position the assessee would .also get a larger commission in future, and (vi) the respondent had accepted Rs. l,00,000 at the instance of the managed company.

The appellant contended that s. 10(2)(xv) applied only when the expenditnre was incurred directly for the purpose of the business of the assessee and not when it affected his business only indirectly as a result of the benefit to the managed company.

Held, that the finding of the Tribunal that the amount which was claimed as a deductible allowance under s. lo(z)(xv) was laid out wholly and exclusively for the purpose of the assessee's business \Vas one of fact and as there \Vas evidence to support it, it could not be interfered with. In deciding whether the payment was a deductible expenditure the question of commercial expediency and the principles of ordinary commercial trading had to be taken into consideration. If the payment of expenditure was incurred for the purpose of the trade or business of the assessee it did not matter that the payment enured to the benefit of a third party also.

Another test was whether the transaction was properly entered into as a part of the assessee's legitimate

- -41: .

commercial undertaking in order to facilitate the carrying on of its business. But if the expense was incurred for fostering the business of another only or was made by way of distribution of profits or was wholly gratuitous or for some improper or oblique purpose outside the course of business then the expense was not deductible.

Tata Sons Ltd. v. The Commissioner of Income-tax, Bombay,

(1950) I.T.R. 460, Union Cold Storage Company Ltd. v. Jones, 8 T.C. 725 and Odhams Press Ltd. v. Cook, 23 T.C. 233, referred to.

Usher's Wiltshire Brewery Ltd. v. Bruce, 6 T.C. 399, Eastern Investments Ltd. v. The Commissioner of Income-tq; x, West Bengal. [1951] S.C.R. 594 and Atherton v. British Insulated & Helsby Cables Ltd, 10 T.C. 156, relied on

CIVIL

APPELLATE

JURISDICTION: Civil Appeal No. 167 of 1958.

Appeal hy,,, special leave from the judgment and order dated the February 15, 1955 of the Bombay High Court in Income-tax Reference No. 29 of 1953.

0. K. Daphtary, Solicitor General of India, R. Ganapathi Iyer and D. Gupta, for the appellant.

N. A. Palkhivala and I. N. Shroff, for respondent.

1960. February 17 The Judgment of the Court was delivered hy

KAPUR J.-This is an appeal hy special leave against the judgment and order of the High Court of Bombay. It arises out of a reference hythe Incometax Appellate Tribunal under s. 66(1) of the India.:µ

Income-tax Act (hereinafter termed the Act.) The appellant in this appeal is the Commissioner of Income-tax and the respondent is a partnership firm which, by an agreement dated September 23, 1935, was appointed the Managing Agent of the Keshav Mills Ltd., Petlad. For the sake of convenience the respondent firm will, in this judgment, he termed the Managing Agent and the Kesha'v Mills Ltd., the Managed Company. By cl. 4 of this agreement the Managing Agent was to get a commission of 4% on the sale proceeds of the cloth, yarn or other goods manufactured and sold by the company and 15% on the amount of hills for charges of ginning and pressing and dyeing or bleaching and on the amount of labour bills and other work done in the running of

the factory. The commission was exclusive of other charg4ls suah as adat, interest, discount, brokerage eto.

Commissioner of

Income-Tax,

Bombay v.

Chandulal Keshavlal <!>-Co.

Kapur].

z960

Commissioner of

Income Tax,

Bombay v.

ChandHlal Keshavlal 6- Co.

Kapur],

The amount of commission was to be credited in the account of the Managing Agent every six months and it was entitled to interest at the rate of six per cent. per annum on the amount so credited. There were other conditions in the Agency Agreement which are not necessary for the purposes of this case. The tota, l commiMion for the accounting year 1950 was a sum of Rs. 3,09,114. Sometime during the accounting year, at the oral request of the Board of Directors of the Managed Company, the Managing Agent agreed to accept a sum of Rs. 1,00,000 only as its commission which was credited to the account of the Managing Agent in the books of the company at the end of the year 1950. The Income-tax Officer and the Appellate Assistant Commissioner held that the amount which accrued as commission to the Managing Agent was Rs. 3,09,114 and that amount was taxable.

An appeal was taken to the Income-tax Appellate Tribunal by the Managing Agent. By an order dated February 26, 1953, the Appellate Tribunal held that the amount which accrued to the Managing Agent as commission was Rs. 3,09,114 but it accepted Rs. 1,00,000 as taxable income and Rs. 2,09,114 was held to be au allowable expenditure withins. 10(2)(xv) of the Act and it was therefore allowed. The Tribunal in its order said that in the past also the Managing Agent had, in the interest of the Managed Company, waived a portion of the Commission and then made the following observation:

"The Tribunal has also held that if the Managing Agency Commission or. a part thereof is foregone in the interest of the Managed Company, it would be allowed as an expenditure under Section 10(2)(xv) of the Act. We allow the amount foregone under Sectiori 10(2)(xv)." Against this order, at the instance of the appellant, a case was sta.ted to the Bombay High Court for its opinion on the following two questions :

(i) Whether on the facts and in the circumstances of the case, the sum of Rs. 2,09,114 was assessable in the hands of the assessee as its income.

(ii) If the answer to question (i) is in the affirmative whether the said sum is an allowable

deduction from the assessee's income under Section 10(2)(xv) of the Act. .

The judgment of the High Court shows that it was inclined to decide the questions in favour of the appellant, but at the instance of the Managing Agent the Appellate Tribunal was directed to submit a supplementary Statement.

 No fresh evidence was led before the Tribunal but it appears that some emphasis was laid on a letter of the Managing Agent dated September 18, 1951, sent to the Income-tax Officer. In this letter the Managing Agent had stated that the only commission which accrued to it was a sum of Rs. 1,00,000 and nothing had been foregone from out of 1Jhe commission or relinquished. It is also stated that the amount.of Rs. 1,00,000 accrued because of the variation of the terms of the Managing Agency Agreement. Reference was also made in the letter to the Balance Sheet of the Managed Company ending December 31, 1950, showing that the paid up capital was rupees 30 lacs, depreciation fund rupees 14 lacs, totalling rupees 44 lacs. As against this sum the Block Account showed a debit of over rupees 48 lacs and it was with the object of strengthening the financial position of the Managed Company and in its interest that the

Chairman of the Board of Directors had requested and the Managing Agent had agreed to accept rupees 1 lac as commission. The Income-, tax Appellate Tribunal submitted a supplementary Statement of

Case dated May 3, 1954, in which it said (l} that there was no oblique motive in accepting Rs. 1,00,000 instead of rupees 3 lacs odd as commission and that the remission was bona fide. It was also remarked that it was not even faintly suggested by the Department that what was given up by the Managing Agent from the commission was done with some dishonest motive; (2) the amount foregone by the Managing Agent was an expenditure incurred wholly and exclusively for the purpose of the business of the.

Managing Agent; (3) that when the appeal was decided by the Appellate Tribunal it did not have tP, e slightest doubt in its mind that the commission was foregone for business considerations; and (4) that the 6

Commissioner of

Income-Ta:r,

Bombay v.

Chandulal Keshavlal & Co.

Kapur].

Commissioner of

Income-Tax,

Bombay v.

Chandulal Keshaulal a;. Co.

Kapur].

amount was given up or expended for reasons of commercial expediency. A very significant paragraph in the supplementary Statement of the Case was paragraph 4 which stated:

"It was assumed that what was in the Interest of the managed company was in the interest of the managing agent. The interests of the managing agent and the managed company are, so to say, linked up. If the managed company is put on a sounder position, not only the shareholders of the managed company benefit, but also the managing agent, inasmuch as the managing agent would get a larger commission in future." Tl; te basic facts which arise out of the Statement of the Case and the documents which were produced by the Managing Agent are: (1) the rather unsatisfactory financial position of the Managed Company as shown by the Balance Sheet ; (2) in the pa; st also the Managing Agent had been remitting a part or whole of the commi5sion whenever the profits of the Managed Company were unsatisfactory; (3) in the year of account the profits of the managed company as per profit and loss account were Rs. 5,72,192. This was after paying to the Managing Agent a commission of Rs. 1,00,000 and if the whole of the accrued commission had been deducted then the profits would have been Rs. 3,63,078 which would be the lowest amount since 1940 and the amount of commission would have been the highest; (4) it was not a bounty by the Managing Agent to the Managed Company;

(5) the business of the Managing Agent was so linked up with the Managed Company that if the latter was put on a sounder position the Managing Agent would also get a larger commission in future ; and (6) the Managing Agent had accepted Rs. 1,00,000 at the instance of the Chairman of the B@ard of Direqtors of the Managed Company. This was the material on which the Tribunal gave a finding in its supplementary Statement 'that what was given up by the assessee was an expenditure for the purpose of the assessee's business'. On this statement the High Court by its judgment dated February 15, 1955, held

the finding of the Appellate Tribunal to be one of x96o fact. It said : Commissioner of "Now this is a finding of fact and unless it can Income-Tax, be suggested that there was no evidence to sup- Bombay port the finding of fa0t we are concluded by this v. finding of fact." Chandulal Therefore the question in regard to s. 10(2)(xv) was Ke•havlal & Co. answered in favour of the Managing Agent. It is' Kapur J. against this judgment and order that the appellant has come in appeal to this Co-µrt by special leave.

