Murarilal v.

Dev Karan

Gajendragadkar

C. I.

1964 - May, 8

SUPREME COURT REPORTS

Thus, it is clear that the equitable principle of justice, equity .and good conscience has been consistently applied by Civil Courts in dealing with mortgages in a substantial part of Rajasthan and that lends support to the contention of the respondent that it was recognised even in Alwar that if a mortgage deed contains a stipulation which unreasonably restrains or restricts the mortgagor's equity of redemption, courts were empowered to ignore that stipulation and enforce the mortgagor's right to redeem, subject, of course, to the general law of limitation prescribed in that behalf.

We are, therefore, satisfied that no case has been made out by the appellant to justify our interference with the conclusion of the Rajasthan High Court that the relevant stipulation on which the appellant relies ought to be enforced even though it creates a clog on the equity of redemption.

In the result, the appeal fails and is dismissed with costs.

Appeal dismissed

SRI JAGADGURU KARl BASAVA

RAJENDRASWAMI OF GAVIMU'IT

COMMISSIONER OF

HINDU

RELIGIOUS

CHARITABLE ENDOWMENTS, HYDERABAD

(P. B. GAJENDJUGADKAR, C.J., M. HIDAYATULLAH, J. c.

SHAH, RAGHUBAR DAYAL AND S.M. SIKRI, JJ.)

Constitution of India, Art. 19(1)(/)-Mutt-Framing of 5clreme-

Repeal of old Act by new Act-Promulgation of Comtitution -in the meantime-Notice on Matadhipati to hand over possession to Executive Officer-Validity-Scheme, it must be tested by funda~ mental rights conferred by the Constitution-Madras Hirz•lu Religious

and Charitable Endowments Act, 1951 (Mad. XIX of 1951), ss.

103(d), 62(3)(a)-(Mad. 11 of 1923), a. 63.

lbe appellant, who was a Matadhipati, moved the High Court for a writ quashina the notice served on him in 1952 by the Executive Oftlcer to hBDd over to the latter the administration and the properties

' .-

,':;

of the Mntt in enforcement of a scheme framed in 1939 under s. 63 1964 of the Madras Act II of 1927. The predecessor of the appellant had

S . 1 filed a suit in the District Judge's Court to set aside that scheme. The " a~dguru suit failed and_ the scheme was confirmed subject to minor modifications. CommLuioner o] In 1951 the Madras Hindu Religious aud Charitable Endowments Act, Hindu RligiouJ 1951, repealed and replaced the Madras Act II of 1927. It was urged Cltaritable Endow on behalf of the appellant in the High Court that the scheme contravened ments his fundamental rights guaranteed by the Constitution. The sinilC Judge who heard the matter found in his favour and held that the sche1.r.1e contravened Art. 19( 1 }(f) of the Constitution. On appeal by

the respondent, the Division Bench reversed the decision of the Single Judge. The High Court granted certificate to the appdlant to appeal to this Court. It was contended that although the scheme was valid as framed under the earlier Act, it incumbent under s. 103(d) of the Act of 1951 that the validity of the all the provisions of the schemo must be tested in the light of its provisions.

Held: Section 103{d) of the Madras Hindu Religious and Charitable . .

Endowments Act, 1951, properly constn1ed, merely meant that earlier schemes framed under M2.dras Act II of 1927 wou!c.l be operative as though they were framed under the Act of 1951. 1t was n:'>t intended by the section that those schemes must be examined and reframed in the light of the relevant provisions of the Act. Section ~2{3 )(a) of the Act which provided for the modification of such schemes made this amply dear. Unless the schemes could be modified under that section tbey must be deemed to have been validly made under the Act of 1951 and enforced as 5uch.

East E11d Dwellings Co. Ltd. v. Finsbury Borough Council, {t952J A.C. 109, considered ..

Althouh the scheme in question bad not been completely imple~ mented before the Constitution, that was no ground for e~~.mi"nin~ its provision in the light of Art. 19 of the Constitution.

The fundamental rights conferred by the Coostitution are not retrospective in operation and the observation made by this Court in Seth Shanti Sarup v. Union of India, are n"ot applicable to the pre.eut case.

Seth Shanti Sarup v. Union of India, A.I.R. 1955 S.C. 62-i, explained and distinguished.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 745 t)f 1963.

Appeal from the judgment and order dated February 6, 1961 of the f\ndhra Pradesh High Court in \Vrit Appeal No. 71 of 1957.

A. V. Vi.rwanatha Sastri, K. Rajendra Chaudhuri and K. R. Chaudhuri, for the appellant.

Sti JagadgUiu

R. Ganapathy lyer and B. R. G. K. Achar, for the respondents.

Cmmissione~ . of May 8, 1964. The

Bmd~;~ Relzg1ous delivered by ClumUJble Endow-

Judgment of the Court was

ments

Gtljbrdragadk, ar

C.J.

GAJENDRAGADKAR, C.

J .-The appellant Shri Jagadguru Kari Basava Rajendraswami of Gavi Mutt is the Matadhipati of Sri Gavi Mutt which is a religious institution dedicated to the propagation and promotion of the tenets of the Veer~ Saiva cult of Hinduism. This Mutt is situated at Uravakonda in the district of Anantapur. It appears that on the 6th September, 1939, the Board of Hindu Religious Endowments constituted under the Madras Act ll of 1927 (hereinafter called 'the earlier Act') framed a scheme under s. 63 of the said Act for the proper administration of the said Mutt and its endowments. The predecessor-in-office of the appellant then filed suit N(.). 21 of 1939 on the file of the District Judge, Anantapur for getting the said scheme set aside. His suit substantially failed, because the District Court was persuaded to make only a few minor modifications in the scheme subject to which the scheme was confinned. That decision was taken in appeal by the predecessor of the appellant to the High Court of Madras (A.S. No. 269 of 1945). During the pendency of the said appeal, the appellant's predecessor died, and the appellant then brought himself on the record as the legal repre$entative of his deceased predecessor. Ultimately, the appeal was withdrawn and, therefore, dismissed.