For the appellant it was argued that there was no evidence in support of the finding that the amount of about rupees 2 lacs which was foregone by the Managing Agent was wholly and exclusively laid out for the purpose of the Managing Agent's business and emphasis" was laid.'on the finding of the Appellate Tribunal in its order dated February 26, 1953, that in the past the Commission had been given up by the Managing Agent in the interest of the Managed Company and that if the Managing Agent's commission or part thereof was foregone in the interest of the Managed Company it was not an allowable expenditure under s: 10(2)(xv).

Tb was also argued that there was no evidence in support of the finding that the amount was expended for the benefit of the Managing Agent and that even if as a result of the _amount being foregone the Managing Agent was helped because it benefited the Managed Company, then s. 10(2)(xv) would not be attracted; in other words the question had to be looked at from the point of view of the direct concern of the Managing Agent and not of remoter or indirect result which may flow as a result of the benefit to the Managed Company and in each case the question on each set of facts is whether the benefit is to the assessee i.e., the Managing Agent or to some one else.

In his argument the learned Solicitor General referred to the following cases : Tata Sons Ltd. v. The Commissioner of Income-tax, Bombay (1 ).

There the assessee was the Managing Agent of another company and was entitled to receive commission on the net profits of the Managed Com.

(I) [1950) IS I.T.R. 460.

Commissioner of Income-Tax, Botnbay v. .Chandulal Keshavlal & Co.

Kapu• ].

pany. During the relevant year the assessee voluntarily paid a sum of money towards the bonus which the Managed Company paid to some of its officrs and claimed it a.s a deductible expenditure under s. 10(2)(xv) of the Act. This deduction was allowed on the ground that the object of the payment from the point of view of commercial principles was to increase the profits of the Managed Coni.pany and thereby the Commission of the Managing Agent. It was argued there also that the payment was entirely gratuitous but that contention was repelled, because the object of the payment from the point of view , of commercial principles was to increase the efficiency of the Managed Company and thereby to increase the profits of the Martaged Company and the commission of tho Managing Agent .. And thus there was an important nexus between the Managed Company and the Managing . Agent. It was also held that the question whether money was wholly expended or laid out for the purpose of the business of the asses.see company must be determined upon principles of ordinary commercial trading.

The second case was Union Cold Storage Company Ltd. v. Jones (1 ). There a British company transferred its foreign cold storage business carried on by it directly or through subsidiary companies to an American Company for a term of years in consideration of certain annual payments to the subsidiary companies and ofa guarantee of any sum necessary to meet its fixed charges and maintain its dividends.

The property remained the property of the British Company but it was placed under the sole control of and was used by the American Company for its own business.

There was no demise or lease to the American Company and no rent was payable but the American Compa.ny was to keep it in proper repair and working order. The British Company paid fire insurance premiums in respect of the premisesmachinery etc., and claimed deductions for the sums so paid out of its profits and for wear and tear of the machinery and plant of the transferred business. It was held that the insurance premiums did not

(1) 8 T.C. 725.

3 S.C.R. SUPREME COURT REPORTS 45 --t represent money wholly and exclusivly laid out for z96o the purpose of trade of the assessee company as the c -. -. ,,

- . ommissioner OJ machmery and plant were not used for those purposes Income-Tax, and the deductions claimed were therefore not Bombay admissible. It was argued in that case that by the v. agreement the assessee company had secured not 01; ly Chandutal h fi b I Keshavlal & Co. the right to receive upto t e sum speci ed ut a so -'- that the American company would have an incentive to send business to the assessee company in order that its profits should rech that specified figure and therefore the expenditure was deductible. But it was held that in order to be so deductibie it had to be for the benefit of the trade which immediately concerned the assessee company. It was also held that if it was

>' of such a nature then the deduction was prima facie a proper one even though it might inure to the benefit of a third party and the matter had to be tested from the point of view of the assessee company ..

The learned Solicitor General relied upon a passage in the judgment at p. 741 :

" ............ they (the Commissioners) find that there was a reflex result of'this Agreement which inured to the benefit of the Appellant Company but I think in terms they indicate that that result was not a direct result but a reflex result.

In their reasons in which they cameto their conclusion they say the arrangements with regard to the stores and machinery and plant were not of an ordinary nature and they did not extend the Appellant Company's market. They also say that the machinery and plant in question is used primarily for the purposes of the trade of the National Company. With those findings before us I think it is quite clear as a matter of fact that the facts so found differentiate this case wholly from Usher's case." From this it was sought to be argued that what one is to look at is the direct result to' the assessee and -14 not remoter or indirect results. What the court found in that case was that insurance premiums were paid by the British Company as owners and not in the course of business and that the assets were used not for its business but for the business of another.

J{apur ].

Commissioner (If

Jne(}ttfe-T a~.

Bombay

Chandulaf Keshavlal & Cu.

Kapur].

46 SUPREME COUR'l' REJ?ORTS

[19GO]

The real test laid down after reference to Usher's

Wiltshire Brewery Ltd. v. Bruce (1 ) was that deduction may be allowed in eases where the payment or expenditure is incurred for the P.Urpose of the trade of the subject making the return and it does not matter that this payment may inure to the benefit of a third party.

Another case relied on was Eastern Investments Ltd.

v. The Oomm, issioner of Income-tax, West Bengal(2 ) where a private limited company had a share capital of rupees 250 lacs of which shares of the value of rupees 50 lacs were held by A and the remaining by his nominees.

The company was in need of money and with the consent of A it resolved to reduce the share capital by rupees 50 lacks by the oompany taking over rupees 50 lacs worth of shares and issuing to A debentures of the face value of rupees 50 lacs ea, rrying interest at 5%. The Income-tax Appellate Tribunal and the High Court held that the interest on debentures was not an allowable expenditure under s. 12(2) of the Act. This Court, on appeal, was of the opinion that the transaction was of a commercial nature from the point of view of the assessee company and on a review of all the facts it came to the c9nclusion th11t the tra.nsaction was voluntarily entered into in order indirectly to facilita, te the carrying on of the business of the company and so made on the ground of commercial expediency. The argument that the debentures were held by the shareholder was rejected on the ground that it made no difference whether the debentures were held by the share4older or by an outsider. The test laid down by this case therefore was that in the absence of fraud or an oblique motive and if a transaction is of a nature which is entered into in the course of business of the assessee and is commercially expedient then it does become a deductible allowance. If as a result of the transaction the assessee benefits it is immaterial that a third party also benefits thereby. At page 599, Bose J., observed; ''In the absence of a suggestion of a fraud this is not televant ; i.t all for giving effct to the provi-

(•) 6 T.C. 399.

(2) [1951] S.C, R, 594.

sions of section 12(2) of the Income"tax Act. Most z960 commercial transactions are entered into for the - ·.' l b fi f b h "d Commissioner OJ mutua ene t o ot s1 es, or at any rate each In ome-Ta:r side hopes to gain something for itself. The test . ombay ' for present purposes is not whether the other party v. benefited, nor indeed whether this was a prudent Chandulal transaction which resulted in ultimate gain to tlie Keshavlal ~Co. appellant, but whether it was properly entered into as a part of the appellant's legitimate commercial undertaking in order indirectly to facilitate the carrying on of its business." In Odhams Press Ltd. v. Oook(1) the assessee company had acquired all the shares in a subsidiary company and printed and published a periodical for the subsidiary company. The subsidiary company made a loss during the ac9ounting year and the assessee company wrote off that amount of loss from the amounts due to it from the subsidiary company and claimed a deduction of that loss from its profits on trading account or as money laid out or expended for the purpose of its trade. The Special Commissioners found that the sum was not written off wholly or exclusively for the purpose of their trade or business and therefore it was an inadmissible deduction. This question was held to be one of fact and that there was evidence to justify that conclusion. Viscount Caldecote L.C., said that the trade or the business of one Company even though it may affect very closely the trade or business of another w.as not the same thing as that other's trade or business. Iu computing the profits and gains of the assessee, it is his trade that is to beTegarded. At page llO, Viscount Maugham observed:

"My Lords, the question thus put answers itself.

There were beyond dispute, the two Telationships, between the Company and the Coming Fashions Ltd., already referred to. The allowance of the £2927 5s. 8d. to Coming Fashions Ltd., might have been ' laid out or expended for the purpose of the trade' of Coming Fashions Ltd., or to some extent for both purposes and it is plain that these facts

alone were sufficient to show that there was evi.dence

(r) 23 1". C. 233.

Kap1!1Y J.

Commissioner of

Jncorne-Tax,

Bombay v.

Chandulal Keshavltil 6" Co.

Kapur J.

to justify the conclusion of the Commissioner that the sum written off was not written off wholly and exclusively for the purpose of the trade or business of the Appellants." The connection between the assessee company and the subsidiary company, apart from the holding of shares, was that the assessee company did printing for the subsidiary company. The effect of the transaction was debiting of another entity's loss to the assessee company but there was no direct connection between the profits of the assessee company with that of the amount claimed. The real. point in that case was that the amount was not wholly and exclusively written off for the purpose of the assessee company.

Viscount Maugham said :

"ls there any real ground for contending on the evidence that one reason for writing off the sum was not to enable Coming Fashions Ltd., to continue to carry on its .business as compiler and vendor of 'Everywoman's' ?" The cases we have discussed above show that it is a

question of fact in each case whether the amount which is claimed as a deductible allowance under s. 10(2)(xv) of the Income Tax Act was laid out wholly and exclusively for the purpose of such business and if the fact.finding tribunal comes to the conclusion on evidence which would justify that conclusion it being for them to find the evidence and to give the finding then it. will become an admissible deduction. The decision of such questions is for the Income-tax Appellate Tribunal and the decision must be sustained if there is evidence upon which the Tribunal could have arrived at such a conclusion.

Another fact that emerges from these cases is that if the expense is incurred for fostering ; the business of another only or was made by way of distribution of profits or was wholly gratuitous or for some improper or oblique purpose outside the course of business then the expense is not deductible. In deciding whether a payment ofmoncy is a deductible expenditure one has to take into consideration questions of commercial expediency and the principles of ordinary commercial trading. If the payment or expenditure

l r

is 'incurred for the purpose of the trade of the assessee it does not matter that the payment may inure to the benefit of a third party (Usher's Wiltshire Brewery Ltd. v. Bruce(1) ).

Another test is whether the transaction is properly entered into as a part of the assessee's legitimate commercial undertaking in order to facilitate the carrying on of its business; and it is -I immaterial that a third party also benefits thereby (Eastern Investments Ltd. v. The Commissioner of Income-tax, West Bengal (2) ).

But in every case it is a question of fact whether the expenditure was expended wholly and exclusively for the purpose of trade or business of the assessee. In the present case the finding is that it was laid out for the purpose of .- the assessee's business and there is evidence to support this finding. Mr. Palkhivala referred in this connection to Atherton v. British Insulated & Helsby Cables Ltd. (3) where, at page 191, Viscount Cave L. C., observed:

"Lt was made clear in the above cited cases of

Usher~ Wiltshire Brewery v. Bruce (1) and Smith v.

Incorporated Council of Law Reportinq (4) that a sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order indirectly to facilitate the aarrying. on of the business may yet be expended wholly and exclusively for the purpose of the trade; and it appear's to me that the findings of the Commissioners in the present case bring the payment in question within that description. They found (in words which I have already quoted) that the payment was made for the sound commercial purpose of enabling the Company to retain the services of existing and future members of their staff and of increasing the efficiency of the staff; and after referring to the contention of the Crown that the sum of £31,784 was not money wholly and exclusively laid out for the purposes of the trade under the Rule above referred to, they found that the deduction was admissible-thus in effect, although

(r) 6 T.C. 399

(2) [r95rl S.C.R. 594

(3) Io T.C. r55

(4) 6 T.C. 477

Commissioner of

Income-Ta:i:,

Bombay v.

Chandulal Keshavlal &- Co.

Kapur].

I960

Commissionsr of

Income-Tax,

Bombay v.

Chandulal Keshavlal & Co.

Kapuy ].

F 6bruary. il9

not in terms, negativing the Crown's contention. I think that there was ample material to support the findings of the Commissioners, and accordingly that this prohibition does not apply." Thus in cases like the present one in order to justify deduction the sum must be given up 'for reasons of commercial expediency ; it may be voluntary, but so long as it is incurred for the assessee's benefit the deduction would be claimable.

The Income-tax Appel.late Tribunal has found in favour of the Managing Agent that the amount was expended for reasons of commercial expediency, it was not given as a bounty but to strengthen the Managed Company and if the financial position of the Managed Company became strong the Managing Agent would benefit thereby. Th>l.t. finding is one of fact.

On that finding the Income-tax Appellate Tribunal rightly came to the conclusion that it was a deductible expense under s. 10(2)(xv).

In our OJ>inion the judgment of the High Court was right and we would dismiss this appeal with costs . • Appeal dismissed. 1-

THE COMMISSIONER OF INCOME-TAX,

BOMBAY NORTH & OTHERS.

M/S. HARIV ALLABHDAS KALIDAS AND CO.,

(S. K. DAs, J. L. KAPUR AND M. HrnAYATULLAH. JJ.)

Income-tax-Managing Agent's Commission payable at the end of the year-Rate of Cm1<missio1~ reduced before then by agreement-If voluntary reliiiquishment of a portion of accrued commission.

The respondent-firm Harivallabhdas Kalidas was appointed

the Managing Agent of Shri Ambika Mills Ltd., the appellant in -" the connected appeal by means of a Managing Agency Agreement the relevant portion of which ran thus:-

" (2)(a) The Company shall pay each year to the said Firm either the commission of 5 (five) per cent on the total sale proceeds of yarn, and of all cloth, manufactnred tram cotton,

THE COMMISSIONER OF INCOME-TAX,

BOMBAY

CHANDULAL KESHA VLAL & CO., PETLAD

L. KAPUR

Indian Income-tax Act

s. 10(2)

Income-tax Act

s. 10(2)(xv)

K. Daphtary

R. Ganapathi Iyer

D. Gupta

A. Palkhivala

I. N. Shroff

KAPUR

High Court of Bombay

s. 66(1)

Income-tax Act

September 23, 1935

Keshav Mills Ltd., Petlad

Kesha'v Mills Ltd.

cl. 4

Chandulal Keshavlal

February 26, 1953

Section 10(2)(xv)

Bombay High Court

Section 10(2)(xv)

September 18, 1951

December 31, 1950

May 3, 1954

February 15, 1955

s. 10(2)(xv)

Ke•havlal & Co.

Kapur

s. 10(2)(xv)

s. 10(2)(xv)

S.C.R. SUPREME COURT REPORTS 45

Usher

Chandulaf Keshavlal

Income-tax Appellate Tribunal

s. 12(2)

Bose

section 12(2)

Keshavlal

Viscount Caldecote

Viscount Maugham

Coming Fashions Ltd.

s. 10(2)(xv)

Palkhivala

Chandulal Keshavlal & Co.

Kapuy ]

s. 10(2)(xv)

COMMISSIONER OF INCOME-TAX

HARIV ALLABHDAS KALIDAS

Income-tax-Managing Agent's Commission

Harivallabhdas Kalidas


3 S.C.R.

SUPREME COURT REPORTS 397

any opinion on this part of the appellant's argument. i96o All we wish t,_o say is that we would inevitably have.

I d R. P. Kapur to consider the evidence ourse ves an to appreciate v. it before we pronounce any opinion on the validity or State of Punjab otherwise of the argument. It is not a case where the - appellant can justly contend that on the face of the re- Gajendragadkar J. cord the charge levelled against him is unsustainable •.

The appellant no doubt very strongly feels that on the relevant evidence it would not be reasonably possible to sustain the charge but that is a matter on which the appellant will have to satisfy the ma.gistrate who takes cognisance of the case. We would, however, like to emphasise that in rejecting the appellant's prayer for quashing the proceedings at this stage we are expressing no opinion one way or the other on the merits of the case.

There is another consideration which has weighed in our minds in dealing with this appeal. The appellant has 'come to this Court under Art. 136 of the Constitution against the decision of the Pµnjab High Court; and the High Court has refused to exercise its inherent jurisdiction in favour of the appellant. Whether or not , we would have come to the same conclusion if we were dealing _with the matter ourselves under s. 561-A is not really very material because in the present case what we have to decide is whether the judgment under appeal is erroneous in law so as to call for our interference under Art. 136.

Under the circumstances of this ca§e we are unable to answer this question in favour of the appellant.

The result is the appeal fails and is dismjssed.

Appeal dismissed.

THE STATE OF BOMBAY

M/S. S. S. MIRANDA LIMITED (P. B. GAJENDRAGADKAR and K. N. WANCHOO, JJ.) Excise Duty-Imposition at successive stages of transportation of excisable article-Validity of-Bombay Abkari Act, z878 (Bom. V of

I878), SS. IO, I9 & I9A. . The respondent held a trade and import licence for foreign liquor-as well as a velldor's licence under the Bombay Abkari

March 25.

r960 Act. It kept liquor in a bonded warehouse.

On April z, 1948, . the appellant asked the respondent to remove the liquor from State of Bombay the bonded warehouse after paying the necessary excise duty. v.

The respondent paid the duty, got the transport permits and s. s. Mimnda Ltd. took over the liquor, some of which it sold. On December 16, 1948, the appellant issued a notification doubling the duty on foreign liquor and called upon the respondent to pay the additional duty on the liquor which was still lying in its godown.

The respondent contended that the imposition of additional duty on the stock on which duty had already been paid at the time of its issue from the bonded warehouse was illegal. The appellants' case was that the respondent was bound to pay the duty prevailing on the transport of liquor at the time of transporting the same from its premises to another place within the State of Bombay:

Wanchoo ].

H dd, that the imposition of the additional excise duty was illegal.• Once the duty had been paid the liquor could be transported free from any further imposition, except where it was transported to a region where the duty was different from the region where the duty was paid. There was no power in the State Government to impose duty at every movement during the course of the trade. Though there was power in the legislature to levy duty at every movement of liquor, it had not exercised that power ; nor had it delegated such power to the State Government.

CIVIL APPELLATE JURISDICTION: Civil Appeal _, No. 21 of 1956.

Appeal from the judgment and decree dated August 12, 1954, of the Bombay High Court in Appeal No. 45 of 1954, arising out of the judgment and decree dated February 17, 1954, of the said High Court in Suit No. 246 of 1956.

H.J. Umrigar, N. N. Keswani and R. H. Dheba1, for the appellant.

M. C. Setalvad, Attorney-General of India, S. M.

Dubash and G. Gopalakrishnan, for the respondents.

1960. March 25.

The Judgment of the Court was delivered by

WANCHOO, J.-This is an appeal on a certificate granted by the Bombay High Court. The brief facts necessary for its disposal are these. Messrs. S. S.