Though a scheme had been formulated by the Board under s. 63 of the said Act, apparently no effective step was taken to take over the actual management of the Mutt and its endowments. The said management continued as before and the fact that an Executive Officer had been appointed under the scheme made no difference to the actual administration of the Mutt. It was on the 5th April, 1952, that the appellant was served with a memorandum asking him to hand over the charge of all the properties of the Mutt to the Executive Officer. A notice issued by the Executive Officer followed on the 16th April, 1952 by which the appellant was infonned that the Executive

Officer would take over possession.

Meanwhile, what is 1964 known as the _Sirur Mutt case was decided by the Madras s,; Jagadguru High Court and the appellant felt justified in refusing to r

. V.· 1 . . ... ommusloner o hand over possess10n to the Executive Officer on the ground Hindu Religio11s that the scheme under which possession was sought to be Charitable Endowale f him .

I'd . h . d ment1 t en over rom was mva 1 masmuc as 1t contravene the appellant's fundamental rights guaranteed by the Consti- Gaiendragadkar

C.J. tution which had come into force from the 26th January,

1950.

In 1951, the Madras Hindu Religious and Charitable Endowments Act XIX of 1951 (hereinafter called 'the latter Act') repealed and replaced the earlier Act. The appellant moved the Madras High Court on the 28th April, 1952, by his writ petition and prayed for an appropriate writ quashing the notice served on him by the Executive Officer threatening to take over the administration of the 11utt and its properties under the scheme. This petition was heard by a single Judge of the said High Court and was allowed. The learned Judge took the view that some provisions of the Scheme contravened the appellanfs fundamental rights under Art. 19(1)(£), and so, it couJd not be enforced. It was no doubt urged before the Iear!led Judge that the appellant's writ petition should not be entertained because he had a definite adequate alternative remedy under the latter Act, but this plea was rejected by the learned Judge with the observation that where the fundamental right is clearly infringed, it is the duty of the Court to interfere in favour of the citizen, unless there n re reasons of policy which make it inexpedient to do so. Accordingly, the learned Judge directed that the scheme should be quashed. He, however, took the precaution to make t11e observation that his order did not mean that the Government was not free to make a scheme in consomme~ with the Constitutional rights of the Matadhipati.

The Tespondent. the Commissioner of Hindu Religious and Charitable Endowments~ who had been imp1eaded by the appellant to the wnt petition 'alontr with the Executive Officer, challenged the cnirectness of the decision rendered by the learned Judge in the writ petition filed by the appel-

1964 lant. This appeal sueceeded and the Division Bench which

Sri Jagadguru heard the said appeal, held that the scheme having been c u."fo 1 framed as early as 1939 under the relevant provisions of Hr; r; let&los the earlier Act which was valid when it was enacted, could Charltabk Endow not be challenged on the ground that some of its provisions contravened the fundamental right guaranteed to the

Gaienrgadkor citizens of this country under Art. 19. Certain other con- . tentions were raised before the appellate Bench by theappellant and they were rejected. It is, however, not necessary to refer to the said contentions, because they have not been argued before us. Having taken the view that thescheme when it was framed was valid, the appellate Bench reversed the decision of the single Judge, alowed the respondent's appeal and directed that the writ petition filed by the appellant should be dismissed. It is against this. decision of the Division Bench that the appellant has come to this Court with a certificate granted by the said High Court.

Before dealing with the points which have been raised before us by Mr. Sastri on behalf of the appellant, we may briefly indicate the nature of the scheme which bas been framed under the relevant provisions of the earlier Act.

This scheme opens with the statement that the Board was satisfied that in the interests of the proper administration of the Mutt and all the endowments, movable and. immovable belonging thereto, a scheme should be settled, and so, the Board, after consulting the 11atadhipati of the Mutt and other persons having interest therein, proceeded to frame the scheme. It was intended that the scheme should come into force on the 6th September, 1939, when it was framed.

It appears that either because the Executive Officer did not take effective steps to implement the scheme, or becausethe predecessor_ of the appellant filed a suit hallenging the 6cheme, the scheme in fact has not been implemented till today. When the notice was served on the appellant in 1952 and it looked as if , he Executive Officer would take over the administration of the Mutt and its properties, the present writ proceedings commenced and throughout the protracted period occupied by these proceedings. the statuJ

quo has continued.

b S.C.R.

SUPREME COURT REPOl<TS ' 257

The scheme consists of 15 clauses and, in substance, it 1964 entrusts the administration of the Mutt and all its endow- Sri Jagadguru ments in the hereditary trustee and two non-hereditary c . v. . c[ . ommlss 10ne r t trustees appomted by the Boar . These latter are liable to Hindu Religioz. be removed by the Board for good and sufficient cause and Clurritahle Ef!dot the Board's order in that behalf has to be final. The Boar<..! is authorised to appoint an Executive Officer for the Mult Gaiendrugadka! on a salary of Rs. 60/- per month. Such Executive Officer

c. J. isrequired to furnish security in the sum of Rs. 500/ o:o to the satisfactiOn of the Board. He has to be in charge of the day to day administration of the Mutt and he has to be answerable to the trustees. The trustees are required to meet once a month in the premises of the Mutt for discharging their duties. They are given the power to inspect the accounts maintained by the Executive Officer and generally supervise his work. The Board is also given the power to issue directions from, time to time regulating the internal management of the Mutt. It would thus be seen that though the scheme was framed in 193'9, in essential features it is similar to the pattern of schemes which have been subsequently introduced either by legislation or by judicial decisions in respect of the management of public charitable institutions like the present Mutt.