Miranda Ltd. (hereinafter called the respondent) is a company and was holding a trade and import licence of foreign liquor as well as a vendor's licence under the Born bay Abkari Act (Born. V of 1878) (hereinafter

...; -

called the Act), upto the end of March 1949. It used z960 to keep the liquor in a bonded warehouse. On April 2, 1 9 d . c d b h S f State o Bombay 1 48, the respon ent was m1orme y t e tate o v. Bombay (hereinafter called the appellant) to remove s. s. Miranda Ltd. the liquor from the bonded warehouse after paying the necessary excise duty. In pursuance of this letter, Wanchoo J. the respondent paid the duty and got transport permits from the appellant. It may be mentioned that the bonded warehouse was in the premises of the respondent itself and all that happened after the payment of the duty was that the liquor no longer remained in bond but came into possession of the respondent. The transport permits were issued on April 5, 1948, and thereafter the respondent took over the liquor and some of it was sold. On December 16, 1948, a notification was issued by the appellant (hereinafter referred to as the Notification) whereby the duty on foreign liquor was doubled. Thereupon the respondent was asked by the appellant to pay the additional duty upon the liquor which was still lying in its godown and was also told that it would not be permitted to deal with that liquor until the additional duty was paid. The respondent objected to this demand but paid the duty, which came to over two lacs of rupees, under protest. Thereafter a notice was given by the respondent under s. 80 of the Code of Civil Procedure to the appellant and was followed by a suit on the original side of the Bombay High Court.

The main contention of the respondent was that the Notification in so far as it imposed and levied additional duty on the stock of foreign liquor on which the duty had already been paid at the time of its issue from the bonded warehouse was illegal, invalid and ultra vires the Act and in particular beyond the scope of s. 19 of the Act. The respondent therefore claimed refund of the duty which it had paid under protest and also interest at 6 per cent. per annum from the date of payment till the date of recovery.

The suit was resisted by the appellant, and its case was that the Notification was valid and that the respondent was bound to pay the duty prevailing on the

z960 transport of the excisable articles at the time of transporting the same from its premises to another place 51"1' of Bombay within the State of Bombay.

5 5 M .v. da L d Thus the only question that fell for consideration

 .'.'.::

• was whether .the additional duty imposed and levied

Wanchoo J. under the Notification was legally levied. The learned judge, who tried the suit, was of the opinion that it was competent for the legislature to impose tax on excisable articles whenever they were transported from one place to another and that that power was delegated to the State Government which was thus competent to impose a duty on excisable articles not only once when they were transported in the beginning but also thereafter whenever they were transported from one place to another within the Stn.te before the goods passed into the hands of the consumer, and dismissed the suit.

The respondent went in appeal against the dismissal.

The appeal was heard by a Division Bench and was allowed and the suit was decreed with interest at certain rates. The Division Bench was of the opinion that reading ss. 10 and 19 together it was clear that when the duty mentioned in s. 19 had been• paid, the prohibition contained in s. 10 must disappear subject to the Explanation to s. 19. It also held that the first proviso to s. 19A of the Act was really a proviso to s. 19 and determined the rate at which the duty was to be paid and that there could be no further imposition of duty against the terms of that proviso by the Notification.

The main contention on behalf of the appellant before us is that it is open to the legislature to impose excise duty at more points than one and that that was what has been done by the legislature in this case and the Government when it made the Notification in December 1948 was carrying out the provisions of the Act.

Reliance in this connection was placed on ss. 3(10), 10 and 19 of the Act, and it is urged that reading these three sections together it will be clear that the Notification was valid and within the powers of the State Government.

The relevant portion of the Notification is in these terms:-

"In exercise of the powers conferred by section 19 r960 of the Bombay Abkari Act, 1878 (Bombay V of 5 b 1878), and in partial supersession of all previous tate

0~.Bom ay

ordes and notifications issued thereunder, that is to s. s. Miranda Ltd. say, m so far as they relate to the imposition of excise and countervailing duties charged on the Wanchoo J. excisable articles specified in column 1 of Schedules A a.nd B hereto annexed, the Government of Bombay is pleased to direct that- .

(a) excise or countervailing duty, as the case may be, shall be imposed on the excisable articles specified in column 1 0f Schedule A at the rate specified in columns 2 and 3 thereof, when such excisable articles are-

(i) imported into the Province in accordance with the provision of sub-section (1) of section 9 of the said Act; or

(ii) issued from any brewery, distillery or a warehouse established under the said Act in the Province ; or

(iii) transported from the premises of persons holding a Trade and Import license under the said Act to any place within the Province : Provided that no such duty shall be imposed on the excisable articles which have been imported into British India and were liable on such importation to duty under the Indian Tariff Act, 1934, or the Sea Customs Act, 1878 : Provided further that if excise or countervailing duty has already been paid-on such excisable articles for their import, issue or transport for consumption into, to or within any place in the Province, the amount of duty to be imposed shall be the difference between the amount of duty leviable at the rates specified in the said Schedule and that already paid on such 11rticles; and

(b) .........•...........•.•...............•..••........•....•.. ,, Then follow the Schedules which it is unnecessary to ..-, set out. By the notification excise duty at the rates

-r specified in the Schedules is imposed on excisable articles when they are transported from the pi:emises of persons holding a trade and import licence . under the said Act to any place within the State. The second

proviso, however, provides that where some excise duty has already been paid in connection with trans- State of Bombay port, the amount of duty to be imposed under the

Notification would be the difference between the duty

I960

5 5 Mfranda Ltd. 1 bl d th N t•fi t• d th d t l d ev1a e un er e o l ca 10n an e u y a rea y

wamhoo J. paid.

The narrow question therefore is whether this additional duty can be legally levied by the State of Bombay and the answer to it will depend on the three provisions of the Act relied upon by the appellant.

Sec. 3(10) defines "to transport" to mean "to

move to one place from another place within the State ". This definition is very wide and would cover any movement of excisable article at any stage from one place to another within the State.

Then comes s. 10, the relevant portion of which is in these terms-

" No intoxicant and no hemp shall be exported or transported unless- ( a) the duty, if any, payable under Chapter VI has been paid or a bond has been executed for the payment thereof." This section thus forbids the transport of any excisable article unless the duty payable under Chapter VI (which deals with the subject of duties) has been paid .

Lastly, we come to s. 19 which is the charging section and is in these terms-

" An excise duty or countervailing duty, as the case may be, at such rate or rates as the State Government shall direct may be imposed either generally or for any specified local area, on any excisable article- ( a) imported in accordance with the provision of sub-section (1) of s. 9; or

(b) exported or transported in accordance with the provisions of s. 10 ; or ( c) manufactured under a license granted in accordance with the provisions of section 14 or section 15; Provided that--

(i) duty shall not be so imposed on any article which has been imported into India and was liable on such importation to duty under the Ind.ian Tariff Act, 1894 or the Sea Customs Act, 1878 :

"" -

,..

T. <

" .

Explanation-Duty may be imposed under this z96o section at different rates according to the places to

' B , h. h . bl . l . t b d c State o1 omnay w IC any exmsa e artic e IS o e remove .1.or conv Sumption, or according to the varying strengths s. s. Mir:nda Ltd. and quality of such article." This section gives power to the State Government to Wanchoo /. fix the rate or rates on which the duty will be levied on transport of excisable articles. The Explanation to the section gives powers to the State Government to impose duties at different rates according to the places to which any excisable article is to be remov.ed for consumption or according to the varying strengths and quality of such article.

The argument on behalf of the appellant is that in view of the very wide definition of the word " transport " and the prohibition of transport contained in s. IO without payment of duty it is clear that every time there is transport the duty becomes payable at the rate fixed by the State Government under s. 19 and that there is nothing in these sections which in any way limits the power to levy duty at every stage of transport. If this argument is accepted it will logically mean that every time there is transport of an excisable article duty will have to be paid till the excisable article has been actually consumed. In other words when for example, the excisable article is transported from the bonded warehouse by a wholesaler he will have to pay duty on it; when a wholesaler sells to a retailer there is bound to be transport ·

from the wholesaler's premises to the retailer's premises and the duty will have to be paid again. Finally when the retailer sells it to a consumer there will again be transport from the retailer's place to the consumer's place and duty will have to be paid a third time.

Further if the interpretation as urged on behalf of the appellant is accepted, the duty will have to be paid again and again in the cases mentioned above, even though the rate remains the same.

The fact that in this particular case the rate was changed and that the State Government only demanded the extra duty will not affect the question of interpretation of the three provisions of the Act with which we are concerned.

Was it then the intention of the legislature when it

r96o made these provisions to levy duty irrespective of the

/ B b fact whether the rate was changed or not, again and .>late o om ay . . bl t" 1 d f h b v. agam as an excrna e ar 10 e passe rom t e ended s. s. Miranda Ltd. warehouse to the wholesaler, from the wholesaler to the retailer and from the retailer to the consumer ?

Wanchoo J.

It is true that it was competent for the legislature to make such a provision; but the question is whether the three provisions which we have set out above, amount to making such a provision. Sri Umrigar for the appellant fairly admits that if the rate of duty had not been changed there would not have been any demand of any further duty on any sale by the respondent which might have resulted in transport and that the practice was not to charge the same duty over again on sale by the wholesaler to the retailer or by the retailer to the consumer even though these sales resulted in transport except where the Exp7anation to s. 19 applies. If this practice is in accordance with law when there is no change in duty we cannot see how the excisable article which had been subjected to duty once will be liable to further duty equal to the difference when there is increase in the rate, (except of course where the Explanation to s. 19 applies).

We see nothing in s. 10 which lays down that every time there is transport, duty must be paid even though the duty has already been paid when the first transport of an excisable article takes place. What s. 10 prohibits is the transport of excisable article unless the duty has been paid thereon.

Once the duty has been paid the prohibition under s. 10 no longer applies, unless the case is covered by the Explanation to s. 19.

However wide may be the definition of " transport ", what has to be seen is whether the prohibition under s. 10 is to apply even to those excisable articles on which duty has been paid. On a plain reading of s. 10, the prohibition under that section cannot apply to transport of excisable articles on which duty has been paid. Section 19, which is the charging section, provides for levying of duty on transport in accordance with the provisions of s. 10.

This brings us back to s. 10 and the question again is whether the prohibition having been removed by payment of duty once, there fa anything in s. 10 which

' . " r

> r

requires that the duty should be paid again for transr960 porting the goods on which dutJ has been paid.

As Stale of Bombay we reads. 10 we find nothing in it which requires that v. duty should be paid again for transport once the duty s. s. Mfranda Ltd. has been paid and the prohibition removed subject __ always to the Expl, anation to s. 19. Under that Expla- Wanckoo J. nation if there are different duties in different regions and the excisable article which has paid duty of one region is rem111ved to another region where the duty is different the excess will have to be paid in order that prohibition of transport in that region may be removed. But apart from the cases covered by the Explanation we can see no justification for reading s. 10 as giving power to impose duty m the same excisable article again and again as it moves in the course of trade from, say, the bonded warehouse to the wholesaler and from the wholesaler to the retailer and from the retailer to the consumer.

Plainly, therefore, once the duty has been paid and the prohibition under s. 10 is removed the transport of the duty-paid excisable artjcle can take place free from any further imposition, except where it is tra.nsported to a region where the duty is different from the region where the duty is paid.

Nor do we find any power in the State Government to impose a duty at every movement during the course of trade in the words of s. 19.

All that s. 19 em. powers the State Government to do is to fix the rate of duty on transport in accordance with s. 10. There ia no delegation to the State Government anywhere in the Act of the power to impose duty from stage to stage during themovement of excisable articles in the course of trade. It is true that the legislature has the power if it so chooses,' to levy duty on every movement; but as we read the three provisions on whibh reliance has been placed we do not find any exercise of that power by the legislature. Nor do we find any delegation by the legislature of any such power to the State Government. The view therefore ta.ken by the Division Bench that once the duty mentioned ins. 19'has been paid the prohibition contained ins. 10 must disappea.r, (subject always to the Expl, anation to s.,,.19), and tba.t there is nothing in

~ .

1960 s. 19 delegating any power to the Siate Government of levying excise duty more than once and at more State of Bombay I t d • th f th ' bl v. t ian one porn urmg e progress o o exmsa e s. s. Miranda Ltd. goods from the time they leave the bonded warehouse till the time they reach the consumer is in our opinion Wanchoo J. correct.

It is not in dispute in this case that the Explanation to s. 19 does not apply.

Turning now tothe first proviso:to s. 19-A, it may be noticed that that section deals with the manner of levying duty. But the first proviso goes further and lays down that where the duty is levied on issue from a bonded warehouse it will be at the rate in force on the date of issue.

We agree with the Division Bench that this proviso has no logical connectiqn with s. 19-A and would more properly be a proviso to s. 19. It has nothing to do with the manner of payment but is concerned with the liability to pay at the rate prevalent on the date of issue from the bonded warehouse.

If that is so, the quantum of tax is once for all determined by this proviso subject always to the Explanation to s. 19 and cannot be increased thereafter.

Reference in this connection was made to s. 15-A also.

But that section seems to have been inserted as a measure of abundant caution and does not appear to go further than s. 10. It seems to determine the time and manner of payment in cases where excisable articles are kept in a distillery or brewery or warehouse or other place of storage established or licensed under the Act where duty may not have been paid before such storage. It is .not the charging section and cannot be read to go beyond s. 19 which is the charging section. We are therefore of opinion that on this ground also no additional duty could be charged from the respondent in this case as the Explanation to s. 19 bas admittedly no application here.

The appeal therefore fails and is hereby dismissed with costs.

Appeal dismissed .

Art. 136

Pµnjab High Court

s. 561

Art. 136

THE STATE OF BOMBAY

M/S. S. S. MIRANDA LIMITED

P. B. GAJENDRAGADKAR

K. N. WANCHOO

Mimnda Ltd.

December 16, 1948

Bombay

H.J. Umrigar

N. N. Keswani

R. H. Dheba1

M. C. Setalvad

S. M.

Dubash

G. Gopalakrishnan

WANCHOO

Bombay High Court

S. S.

Miranda Ltd.

April 2, 1 9 d . c d b h S f State

s. s. Miranda Ltd.

Wanchoo

April 5, 1948

s. 80

the Code of Civil Procedure

s. 19

ss. 10 and 19

s. 19

s. 10

s. 19

s. 19A

s. 19

ss. 3(10), 10 and 19

section 19

Bombay Abkari Act, 1878

Government of Bombay

section 9

Sea Customs Act, 1878

Mfranda Ltd.

wamhoo

Sec. 3(10)

s. 10

s. 19

s. 9

s. 10

section 14

section 15

India

Tariff Act, 1894

Sea Customs Act, 1878

s. 19

Miranda Ltd.

Umrigar

s. 19

s. 19

s. 10

s. 10

s. 10

s. 19

s. 10

s. 10

Section 19

s. 10

s. 10

s. 10

s. 19

s. 10

s. 10

s. 19

s. 19

s. 10

s. 19

s. 19

s. 19

s. 19

s. 19

s. 19

s. 15

s. 10

s. 19

s. 19


- ,,

3 S.C.R. SUPREME COURT REPORTS 407

KALINbI & OTHERS

Kalindi TA'.l'A LOCOMOTIVE.& ENGINEERING CO., LTD. "· Tata Locomotive .:;,. (P. B. GAJENDRAGADKAR, K. N. WANCHOO and Eng. Co. Ltd.

K. c. DAS GUPTA, JJ.)

Industrial Dispute-Enquiry by management into misconduct of workman-Representation by representative of Union-Whether workman entitled to.

A workman against whom an enquiry is being held by the management has no right to be represented at such enquiry by a representative of his union, though the employer in his discretion, can and may allow him to be so represented. In such enquiries fairly simple questions of fact as to whether certain acts of misconduct were committed by a workman or not fall to be considered and the workman is best suited to conduct the case.

Ordinarily, in enquiries before domestic tribunals a person accused of any misconduct conducts his own case and so it cannot be said that in any enquiry .against a workman natural justice demands that he should be represented by a representative of his Union.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 101 of 1960.

Appeal by special leave from the Award dated 2nd March, 1959, of the Labour Court, Chotanagpur Division, Ranchi, in Misc. Cases Nos. 73, 76, 77, 79-82,

84-90 of 1958.

N. G. Chatterjee, A. K. Dutt and B. P. Maheshwari for the appellants.

Sohrab D. Vimadalal, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondents.

1960. March 25. The Judgment of the Court was delivered by

DAS GUPTA, J.-When the management of -an industry holds an enquiry into . the charge!'! against a

workma:µ for the purpose uf deciding what action if any, should be taken against him, has the workman a right to be repre8ented by a representative of his Union at the enquiry? That is the principal question raised in this appeal. The 14 appellants, all workmen in Mfs. Tata Locomotive & Engineering Co., Ltd., Jamshedpur, were dismissed under the orders of the company's management on the result of an enquiry held

Das Gupta].

r96o against them. As industrial .IHsputes between these . . workmen and the company were at that time pending K":;•d• before the Industrial Tribunal,· Bihar, the company Tata Lo,; motive & filed applications purporting to be under s. 33 of the Eng. co. Ltd.

Industrial Disputes Act praying for approval of the action taken by it against the workmen. Workmen Das Gupta J also filed applications under s. 33A of the Industrial Disputes Act complaining of the action taken against them by the company. The applications of the company under s. 33 were however ultimately held to have become infructuous and the applications under s. 33A were only considered and disposed of by the Labour Court. The applications of these 14 appellants were however dismissed.

Against that order the appellants have preferred this appeal after having obtained special leave for the purpose.

The common contention urged on behalf of the appellants was that the enquiry on the results of which the orders of dismissal were based was not a proper_ and valid enquiry inasmuch as the workmen were not allowed to be represented at the enquiry by a representative of the J amshedpur Union to which these workmen belonged. It has been urged that fair play demands that at such an enquiry the workman concerned should have reasonable assistance for examination and cross-examination of the witnesses and for seeing that proper records are made of the proceedings. It has been argued that a representative of the workmen's Union is best suited to give such assistance and in the absence of such assistance the workman does not get a fair chance of making his case before.the Enquiry Officer. It appears that when on June5, 1953, requests were made on behalf of the several workmen that they shoulc; l be allowed to be represented by a representative of the Jamshedpur Mazdoor Union at the enquiry to conduct the same on workmen's behalf, the management rejected this request but informed the workmen that they could, if they so desired, be represented by a co-worker from the workmen's own department at the enquiry. The question which arises therefore is whether this refusal of the workmen's request to be represented at the

~· '

• -r . "

enquiry by a representative of their Union vitiated the I96o enquiry.

K r d' Accustomed as we are to the practice in the courts a:~ • of law to skilful handling of witnesses by lawyers Tata Locomotive e;. specially trained in the art of examination and croes- Eng. Co. Ltd. examination of witnesses, our first inclination is to think that a fair enquiry demands that the person Das Gupta J. accused of an act should have the assistance of some person, who even if not a lawyer may be expected to examine ap.d cross-examine witnesses with a fair amount of skill.