Mr. Sastri does not dispute the fact that the relevant provisions of the earlier Act as well as the scheme framed under them were valid at the relevant time. He, however, argues that the earlier Act has been repealed by the latter Act XIX of 1951, and according to him, it is necessary to consider whether the present scheme is consistant with the appropriate and relevant provisions of this latter Act. Thi~ argument is based ou the provisions contained in s. l03(d-) of the latter Act. This section provides that notwithstanding the repeal of the Madras Hindu Religious Endowments Act No. II of 1927, all schemes settled or modified by a Court of law under the said Act or under s. 92 of the Code of Civil Procedure, 1908, shall be deemed to have been settled or modified by the Court under this Act and sha11 have effect accordingly. The argument is that thouf!h the present scheme was framed under the provisions of the earlier Act, it m.ust now be deemed to be a scheme which

51 S.C.-17.

SUPRE!\IE COURT REPORTS

1964 - has been settled or modified by the Court under this latter Sri Jagadguru Act, and so, it necessary to enquire whether all the proc

. V.· 1 visions of the scheme are consistent with the material prommmssloMr o . .

H . .

Hindu Religlou' VISions of the latter Act.

It JS found that any of the said Charirc:blt Endow provisions are inconsistent with tbe relevant provisions of ment1 . - the lattr Act, they must be modified so as to make them Gaiendragadkar consistent with the said provisions.

C.J.

In support of this argument, Mr. Sastri has invited our attention to the observations made by Lord Asquith of Bishopstone in East End Dwellings Co. Ltd. v. Finsbury Borough Council ( 1) that "if you are bidden to treat an imaginery state of affairs -as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it." Basing himself on these observations, Mr. Sastri has urged that if the deeming provision prescrib ... ed by s. 1 03 (d) is given its full effect, there would be no scope for refusing to apply the test for which he contends.

We are not impressed by this argument. It is no doubt true that s. 103 (d) provides that a scheme settled or modified by a Court under the earlier Act shall be deemed to have been settled o~ modified under the latter Act; but the effect of this provision merely is to make the schemes in question operative as though they were framed under the provisions of the latter Act; the intention was not to examine the said scbpmes once again by reference to the relevant provisions of this latter Act and re-frame them so as to make them consistent with these provisions. This position appears to be clear if we examine other sub.clauses of s. 103. Section 103(a) which deals with rules made, noti:- fications or certificates issued, orders passed, decisions made, proceedings or action taken, schemes settled and things done by the Government, the Board or its President or by an Assistant Commissioner under the earlier Act, provides tl)at the said rules, notifications, etc. in so far as they are not inconsistent with the latter Act, shaU be deemed to have been made, issued. oassed, taken. settled or done by

(I) [1952] A.C. 109 at p. 132.

.8 S.C.l:{.

S.UP.REl\1£ COURT 1\.EPOl~TS 259

.the appropriate authority under the corresponding provi- 1964 swns of this latter Act and shall, subject to the provisions Sri Jagadguru or clause (b) have effect accordingly. Having thus provid- ..

. V:· h f 1 'fi d Commrss1oner of ed tor t e contmuance o rues, nob cations, or ers, etc.~ flindu Religlo111 in so far as they are not inconsistent with the provisions of Charitable Endow the Jatte1 Act, s. 103(b) has made pr€>vision for the modi- fications in the said rules~ notifications and orders. l n Gajengr)gadkar .other words, the scheme of s. 103 (a) & (b) clearly brings · out the fact that where the legislature wanted the continuance of the action take'l under the provisions of the earlier Act only if the said action was consistent with the relevant provisions of the latter Act, it has so provided. The same type of provision is made by s. H)3(f), (g) and (h).

If we examine s. 103(d) in the light of these other provisions, it would be clear that the question of the consistency or otherwise of the schemes to which s. 103 (d) applies. is treated as irrelevant, because no reference is made to the said aspect of the schemes. 1 n other words~ the schemes to

•. ,:hich s. 103 (d) applies have to be deemed to be settled or modified under the provisions of the latter Act without examining whether aU the provisions of the said schemes are necessarily justified by, or consistent with. the provisions of this latter Act; and that is why we dn not think Mr. Sastri js right in contending that the deeming clause prescribed by s. 103 (d) necessitates an examination of the said schemes before they are allowed to be continued as though they were sett1ed or modified under the Jatter Act.

This does not, however, mean that there is no provision prescribed by the latter Act for the modification of such schemes.

Section 62 ( 3) (a) specifically provides that any scheme for the administration of a. religious institution settled or modified by the Court in a suit under sub-section { I ) or on an appeal under sub-section ( 2) or any scheme deemed under s. 103, clause (d), to have been settled or modified by the Court may, at any time, be modified or cancelled by the Court on an application made to it by the Commissioner, the trustee or any person having interest. This provision clearly brings out the fact that if a scheme governed by s. 103 (d) is deemed to have been made or sanctioned under the provisions of the latter Act

1964 and thus continued, m6difications in it can be etfected by

Sri Jagadguru adopting the procedure prescribed by s. 62( 3). 'In other

, v_-. words, a scheme like the present is automatically continued ommlsvloner of b . f 103(d) b . 1' bl b od'fi d 'f Ilindu Religious Y operatiOn o s. • ut 1s 1a e to e m 1 e t Charitable Endowappropriate steps are taken in that behalf under s. 62 ( 3).

mems Reading s. 103(d) and s. 62(3) together, it seems to us

Gajendragadkar that Mr. Sastri's argwnent that the consistency of the

c. J. scheme with the relevant provisions of the latter Act should be examined in writ proceedings, cannot be entertained.

In fact, unless modifications are made in the scheme under s. 62(3), the scheme as a whole, will be deemed to have been made under the latter Act and will be enforced as a valid scheme.

That clearly is the purpose of s. 1 03 ( d I.

Therefore, we do not think we are called upon to consider the further contentions raised by Mr. Sastri that some of the clauses in the scheme are inconsistent with the provisions of the latter Act.

There is one more point to which reference must be made before we part with this appeal. Mr. Sastri contended that though the scheme may have been valid when it was framed, since it was not actually enforced before the 26th January, 1950, it is open to the appellant to challenge the validity of the scheme on the ground that it deprives him of his fun dam en tal right under Art. 19 ( 1 ) (f) and as such, invalid.

Mr. Sastri concedes that the fundamental rights guaranteed by the Constitution are not retrospective in operation; but that, he says, is no answer to his plea, because the deprivation of his property rights is taking place for the first time ia 1952 and as such, it is open to the. challenge that it is invalid on the ground that it contra venes his fundamental right under Art. 19{ 1) (f).

In support of this argument, Mr. Sastri has relied on certain observations made by Mukherjea J. in the case of

R. S. Seth Shanti Sarup v. Union of India and Ors(l). In that case, a partnership firm known as Lallamal Hardeodas Cotton Spinning Mill Company of which the petitioner was a partner, used to carry on the business of production and supply of cotton yam. When it was found that the Mill

(I} A.I.R. 1955 S.C. 624.

• . .

SUPRE:\IE COURT l\EPORTS • 261 s s.C.R ... .

_ could be rutf only at a loss, it was closed on 19th March, . 1964

1949. 'Thereafter, n the 21st uly, 1949> the Government . Sri J;; dguru of u .P .. passed an order purportmg to exercise its authority v. _under s. 3(f) of the U.P. Industrial Disputes Act 1947 CHmmd i.uione! of . .' ' m u Rel1glou.r _ by whih one of the artners of the ns:m was appoted as Charitable Endo.,... authonsed controller' of the undertaking. The said order menu ; directed the said authorised controller to take over posses- Guiendrogadl.:ar : on of tbe .Mill to the exclusion of th!! other partners, and

C. 1• i run it sl{bject.to the general supervision. of the District : Magistrate, Aligarb. In 1952, the Unio!l of India passed an order under s. 3 ( 4) of the Esential Supplies (Tempo. rary Powels) Act, 1946, appointing the same person ns an

authorised controlJer under the provisions of that section,

and issued a direction to him to run the said undertaking

io the exclusion of all the other partners. It was then. that the petitioner moved this Court by writ petition under Art. 32 and hallenged the validity of both the orders on the ground that they were illegal and that they invaded ru.~ fundamental right.

His plea was upheld and both thP. _ impugned orders were quashed.

• In appreciating the effect of this decision, it is nces ~,..r)t to bear in mind one cruciul fact on which therl! was no di , pute between the parties in that case, and that fact

\\'; h thut both the impugned orders did not come wilhin

th~ purview of. and were not warranted by, the provisions of tlte rcl.vant Acts. under which they were purported to . have been issued. In other words, it was conceded by the .... Go\ernmc:nt tbat the impugned orut!r;, wr~ invalid in law.

Even so, it was urged that though the orders :nay be invalid, they cannot be cha1leng.ed under Art. 32 inasmuch as tl1e first invasion of the petitioner's right w.as made in 1949 when the Constitutional guarantee was not availnble to him.

In repelling this contention, fukherjea, J., observed that the order against which the petition was primarily directed Was the order of the Central Government passed in October,

_-_ 952, nd that was a mplete and clear answer to the .. ontcntJon raised by the learned Attorney-General. Even

s~. the learned Judge proceeded to observe that assuming \at the deprivation took pJnce in 1949 and at o time when t e Constitution had not come into force, the order effect •

' .

I ' .

I 1

r t I

262 SUPRE!viE COURT REPORTS [1904)

1964 ing the deprivation which continued from day to day must Sri Jagadguru be held to have come into conflict with the !undamenta!

ommi.rsrner of rights of the petitioner as soon as the Constitution came into

indu Religious force and became void on and from that date under Art haritable Endow- 13 ( l ) f th c-· . . l . . . . . ment., o e onstltutlon. t IS on tnese observations that Mr. Sastrfs argument is founded.

With respect, we are Gajendragadkar

c. 1. not prepared to hold tha, t these observations vtere intended to lay down an unqualifie~ proposition of law that even it a citizen was deprived of his fundamental right:; by a valid scheme framed under a valid law at a time when the Consti· tution was not in force, the mere fact that such a schem~ wou!d continue to operae even after the 26th January. 1950, would expose it to the risk of having to face a chalienge under Art. 19. If. the broad and unqualified proposition for which Mr. Sastri contends is accepted as true, then it would virtually make the material provisions of the Constitution in reSpect of fundamental rights retrospective in operation. In the present case, the scheme was framed and the Executive Officer was appointed as e3rly as 1939.

If the Executive Officer could not take over the actu:1r administration of the Mutt and its properties. it was partly

beause the a!'pellant has continuously challenged the implementation of the scheme by legal proceedings and partly because he has oerwise obstructed the said implementation. But it is clear that when the scheme was framed and a challenge made by the appellant to its validity failed in courts of law~ his property rights had been taken away.

The fact that the order was not irnolemented does not make any difference to this legal position. If Mr. Sastri's argu ment were right, all such schemes, though implemented find enforced. may still be open to challenge on the ground that they contravened the Matadhipati's fundamental rights under Art. 19. Such a plea does not appear to have ever been raised and, in our opinion, cannot be validly raised for the simple reason that the fundamental rights are not retrospective in their operation. The observations on which Mr. Sastri relies must be read in the light of the--- relevant fact to . which we have -just referred.