We have to remember however in the first place that these are riot enquiries in a court of law. It is necessary to remember also that in these enquiries, fairly simple questions of fact as to whether certain acts of misconduct were committed by a workman or not only fall to be considered, and straightforward questioning which a person of fair intelligence _ and knowledge of conditions prevailing in the industry will be able to do will ordinarily help to elicit the truth. It may often happen that the accused workman will be best suited, and fully able to cross-examine the witnesses who have spoken against hiru and to examine witnesses in his favour. _ It is helpful to consider in this connection the fact that ordinarily in enquiries before domestic tribunals the person accused of any misconduct conducts his own case. Rules have been framed by Government as regards the procedure to be followed in enquiries against their own employees. No provision is made in these rules that the person against whom an enquiry is held may be represented by anybody else.

When the general practice adopted by domestic tribunals is that the person accused conducts his own case, we are unable to accept an argument that natural justice demands that in the case of enquiries into a chargesheet of misconduct against a workman he should be represented by a member of his Union.

Besides it is necessary to remember that if any enquiry is not otherwise fair, the workman concerned can challenge its validity in an indust.rial dispute.

Our conclusion therefore is that a workman against whom an enquiry is being held by the management'has no right to be represented at such enquiry by a ,

Ig6o representative of his Union; though of course an

Halindi employer in his discretion can and may allow his v. employee to avail himself of such assistance.

Tata Locomotive , i;, On behalf of the appellants, Charan Singh, Parma- Eng. Co. Ltd. nand and K. Ganguli, it was urged that the orders of

Das Gupta]. dismissal were bad inasmuch as they were based on a finding of guilt of misconduct not mentioned in the charge-sheet. Each of these appellants it appears, was accused in the charge-sheet of four different acts of misconducts:-

" I. Participating in a.n illegal strike;

2. Leaving your appointed place of duty;

3. Inciting other employees to strike work;

4. Threatening and intimidating other workers. " The Enquiry Officer found each of them guilty of the first three charges. He, however, recorded no findings as regards the fourth charge but instead found these workmen guilty of a misconduct not mentioned in the charge-sheet, viz., "Behaving in a riotous and disorderly manner !Jy shouting slogans on the shop floor". On behalf of the appellants it is urged that as it is not possible to ascertain as tQ how this finding of guilt as regards misconduct not mentioned in the charge-sheet affected the decision of the manager, the order of dismissal must be set aside.

The record however discloses three oases in which the manager made orders of dismissal on a finding of guilt of only of the acts of misconduct alleged in these three charges, namely, (i) participating in an illegal strike;

(ii) leaving the appointed place of duty; and (iii) inciting other employees to strike work. There is no reason to think therefore that he would have discriminated in favour of these appellants, Charan Singh, Parmanand and K. Ganguli. The conclusion .that necessarily follows is that leaving out of account the misconduct not mentioned in the charge-sheet, viz., "behaving in a riotousand disorderly manner by shouting slogans m the shop floor '', the manager would have made the order of dismissal. The fact that this act of misconduct not mentioned in the charge-sheet was also mentioned as one of the items on which the order of dismissal was based does not therefore affect the validity of the order.

The c.harge-sheet against S. B. Nath accused him of four acts of misconduct:-

" 1.

Participating in an illegal strike; 2.

Leaving your appointed place of duty;

3. Inciting other employees to strike work; 4.

Threatening and intimidating other workers."

The relevant portion of the order of dismissal is in these words :-

" He has been found guilty of the following acts of misconduct :- .

For entering the works when not on duty and inciting other employees to strike work.

He is therefore dismissed from the service of the company ... ".

It is argued that as he has not been accused in the charge-sheet "for entering the Works when not on duty " but this had been taken into consideration in deciding on his punishment the order is bad. It has to be noticed however that "entering the Works when not on duty " is not a misconduct under the com-

~ pany's standing orders.

It is quite clear that the statement in the dismissal order as regards "entering the Works when not on duty" was really intended ·.to state the manner and occasion in which the misconduct of "inciting other employees to strike work " was committed. The unnecessary and indeed slightly erroneous mention that he had been found guilty of "entering the Works !- when not on duty " does not justify the conclusion that this fact of ·"entering the works when not on duty " played any part in the mind of the punishing authority in determining his punishment. A statement in the dismissal order "that he has been found guilty of entering the Works when not on duty" as an act of misconduct is obviously erroneous. The act of misconduct of which this appellant was found guilty was "inciting other employees to strike work" and that is the only misconduct which weighed with the punishing authority. The contention that the mention in the dismissal order of " entering the Works when not on duty" as an act of misconduct of which he had

Kalindi v.

Tata Locomotiva &

Eng. Co. Ltd.

Das (fupta ].

r960 been found guilty, vitiates the order of dismissal cannot therefore be accepted.

Kalindi On behalf of the appellant M. R. Ghosh it was urged

Tata Loc:;,,01ive & that the alleged misconduct of "deliberately prevent-

Eng. Co. Ltd. ing the man in charge of the Compressor in the repair shop from carrying out his duty" of which he is Das Gnpta J said to have been found guilty in the order of dismissal was not alleged in the charge-sheet. This is really a misreading of the charge-sheet. Against this appellant four acts of misconduct were alleged in the charge-sheet :-

" 1. Participation in an illegal strike ; 2.

Inciting other employees in the other sections of the Auto Division to strike work ; 3.

Leaving your appointed place of duty or work without permission ; 4.

Threatening and intimidating the other workers in the Repair Shop." "The dismissal order after mentioning that he was found guilty of the first three charges further states that he was found guilty of the following acts of misconduct: "threatning and intimidating the workers in the Re_pair Shop and deliberately preventing the man in charge of the Compressor in the Repair Shop from carrying out his duty." The argument is that the charge as set out in the charge-sheet does not mention this act of "deliberately preventing the man in charge of the Com-pressor in the Repair Shop from carrying out his duty." This is obviously erroneous.

The charge-sheet after alleging the four acts of misconduct went on to' give particulars of these charges.

As regards the fourth charge, viz., " threatening and intimidating the other workers in the Repair Shop " the particulars were in these words: " By threatening and intimidating others in the repair shop you stopped them from working and ; i, lso you took the Compressor man by his hand and got the Compressor stopped." The statement in the dismissal order as regards his being guilty of "deliberately preventing the man in charge of the Compressor in the Repair Shop from carrying out his duty " has in fact been mentioned in the charge-sheet, though in slightly different words.

There is no ubstance therefore in the contention th; i, t

.. -

the acts of misconduct on which the dismissal order r96o was based included one not mentioned in the charge- K 1. a a in i sheet. v.

The four acts of misconduct alleged in the charge- Tata Locomotive.S. sheet against Gurbux Singh were :-· Eng. co. Ltd.

1. Participating in an illegal strike ; 2.

Leaving your appointed place of duty; Das Gupta J.

3. Inciting other employees to strike work ; 4.

Threatening and intimidating other workers.

The Enquiry Officer's report fom:id him guilty of the following acts :- ·

1. Participating in an illegal strike;

2. Leaving his place of duty without permission;

3. Inciting other employees to strike work and 4.

Threatening and intimidating Mr. Charan

Singh to stop work.

The manager's order Qn these is in these words :-

"I have gone through the findings of the Enquiry Officer as well as the proceedings of the Inquiry.

Though Mr. Gurubux Singh created a scene on the 11th June, 1958, and left the place of enquiry, still he was given a chance and the enquiry was held at a later date.

Having gone through the evidence recorded against him during the enquiry,. I agree with the findings of the C. P. 0.. The charges being of a very serious nature, I order that he be dismissed from the services of the company with effect from the date of the charge-sheet." .

The formal dismissal order that was drawn up on the basis of this finding and served on him after stating that he was found guilty of the first three charges stated that he was found guilty of threatening and intimidating Mr. Chakravarty, chargeman, who was compelled to stop work on 21-5-58. On his behalf it has been urged that though the enquiry officer's report says that he was guilty of " threatening and intimidating Charan Singh " the General Manager misled himself into thinking that he had threatened and intimidated Mr. Chakravarty, Chargeman. There being no finding by the Enquiry Officer that Gurubux .. Singh was guilty of threatening and intimidating

.1960

Mr. Chakravarty, Chargeman, the General Manager was not entitled to take such a misconduct into consi- Kalindi deration. v.

Tata Locomotive .i;.

On an examination of the Enquiry Officer's report Eng. co. Ltd. it is however obvious that there is a clerical error in

Das Gupta ]. the concluding portion of the report in stating the finding as regards the fourth charge as "threatening and intimidating Charan Singh to stop work".

Charan Singh was really one of the striking workers and there was no question of intimidating him. It is abundantly clear from the report that the case that was sought to be made as regards the fourth charge was that Chakravarty had been intimidated and that this allegation was found proved. There could not have been and was not any allegation of Charan Singh being intimidated. It is quite clear that the name of Charan Singh was accidentally mentioned in the concluding portion of the report instead of the correct name Chakravarty. There is no justification for thinking that the General Manager who had gone through the evidence and report of the Enquiry Officer could possibly have been misled by this clerical mistake. The relevant charge was threatening and intimidating other workers, whether Charan Singh or Chakravarty was intimidated would not be of any consequence. In fact however the allegation against this appellant clearly was that Chakravarty had been intimidated by him. The body of the report shows that that was what the Enquiry Officer found proved.

It is reasonable to think that that conclusion and not the wrong statement that Charan Singh was threatened and intimidated-which was nobody's casewcighed with the General Manager in determining the punishment. In ou.r opinion, there is no substance in the contentjon urged on his behalf that the finding that Charan Singh was threatened and intimidated as an act of misconduct instead of Chakravarty was wrongly relied upon.

On behalf of the appellant S. K. Dhanda it has been urged that in making the dismissal order the General Manager wrongly thought that he had been found

guilty of all the four acts of misconduct which were against him in the charge-sheet though in fact he was

found guilty only of three and the fourth charge was not proved. The four acts of misconduct alleged in the charge-sheet were :-

 ri;6d

Kalindi

V,

(1) Participation in an illegal strike;

(2) Leaving his place of duty without Tata Locomotive & permis- Eng. Co. Ltd. sion;

(3) Inciting other employees in the Paint Shop, Das Gupta].

Propeller Shaft Section, Rear Axle Section and Press Section of the Auto Division to stop work;

(4) Behaving in a riotous and disorderly manner \tnd threatening and intimidating another coworker.

The formal order of dismissal that was drawn up stated that he had been found guilty of the following acts of misconduct :-

" (1) Participating in an illegal strike;

(2) Leaving his place of duty without permission;

(3) Inciting other employees in the Paint Shop, Propeller Shaft Section, Rear Axle Section and Press Section of the Auto Division to stop work.

(4) Threatening and intimidating another employee by name Mr. T. S. N. Rao, T. No. 6610/60205/1, and stopping him fr01µ doing his work.

He is therefore dismissed from the service of the

" company ......... .

The Enquiry Officer's report states the conclusions reached by him thus :-

" From the statement of the witnesses, it has been conclusively proved that Mr. Dhanda:

(1) participated in an illegal strike;

(2) left his place of duty without permission ;

(3) incited other employees to stop work.

It can be said that the charge of threatening and intimidating has not been proved beyond doubt." If one looks at the formal order of dismissal only it seems that though the charge of threatening and intimidating other employees was not proved against him the order of dismissal was partially based on it.

If there was nothing else this might be a serious infirmity in the order. We find however that the General Manager recorded his order on the formal Report itself in these words :- •

x960

Kalindi v.

Tata Loaomotive &

Eng. Co. Ltd.

Das Gupta j.

''I have gone through the findings of the Enquiry Officer and the proceedings of the enquiry. Even though the charge of threatening and intimidating other workers has not been proved against Mr.

Dhanda the other charges are also of a serious nature. In the circumstances, I order that he be dismissed from the service of the company with effect from the date of the charge-sheet." This was dated July 3, 1958, and the formal order also bears the same date. Reading the two together it is quite clear that the General Manager in passing the order of dismissal proceeded on the basis that the charge of threatening and intimidating other employees had not been proved against Mr. Dhanda but a mistake crept into the formal order that was drawn up and among the acts of misconduct mentioned as those of which Dhanda had been found guilty and on which the dismissal order was based the fourth charge as regards threatening and intimidating other employees was also mentioned. It is proper to hold that this was an accidental clerical mistake and that in fact the General Manager did not proceed on the wrong basis that Dhanda had been found guilty on this fourth charge a !so.

The mere fact that such a clerical error appears in the formal order does not affect the validity of the order in any way.

We have therefore come to the conclusion that the separate contentions pressed on behalf of seven of the appellants that the Tribunals below did not consider certain infirmities in the order cannot also be sustained.

The appeal is accordingly dismissed, but in the circumstances we make no order as to costs.

Appeal dismissed.

' . ,_ .

407

KALINbI & OTHERS

l'A LOCOMOTIVE.& ENGINEERING CO., LTD

P. B. GAJENDRAGADKAR

K. N. WANCHOO

K. c. DAS GUPTA, JJ.

N. G. Chatterjee

A. K. Dutt

B. P. Maheshwari

Sohrab D. Vimadalal

S. N. Andley

J. B. Dadachanji

Rameshwar Nath

P. L. Vohra

DAS GUPTA

Jamshedpur

Das Gupta

Industrial Tribunal,· Bihar

s. 33

Industrial Disputes Act

Das Gupta

s. 33A

Industrial Disputes Act

s. 33

s. 33A

J amshedpur Union

June5, 1953

Jamshedpur Mazdoor Union

Das Gupta

hiru

Charan Singh

Parma- Eng. Co. Ltd.

K. Ganguli

Parmanand

S. B. Nath

M. R. Ghosh

Das Gnpta

Gurbux Singh

Charan

Singh

Gurubux Singh

11th June, 1958

Chakravarty

Gurubux .. Singh

S. K. Dhanda

T. S. N. Rao

Dhanda

July 3, 1958


3 S.C.R.

SUPREME COURT REPORTS 417

MRS. KUSUMBEN D. MAHADEVIA v.

THE COMMISSIONER OF INCOME-TAX,

BOMBAY.

(S. K. D.As, J. L. KAPUR and M. HIDAY.A.TULL.AH, JJ.)

Income-tax-Reference-High Court's jurisdiction-If can decide a question not decided by the Tribunal-Indian Income-tax Act, I922 (XI of I922), s. 66-The States (Taxation Concessions) Order, I949, para. 4.

The appellant was a shareholder of a company known as Mafatlal Gagalbhai and Co., Ltd. The Company with its registered office at Bombay was at all material times resident in British India. It was also doing business in the former Baroda State and used to keep its profits derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari. In the year 1949 Mafatlal Gagalbhai and Co. Ltd. declared dividends out of profits which had accrued partly in British India and partly in the Indian State. , The appellant was assessed to income-tax on the dividends earned by her. She did not bring those dividends into British India and claimed the benefit' of para. 4 of the Merged States (Taxation Concessions) Order. The Tribunal held that the income did not accrue to the appellant in the Baroda State but it did not decide the question whether she was entitled to the bene:fits of the Taxation Concessions Order. The High Court on a; reference to it held that para. 4 of the Taxation Concessions Order did not apply to the assessee but it did not decide the other question as to where the income had accrued to the assessee. On appeal by special leave the appellant contended, inter alia, that since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order and had not expressed any opinion thereon, the High Court could m>t raise the question on its own and decide it : ' Held, that the High Court exceeded its jurisdiction in going outside the point of law decided by the Tribunal and deciding a different point of law.

Section 66 of the Income-tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out of the order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order.

New f ehangir Vakil Mills Ltd. v. Commissioner of Income-tax, [1959] 37 I.T.R. II, .Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax, [1954] 26 I.T.R. 686, Commissioner of Incometax v. Breach Candy Swimming Bath Trust, [1955] 27 I.T.R. 279 and Ismailia Grain Merchants Association v. Commissioner of Incometax, [1957] 31 I.T.R. 433, distinguished, Mash Trading Co. v. Commissioner of Income-taxi [1956] 30 I.T.R. 388, considered.

March 30.

Mrs. /( 1'su1nben

D. JYI hadevia

Comniissioner of

Inco1netax,

Bombay

H ida yatullah J.

SUPREME COURT HEPORTS [1960]

C1v1L APPELLATE JURISDICTION: Civil Appeal No. 507 of 1957.

Appeal by special leave from the order and judgment dated September 28, 1955, and February 20, 1956, of the Bombay High Court in Income-tax Refer ence No. 28 of 1955. . R. J. Kolah and I. N. Shroff, for the appell11nt.

C. K. Daphtary, Solicitor . GenP-ral of India, R. Ganapathy Iyer and D. Gupta, for the respondent.

1960. March 30.

The Judgment of the Court was delivered by HIDAYATULLAH, J.-This is an appeal with the special leave of this Court, and is directed against an order dated tieptember 28, 1955, and a judgment dated February 20, 1956, of the High Court of Bombay. By the order, the High Court reframed a question referred to it by the Appellate Tribunal at Bombay, which it answered by its judgment.

Mrs. Kusumben D. Mahadevia (hereinafter referred to as the assessee) who has filed this appeal, was, at all material times, residing in Bombay. She was a shareholder, holding 760 shares of Mafatlal Gagalbhai & Co., Ltd., Bombay.

For the assessment year 1950-51 (the previous year being the calendar year 1949), she was assessed to income-tax on a total income of Rs. 1,50,765 which included a grossed-up dividend income of Rs. 1,47,026. In the latter income was included a sum of Rs. 47,120 being the dividends declared by Mafatlal Gagalbhai & Co., Ltd., Bombay.

Mafatlal Gagalbhai & Co., Ltd., is a private limited

Company with its registered office at Bombay. It was, at all mater-ial times, 'resident and ordinarily resident' in British India. It was also doing business in the former Baroda State, and used to keep its profits derived in that State with Mafatlal Gagalbhai Investment Corporation, Navsari. In the year 1949 Mafatlal Gagalbhai & Co., Ltd., declared dividends out of these accumulated profits by three resolutions, which are reproduced : 25-3-1949. "That a further dividend of Rs. 17 per ordinary share free of income-tax for the year 1947 be and is hereby declared absorbing Rs. 4,29,250

- -

and the same be payable in Navsari out of the profits of the year I 947 lying at Navsari." ·

24-9-1949. "That a further dividend of Rs. 24 per ordinary share free of income-tax for the year 1948 be and is hereby declared absotbing Rs. 6,06,000 and the same be payable in N avsari out of the profits of the year 1948 lying at Navsari with Messrs. M.G.

Investment Corporation Ltd. on or after 30th April,

1949."

24-9-1949. "Resolved that an Ad-interim dividend.of Rs. 21 per ordinary share free of income-tax absorbing Rs. 5,30,250 be and is hereby declared for the year 1949 out of the income of the Company for the year 1949 remaining unbrought with Messrs.