The deprivation of the petitioner~& property rights ws brought about by invalid orders and it was in respect. of such invalid

orders that the Court held that the petitioner was entitled 1964

to seek the protection of Art. 19 and invoke the jurisdic- Sri Jagadguru tion of this Court under Art. 32. In our opinion, therec . ~- . . . . vmmzs.noner o fore, there is no substance m the contention that smce m tlindu Religim1. the present case, the scheme has not been completely imple- Charit",!!.~!t; ttdow mented till 1952, we mu.St examine its validity in the light - of the fundamental rights guaranteed to the appellant under Gujen~~tr,:;; tlr Art. 19 of the Constitution.

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

Appeal dismisst!.:l.

COivli\HSSTONER OF INCOME-TAX'; NEW DELHI

AN ANT RAO B. KAMA T

(K. SuBBA RAo. J. C. SHAH AND S. M. SIKRI, JJ.)

Income-tax-Dividend declared and paid in different yearJ-Ratt: of

which year applicable-Meaning of 'rehate'-Is tlrere an)' tUstinction between rebate under Finance Act and the rebate zmda other statutes-Indian Income-tax Act~ 1922 (ll of 1922), ,~.1. 16(5), 60A-Part B States (Taxation Concession) Order, 1950.

The assessee had received in the previous years (1950-51 a.nd 1951-52) dividends from two companies. These companies had {l}een allow"'d rebate under the Part Jl States (Taxation Concession) Order, 1950.

For the assessment years 1951-52 and 1952-53, the assessee claimed before the Incomt!tax Officer that the dividend received by him should be "grossed up" under s. 16(2) of the Act, without taking into con

sideration the rebate allowed to the said companies under the said concession order. On a construction of s. 16(2) the assessee pleaded that the rate applicable to the total income of the said companies was the rate prescribed by the relevant Indian Finance Act. The Income-tax Officer grossed up at the State rnte and not at the rate presrribed by the relevant Finance Act. Before the Tribunal and the High Court tile assessee succeeded.

Held: (i) Iu interpreting s. 16(2) effect must be given to these words occurring in the said section 'without taking iuto account any rete-

J()(j.f

Ma.v, S

Gajendragadkar

Rajasthan High Court

SRI JAGADGURU KARI BASAVA RAJENDRASWAMI OF GAVIMUTT

M. HIDAYATULLAH, J.

SHAH

RAGHUBAR DAYAL

S.M. SIKRI, JJ.

Constitution of India

Art. 19(1)(/)

Repeal of old Act by new Act

and Charitable Endowments Act, 1951

ss.

103(d), 62(3)(a)

s. 63

Madras Act II of 1927

Charitable Endowments Act

Madras Act II of 1927

Cltaritable Endow

Art. 19( 1 }(f)

s. 103(d)

Section 103

Endowments Act, 1951

Art. 19

CIVIL APPELLATE JURISDICTION

A. V. Vi.rwanatha Sastri

K. Rajendra Chaudhuri

K. R. Chaudhuri

Sti JagadgUiu

R. Ganapathy lyer

B. R. G. K. Achar

GAJENDRAGADKAR

Jagadguru Kari Basava Rajendraswami

Uravakonda

Anantapur

6th September, 1939

s. 63

High Court of Madras

s. 63

5th April, 1952

16th April, 1952

Madras

Jagadguru High Court

26th January,

1950

Endowments Act XIX of 1951

Madras High Court

28th April, 1952

Art. 19(1)(£)

Jagadguru

Charltabk Endow

Art. 19

Sastri

Clurritahle Ef!dot

Religious Endowments Act

s. 92

Code of Civil Procedure, 1908

Asquith of Bishopstone

s. 1

s. 103

s. 103

Section 103(a)

s. 103(b)

s. 103

s. 103(d)

s. 103

s. 103

s. 103

Section 62

s. 103

s. 103

s. 62( 3)

s. 62

s. 103(d)

s. 62(3)

Gajendragadkar

s. 62(3)

s. 1

26th January, 1950

Art. 19

Art. 19

Mukherjea

s. 3(f)

Industrial Disputes Act 1947

s. 3

Art. 32

Art. 32

fukherjea

In repelling this contention, fukherjea, J., observed that the order against which the petition was primarily directed Was the order of the Central Government passed in October,
952, nd that was a mplete and clear answer to the .. ontcntJon raised by the learned Attorney-General.

Sastrfs

26th January. 1950

Art. 19

Art. 19

Art. 19

Art. 32

Art. 19

AN ANT RAO B. KAMA

K. SuBBA RAo

C. SHAH

S. M. SIKRI

s. 16(2)

s. 16(2)

Indian Finance Act

s. 16(2)


8 S.C.R

SUPREME COURT REPORTS

orders that the Court held that the petitioner was entitled 1964 to seek the protection of Art. 19 and invoke the jurisdic- Sri Jagadguru tion of this Court under Art. 32. In our opinion, therec . v. • • • • om1nzss1011er o fore, there is no substance 10 the contention that smce m !Iindu Religim1. the present case, the scheme has not been completely imple- Charui;::;.~};""0"' mented till 1952, we mu5t examine its validity in the light - of the fundamental rights guaranteed to the appellant under Ga; en~'"t'"""' Art. 19 of the Constitution.

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

Appeal dismissed.

COMi\HSSfONER OF INCOME-TAX'; NEW DELHI

ANANT RAO B. KAMAT

(K. SUBBA RAo, J. C. SHAH AND S. M. SIKRI, JJ.)

Jnco1netax-Dividend declared and paid in different yeurs-Rate of which year applicable-Meaning of 'rebate'-ls there any tUstinction between rebate under Finance Act and the rebate under other statutes-Indian lllcome-tax Act, 1922 (11 of 1922), .,,-. 16(5),

60A-Part B States (Taxation Concession) Order, 1950.

"fhe assessee had received in the previous years (1950-51 and 1951-52) dividends from tv.ro con1panies. These companies had li>een allowed rebate under the Part R States (Taxation Concession) Order, 1950.

For the assessment years 1951-52 and 1952-53, the assessce claimed before the Income-tax Officer that the dividend received by him should be "g'tossed up" under s. 16(2) of the Act, without taking into consideration the rebate allowed tO the said companies under the said concession order.

On a construction of s. 16(2) the assessee pleaded that the rate applicable to the total income of the said coinpanies was the rate prescribed by the relevant Indian Finance Act. The Income-tax Officer grossed up at the State rate and not at the rate prescribed by the relevant Finance Act. Before the Tribunal and the High Court the cwessee succeeded.

Held: (i) In interpreting s. 16(2) effect must be given to thes-o words occurring in the saic! section 'without taking into account any reb3.te-

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_SUPRE?IIE COURT I~EPORTS

[1964J

allowed or additional income:-tax charged'. If these words are ignored~ it will be rewriting s. 16(2). Section 16(2) applies the rate of the

C.!~T:.< : year in ,, .. hich the dividend _is paid, etc., and not of the year when the Anant Rao B. profits V.ere made by the company. On the fact of this case it wa, Kamat held that the rates prescribed by the relevant. Finance Act apply.

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' ...

- - Rajputana .Agencies Ltd. v. _Commissioner of lncOmetax, [1959] Supp. 1 S.C.R. 142, distinguished. -

.-- (ii) The word 'rebate' in s. 16(2) not only relates to rebate granted

under the Indian Finance Act but is wide enough to include any rebate \\rhich may be granted by other stattitory _ ofders.-

- The form Of the certificate prescribed under the _InCoalC-tax R.~ cannot change the meaning of the word 'rebate?. The word •rebate' iB an apt word to uSe m respect of remission.

A.f/s. J.laganlal Sankalchand v.- Commissioiier of Incometax~ New Delhi, c:A. No. 703 of 1963.- -Judgment,· dated May 8, 1964 distinguished.

 (iii) The words "exemption' or 'other modification' in s. 60A are wide enough to Cnable the Central Government to give rebate_ such as has been a.IloWed unc!'!rthe Concc:ssiozi Ordei-." - -

CIVIL- APPELLATE JURISDICTION: Civil Appeal Nos: 687- 688 of 1963.

Appeals from the judgment and order: dated February 3, 1962 of the Rajasthan High Court in D. B. Civil Reference No. 13 of 1958.. ·

S. K. Kapur and R. N. Sachthey, for the appellant:

N. S. Palkhivala, S. P. Mehta, I. B. Dadachanji, 0. C.

Mathur and Ravinder _Narai11, for the respondents.

l\foy 8, 1964. The Judgment of the Court was delivered by

S1KR1, J.-These are appeuls by the Commissioner of fncome Tax on certific1tes granted by the Rajasthan High Court under s. 66A ( 2) of the Indian Income Tax Act, 1922 (II of 1922), hereinafter.referred to as the Act, against the judgment of the Hi~ Court in a consolidated reference under s. 66(1) of the Act.

The High Court answered t.'1e question, reproduced below, in the affirmative. -The reference was made by; the Income Tax Appellate Tribunal in the following cinmrnstances. ;) ' ·

Cl.T. v.

The respondent, Anant Rao B. Kamat, hereinafter referred to as the assessee, had received in the previous years (1950-51 and 195f-52) dividends from two companies, Associated Stone Industries (Kotah) Ltd., and Rajputana Mining Agencies Ltd.

Fo1 the assessment years 1951-52, .and 1952-53, the assessee claimed before the, Income Tax Officer that the dividends received by him should be 'grossed up' under s. 16(2) of the Act, without taking into consideration the rebate allowed to the said companies under the Part B States (Taxation Concessions)

Order, 1950, hereinafter called the Concession Order.

According to the assessee, on a true construction of s. 16(2) of the Act, the rate applicable to the total income of the s.aid companies was the rate prescribed by the relevant Indian Finance Acts.

The Income Tax Officer disallowed the grossing up at the Indian rate but allowed at the State

rate, defined by paragraph 3 (v) of the Concession Order.

The Appellate Assistant Commissioner upheld the order of the Income Tax Officer, but the assessee succeeded before the Income Tax Appellate Tribunal.

On the application of the Commissioner of Income Tax. the Tribun"J referred the following question to the High Court:

Anant Rao B.

"Whether the appropriate portion of the dividend received by the assessee from either of the said

two companies in the financial year 1950-51/ 1951-52 is to be increased at the rate applicable to the total income of the respective companies for the financial year 1950-51/1951- 52 and without regard to any benefit conferred

by the T. C. Order 1950 that the companies would get in the matter of payment of tax by them on their profits accruing or arising to them in a part 'B' State and assessable for the assessment year 1950-51/1951-52?"

The High Court, after asking for a supplementary statement of the case, answered, as we have already said in favour of the assessee.

The learned counsel for the appellant has contended before us that the rate applicable to the total income of the

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said companies was the rate as finally applied after taking. into consideration the effect of the Concession Order.

He has further urged that the word 'rebate' occurring ins. 16(2) does not include the relief given to the said comp.anies under the Concession Order for the Concession Order is not concerned with granting rebate but is concerned with the deter- . mination of the tax payable.

In this counection, he relied on s. 60A of the Act under which the Concession Order was made, and said that this section enabled the C.:ntral Government to make an exemption, reduction in rate or other modification in respect of income tax but not to grant a rebate.

The learned counsel for the respondent controverted these arguments and supported the judgment of the High Court.

Before addressing ourselves to the contentions at the Bar, it is necessary to reproduce the relevant statutory provisions.