M. G. Investment Corporation Ltd., Navsari, and that the same be payable in Nvsari on or after 30th April, 1949." .

The assessee did not bring these dividends into British India. She claimed the benefit of para. 4 of the Merged States (Taxation Concession(?) Order, 1949 (hereinafter referred to briefly as the Concessions Order) ; but the Tribunal held that the income did not accrue to her in the Baroda State. The Tribunal pointed out that the dividends were declared by Mafatlal Gagalbhai & Co., Ltd., out of its profits which had accrued partly in, what was then called, British India and partly in the Indian State. The dividend was thus declared out of 'composite profits'. It further pointed out that the assessee had paid for and acquired the shares of a Company in British India and was thus holding an asset in British India, and that the income was from that asset. The Tribunal, however, at the instance of the assessee drew up a statement of the case under s. 66(1) of the Indian Income-tax Act, ana referred the following question to the High Court :

"Whether the net dividend income of Rs. 47,120 accrued to the assessee in the former Baroda State, or whether it is income accrued or deemed to have accrued to the assessee in British India ?"

When the reference was heard, the High Court was of the opinion that the Tribunal ought to have decided 'and referred also the question whether the.Concessions

Mrs. Kusumben D. M ai1adevia

Commissioner of

Income-tax,

Bombay

Hidayat1tllah ].

Mrs. J(usumben D. Mahadtvia v.

Commissioner of

Income-tax,

Bombay

Hidayatullah ].

Order applied to the assessee.

The High Court recognised the grievance of the assessee that no such point was raised before the Tribunal. The High Court, however, by its order dated September 28, 1955, decided that there was no need to send the case back for a supplemental statement, since all tho facts necessary to decide the two questions were before the High Court. The High Court then reframed the question, as it said, to comprehend the two points of law in the following words :

" Whether the assessee is entitled to any concession under the Merged States (Taxation Concessions) Order, 1949, with regard to the net dividend income of Rs. 47,120_?" The reference then came up for final disposal on February 20, 1956, and the High Court answered the question in the negative, holding that para. 4 of the Concessions Order did not apply to the assessee.

The High Court did not decide where the income had accrued to the assessee. Leave to appeal to this Court was refused by the High Court, but the assessee applied to this Court for special leave against both the order and the judgment and obtained it, and the present appeal has been filed.

At the very outset, the assessee has questioned the jurisdiction of the High Court to frame and deal with a question of law not arising out of the order of the Tribunal. The assessee points out that the Tribunal had decided that the income had accrued in British India. The assessee had challenged this part of the decision, and if the Commissioner felt it necessary, he should have obtained the decision of the Tribunal and asked for a reference on the other point also.

Since the Tribunal had not gone into the question of the applicability to the assessee of the Concessions Order

and had not expressed any opinion thereon, the

assesee contends that the High Court could not raise the question on its own, and decide it. The assessee strongly relies upon a decision of this Court in New Jehangir Vakil Mills Ltd. v. Commissioner of Incometax ('). In that case, the Bombay High Court had

(r) [19,9J 37 I.T, R. II,

directed the Tribunal to submit a supplementary statement of the case on points not arising from the. order of .the Tribunal, and this Court held that the High Court had no jurisdiction to do so. The learned counsel for the Commissioner, on the other hand, contends , that the question was the assessability of the assessee, who claimed the benefit of the Concessions Order.

The main question was thus the applicability of the

Concessions Order, and the question of the accrual of the income, whether in British India or in Baroda, was merely ancillary. The latter question was, according to the respondent, included in the first . question, and the High Court was right when it framed a comprehensive question and answered it in the sequence it did. The respondent points out that the High Court having held that the Concessions Order did not apply, was not required to decide the other limb of the question, as it became unnecessary to do so.

In our opinion, the objection of the assessee is wellfounded.

The Tribunal did not address itself to the question whether the Concessions Order applied to the assessee. It decided the question of assessability on the short ground that the income had not arisen in Baroda but in British India. That aspect of the matter has not been touched by the Bombay High Court.

The latter has,. on the other hand, considered whether the Concessions Order applies to the assessee, a matter not touched by the Tribunal. Thus, though the result is the same so far as the assessment is concerned, the grounds of decision are entirely different.

The High Court felt that the question framed by it comprehended both the aspects and, perhaps it did.

But the two matters were neither co-extensive, nor was the one included in the other. The question of accrual of income has to be decided under the Incometax Act, and has but little to do with the Concessions Order. That question can be adequately decided on the facts of this case without advertence to the Concessions

Order. It cannot; therefore, be said to be either coextensive with or included in the decision of the question actually considered by the High Court to wit, whether the Oonceesione Order applied or not. If thi!i

~· I

Kusumben D. Mahadevia v.

Commissioner of I ncome-ta:r,

Bomb4y

H idayatullah J.

I960

Kusumben D. Mahadevia v.

Ccmmissioner of Income-tax, Bombay

Hidayatullah ).

be so, it is manifest that the Tribunal decided something which stawls completely outside the decision of the Bombay High Court. The High Court also decided a matter which was not considered by the Tribunal even as a step in the decision of the point actually decided. The two decisions are thus strangers to each other, though they lead to the same result.

Section 66 of the Income-tax Act which confers jurisdiction upon the High Court only permits a reference of a question of law arising out oft he order of the Tribunal. It does not confer jurisdiction on the High Court to decide a different question of law not arising out of such order. It is possible that the same question of law may involve different app. roaches for its solution, and the High Court may amplify the question to take in all the approaches.

But the question must still be one which was before the Tribunal and was decided by it. It must not be an entirely different question which the Tribunal never considered.

The respondent attempted to justify the action taken by contending that the decision of the question of the accrual of the income with reference to the place of accrual implied the applicability of the Concessions Order.

We do not agree. If this were so, there would be no necessity to frame the question again. Indeed, the High Court itself felt that there were two limbs of the question of assessability, and reframed the question to cover both the limbs.

Where the High Court went wrong was in not deciding both the limbs but one of them and that too, the one not decided by the Tribunal. The resulting position can be summed up by saying that the High Court decided something which the Tribunal did not, and the Tribunal decided something which the High Court did not. This is clearly against the provisions of s. 66.

The respondent referred to Scindia Steam Navigation Go. Ltd. v. Commissioner of Income-tax('), Commissioner of Income-tax v. Breach Gandy Swimming Bath Trust (') and I smailia Grain Merchants Association v. Commissioner of Income-tax (3). They

(1) [1954] 26 I.T.R. 686.

(2) [1955) 27 I.T.R. 279.

(3) [19,57) l' l.T.R. 43"

....

were all decisions of the same Court, and arose in different circumstances. In two of them, the question was wide enough to take in a fine of reasoning not. adopted by the Tribunal, and in the third, the question was widened by deleting a reference to a section, when another section was also material. They were not cases where the issues of law as decided by the Tribunal and the High Court were entirely different, which is the case here. The Punjab High Court has taken a contrary view in Mash Trading Co. v. Commissioner of Income-tax (1 ).

For the reasons given above, we are of opinion that theHigh Court exceeded its jurisdiction in going outside the point of law decided by the Tribunal and deciding a different point of law. The order of the High Court will, therefore, be set aside, and the case -will be remitted to the High Court to decide the question framed by the Tribunal. In view of the fact that both the assessee and the Commissioner pointed out the anomaly to the : High Court and the question was reframed in spite of this, the costs of this appeal shall be costs in the reference to be heard by the High Court, and will abide the result.

Appeal allowed.

Case remitted.

M/S. BURN & CO. LTD. & OTHERS v.

THEIR EMPLOYEES. (P. B. GAJENDRAGADKAR, K. N. W ANCHOO and K. c. DAS GUPTA, JJ.) Industrial Dispute-Incentive bonus-Scheme-Eclusion of clerical and subordinate staff-Propriety-Power of Industrial Tribunal.

There can be no doubt from the point of view of Economics that the clerical and subordinate staff of an industry like its' manual workers contribute to its production and there can, therefore, be no reason for exciuding them wholly from the benefits of a scheme of incentive bonus.

The fact that the clerical staff are paid dearness allowance at a higher scale can be no reason for their exclusion. '

(1) [1956] 30 I.T.R. 388.

Kusumben. .D. Mahadevia v.

Commissioner of

Income-tax,

Bombay

H idayatullah J.

r960

March30.

417

MRS. KUSUMBEN D. MAHADEVIA

THE COMMISSIONER OF INCOME-TAX,

BOMBAY

L. KAPUR

Income-tax Act

s. 66

Mafatlal Gagalbhai and Co., Ltd.

Bombay

Baroda

Mafatlal Gagalbhai and Co. Ltd.

British India

Indian

Baroda State

Section 66

Income-tax Act

D. JYI hadevia

R. J. Kolah

I. N. Shroff

C. K. Daphtary

R. Ganapathy Iyer

D. Gupta

HIDAYATULLAH

February 20, 1956

High Court of Bombay

Appellate Tribunal at Bombay

Kusumben D. Mahadevia

Mafatlal Gagalbhai & Co., Ltd.

M.G.

Investment Corporation Ltd.

M. G. Investment Corporation Ltd.

Navsari

Nvsari

30th April, 1949

s. 66(1)

Income-tax Act

Kusumben D. M

J(usumben D. Mahadtvia

Bombay High Court

Section 66

Income-tax Act

s. 66

Punjab High Court

K. N. W ANCHOO

K. c. DAS GUPTA

idayatullah