These read thus:

"' S. 16(2)-For the purposes of inclusion in the total income of an assessee any dividend shaU be deemed to be income of the previous year in which it is paid, credited or distributed or deemed to have been paid, credited or distribued to him, and shall be increased to such amount as would, if income tax (but not supertax) at the rate applicable to the total income of the company (without taking into account any rebate allowed or additional income-tax ch3rged) for the financial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed. were deducted therefrom, be equal to the amount of the dividend:

Provided that when the sum out of which the dividend has been paid, credited or distributed or deemed to have been paid, credited or distri- . buted includes-

( i) any profits and gains of the company not included in its total income, or

8 S.C.R.

(ii)

SUPREME COliRT REPORTS

any income of the company on which incometax was not payable, or

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(iii) any amount attributable to any made in computing the profits of the company,

allowance 4.llllfll Rao 11 .. and gains Kamal

the increase to be made under this section shall be calculated only upon such proportion of the dividend as the said sum after deduction of the inclusions enumerated above bears to the whole of that sum.

S. 18(5)-Any deduction made and paid to the account of the Central Government in accordance with the provisions of this section and any sum by which a dividend has been increased under sub-section ( 2) of section 16 shall be treate<l as ; a--payment of income-tax or supertax on behalf of the person from whose income the deduction was made, or of the owner of the security or of the shareholder, as the case may be, and credit shall be given to him therefor on the production of the certificate furnished under sub-section ( 9) or section 20, as the case may be, in the assessment, if any, made. for the following year under this Act:

Provided ....... .

S. 6UA. Power to make exemption, etc., in relation to merged territories or to the territories which immediately before the 1st November, 1956. were comprised in any Part B State.

If the Central Government considers it necessary or expedient so to do for avoiding any hardship or anomaly, or removing any difficulty, that may arise as a result of the extension of this Act to the merged territories or to the territories which immediately before the 1st November, 1956, were comprised in any Part B State, the Central Gov- . / emment may , by general or special order, make an exemption, reduction in rate or other modification in respect of income-tax in favour of any class of income, or in regarrt

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to the whole or any part of the income of any person or class of persons:

Provided that the power conferred by this section shall not be exercisable in the case of merged territories and the territories which immediately before the !st November, 1956, were comprised in Part B States other than the State of Jammu and Kashmir, after the 31st day of March, 1955, and, in the case of the State of J ammu and Kashmir after I.he 31st day of March, 1959, except for the purpose of rescinding an exemption, reduction or modification already made.

Para 3 (iii) of the Concession Order - The expression "Indian rate of tax" means the rate determined by dividing the amount of income-tax and super-tax payable in tl1e taxable territories on the total income for the year in question in accordance with the rates prescribed by the relevant Finance Act of the Central Government, by the amount of such total incom~.

Para 3 (\') of the Concession Order-The expression

"State rate of tax' meaps the rate determined by dividing the amount of income-tax .1nd supertax and payable on the total income according to the rates of tax in fnrce in the State immediately before the appointed cay, or for the year in question, as th~ case mav be, by the amount of such total income and where under any State law, the ratl.'s of tax in force in the State are prescribed with reference to the total income including agricultural income, the State rate of tax shall he the rate determined by dividing the amount of income-tax and supertax on the total income including the agricultural income without taking into account anyreduction of tax allowed on the agricultural income by the State law by the amount of such total income;

F.:xp, lanation.-Where there was no State law relating to charge of income-ta, x.and super-tax, the

rates of income-tax and super-tax in force in that State immediately before the appointed day shall, for the purposes of this clause, be deemed to be the rates specified in the Schedule.

Para 6 of the Concession Order-Income of a previous year which does not fall under paragraph 5.

1 ·:. ; ncome, profits and gains of any previous year ending after th~ 311t day of March. 1949. which does not fall within paragraph 5 of this Order shall be assessed under the Act for the year ending on th~ 31st day of March, 195L or on the 31st day of M.arch, 1952, as ::ie case may be, and the tax payable thereon shall be determined os hereunder:

In respect of so much of the income. profits and gain~ included in the total income as accrue or arise in any State Gther than the States of Patiala a!'ld East Punjab States Union and Travancore-Cochin--

(i) the tax shall be computed (al at the Indian rate of tax and (b) at the StHte rate of tax in force immediately before the appointed day;

(ii) where the amount of tax computed under subclause (a) of clause ( i) is less than or is equal to the amount of tax computed under subclause (b) of clause (i), the amount of the first-mentioned tax shall be the tax payable;

(iii) where . the amount of tax computed under subclause (a) of clause (i) exceeds the tax computed under sub-clause (b) of clause ( i), the excess shall be allowed as a rebate from the first-mentioned tax and the amount of the firstmentioned tax as so reduced shall be the tax. payable ..... .

Para 6A of the Concession Order-Income. profits and gains chargeable to tax in the assessment year 1952-53, 1953-54 and 1954-55-

. Th~ incon_ie, profits and gains of any previous year which is a prevmus year for the asessment for the year end-

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Anant Rao B.

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•• 4.nant Rao B.

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ing on the 31st day of March, 1953, 1954 and 1955, shall be charged to tax at the Indian rates of tax, provided that from the tax so computed, there shall be allowed in each year, rebate at the percentage thereof specified thereunder:

in respect of so much of the income, profits and gains as accrue or arise-

(a) in the States of Saurashtra, Madhya Bharat or Rajasthan, to any assessee, at the rate of 40 per cent, 20 per cent and 10 per ce_nt, respectively, for the assessment for the year ending on the 31st day of March,

1953, 1954 and 1955 .... ".

'The scheme underlying s. 16(2) and s. 18(5) seems to be this. Under s. 16 (2) the dividends are grossed up and

under s. 18 ( 5) any sum by which a dividend is increased under s. 16(2) is treated as payment of income-tax on behalf of the shareholder.

In this setting, Jet us examine what is the true construction of s. 16(2) of the Act. It is common ground that 'grossing up' has to be effected in this case.

The real point of controversy between the parties is regarding the rate at which it is to be done. The learned counsel for the appellant relying on the decision of this Court in Rajputana Agencies Ltd., v.

Commissioner of Income Tax(') urged that the same meaning should be attributed to the expression "rate applicable to the total income of the company" in s. 16(2), as was attributed by this Court to the same expression occurring in sub-clause(b) of clause (ii) to the second explanation to proviso to paragraph B of Part I of the First Schedule to the Indian Finance Act, 1951.

We are unable to accept this argument. It i~ true that the same expression occurs in s. 16(2) and the sub-clause above referred to, but as pointed out by the High Court, the words 'without taking into account any rebate allowed or additional income-tax charged' occur in s. 16(2) and not in the said sub-clause, and effect must be given to these words. If we ignore these words, we would be Tewriting s. 16(2). It will be noticed thats. 16(2) applies the rate of the year in which the dividend is paid, etc., and

(1) (1959] Supp. • s.c.:R. r42

not of the year when the profits were made by the compaµY..

The legislature has devised a mechanical test which has to be applied regardless of the hardship or the benefit which may accrue to an assessee.

Therefore, we agree with the High Court that though the rate applicable is the rate which is actually applied, rebate if any allowed to a company, has not to be, as directed by s. 16(2), taken into account.

This takes us next to the point that benefit given by the Concession Order is not a rebate at all.

We cannot accept this contention. The Concession Order itself uses the word 'rebate' in paras 5, 6, and 6A.

Indeed, though it may be possible to urge something while dealing with para 6. no aq?ument is possible q:garding para 6A, for it expressely says that 'there shall be allowed in each year rebate at the percentage thereof specified hereunder'. The learned counsel for the appellant laid great stress on the language of para 6 of the Concession Order.

He said that clause (i J directed the computation of tax and clause (iii) was equally directing computation of tax, and that in this context the word 'rebate' has been loosely used. We are unable to say that the word 'rebate' has been loosely used. In para 6A the meaning is clear and the word 'rebate' must have the same meaning in both paras.

Further. but for the provisions of the Concession Order. the said companies would have been taxed at the rates prescribed by the relevant Finance Act.

The Concession Order remits what would otherwise be the proper tax leviable under the Finance Act. read with Indian Income Tax Act. The word 'rebate' is an apt word to use in respect of a remission.

That a rebate as such can be directed to be a'.lowed under s. 60A of the Act seems clear to us.

The words 'exemption' or other modification are wide enough to enable the Central Government to give rebate such as has been allowed under the Concession Order.

During the course of the hearing of the connected Civil Appeal in M/s. Maganlal Sankalchand v. The Commissioner of Income Ta:c, New Delhi('), the learned counsel

(1) Civil Appeal No. 703 of 1963-judgment delivered on May&,

1964.

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for the Commissioner of Income Tax raised two additional arguments.

First, he urged that the word 'rebate' in s. 16(2) only related to rebate granted under the Indian Finance Act, and not any rebate granted under the Concession Order. He further referred us to r. 14 of the Indian Income Tax Rules, which prescr.ibes the certificate to be furnished by the principal officer of a company under s. 20 of the Act.

The relevant portion of the certificate is a& follows:

''I/We cermy :-

(A) (i) that the Company/ estimates that out of the profits of the said period-

(a) .... per cent., is chargeable at full Indian rate;

(b) .... per cent., is chargeable at the reduced rate of ... <Name of Part B State):

and .... ~.

Regarding his first contention, we are unable to limit the meaning of the word 'rebate' to rebate granted under the.

Indian Finance Act. The word 'rebate' is not qualified and is wide enough to include any rebate which may be granted by other statutory orders.

The form of the certificate referred to us which mentions reduction of rate cannot change the meaning of the word 'rebate'.

In the result, we agree with the High Court that the answer to the question referred should be in the affirmative.

The .appeals accordingly fail and are dismissed with costs.

One set of hearing fees.

Appeals dismissetl.

Art. 19

Jagadguru

Art. 32

Art. 19

ANANT RAO B. KAMAT

C. SHAH

S. M. SIKRI, JJ.

s. 16(2)

s. 16(2)

Indian Finance Act

s. 16(2)

S

1964

s. 16(2)

Section 16(2)

Anant Rao

Kamat

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' ...
- Rajputana .Agencies Ltd. v. _Commissioner of lncOmetax, [1959] Supp.

s. 16(2)

s. 60A

S. K. Kapur

R. N. Sachthey

N. S. Palkhivala

S. P. Mehta

I. B. Dadachanji

Ravinder _Narai11

s. 66A

Indian Income Tax Act, 1922

s. 66(1)

Anant Rao B. Kamat

Rajputana Mining Agencies Ltd.

s. 16(2)

s. 16(2)

Indian Finance Act

Income Tax Appellate Tribunal

Anant Rao B.

Kamal

Sikri

s. 60A

S. 16(2)

SUPREME COliRT REPORTS

S. 18(5)

Central Government

section 16

section 20

S. 6U

st November, 1956

Jammu and Kashmir

31st day of March, 1955

J ammu and Kashmir

31st day of March, 1959

Patiala

Travancore-Cochin--

Saurashtra

Madhya Bharat

Rajasthan

s. 16(2)

s. 18(5)

s. 16

s. 18

s. 16(2)

s. 16(2)

s. 16(2)

s. 16(2)

s. 16(2)

s. 16(2)

s. 16(2)

Indian Income Tax Act

s. 60A

CJ.T.

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s. 16(2)

s. 20

Indian Finance Act