281!

STATE QF PUNiil A

MAJOR SINGH

April 28, 1966 II

(A.K. SARKAR, C.J., ]. R. MUL>HOLKAR ASD R. S. BACHAWAT, JJ.J

Indian Penal Code (.J5 of 1860), s. 354-Scope of-Relevancy of age of victim.

Per Mudholkar, J.: Unde~ s. 354 of the Indian Penal Code, while the individual reaction of the victim to the act of the accused would be irrelevant, when any act done to or in the presence of a woman is clearly suggestive of sex according to the common notions of mankind, that act must fall within the mischief of the section and would constitute an offence under the section. [293 A-CJ

Since the action of the accused (respondent) in interfering with and thereby causing injury to the vagina Qf the child, who was seven and half months old, was deliberate, he must be deemed to have intended to outrage her modesty. (293 CJ

Per Bachawat J: The essence of a woman's modesty is her sex.

Even a female of tender age from her very birth possesses the modesty \vhich is the attribute of her sex. Under the secti0n the culpable intention of the accused is the crux of the matter. The reaction of the

\voman is very relevant, but its absence is not al\vays decisive.

The respondent is punishable for the offence under the section because, by his act he outraged and intended to outrage whatever modesty the little victim was possessed of. [293 F; 294 B-C]

Per Sarkar, C.J., (dissenting): Under the section the accused would be guilty of an offence if he assaults or uses criminal force "'intending to outrage or knowing it to be likely that he will thereby outrage" the modesty of a woman. This intention or knowledge is the ingredient of the offence and not the woman's fC<'lings or reacc

tion. The test therefore. would be whether a reasonable man will F think that the act of the offender was intended to or was known to be likely to outrage the modesty of the woman. [288 B. FJ.

In the present case. there could be no question of the aocused having intended to outrage the modesty of the child or having known that his act was likely to have that result, because, though the victim is a "\\.'Oman" under the Penal Code, no reasonable man would say that a female child of that age was possessed of womanly G modesty. [289 GJ

CRIMl~AL AP PELLA IE JURJSDICTIOS: Criminal Appeal No. 54 of 1964.

Appeal from the judgment and order dated the May 31. 1963 of the Punjab High Court in Criminal Appeal No. 1023 of 1962.

Dipak D1111 Cha11dlt11ri and R. N. Sachthcy, for the appellant.

. .

l'tJlihll v.

MAJol\ SINGH (Sarkar, C.J.i 281

A. S. R. Chari, for the respondent.

The following Judgments of the Court were delivered.

Sarkar, C.J. The question is whether the respondent who caused injury to the private parts of a female child of seven and half months is guilty under s. 354 of the Penal Code of the offence of outraging the modesty of a woman. In the High Court, the matter was heard by three learned Judges two of whom answered the question in the negative and the third answered it in the affirmative. Hence this appeal by the State.

It would be convenient to set out the section at once.

C S. 354. "Whoever assaults or uses criminal force to

any woman, intending to outrage or knowing it to be likely that he will thereby outrage her modesty, shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both".

"Criminal force" is defined in s. 350 of the Code and it is not in dispute that such force had been used by the respondent to the child. It is also not in dispute that the child was a woman within the Code for in the Code that word is to be understood as meaning a female human being of any age: sec ss. 7 and 10.

The difficulty in this case was caused by the words "outrage her modesty". The majority of the learned Judges in the High Court held that these words showed that there must be a subjective element so far as the woman against whom criminal force was used is concerned. They appear to have taken the view that the offence could be said to have been committed only when the woman felt that her modesty had been outraged. If I have understood the judgment of these learned Judges correctly, the test of outrage of modesty was the reaction of the woman concerned.

These learned Judges answered the question in the negative in the view that the woman to whom the force was used was of too tender an age and was physically incapable of having any sense of modesty. The third learned Judge who answered the question in the affirmative was of the view that the word "modesty" meant, accepted notions of womanly modesty and not the notions of the woman against whom the offence was committed. He observed that the section was intended as much in the interest of the woman concerned as in the interest of publid morality and decent behaviour and the object of the section could be achieved only if the word 'modesty' was considered to be an attribute of a human female irrespective of whether she had developed enough understanding to realise that an act was offensive to decent female behaviour or not. The reported decisions on the question to which our attention was drawn do not furnish clear assistance. None of them deals with a case like the present.

288 stn>ru:l!E COURT REPORTS

(1966) SGPP. B.C.R.

But I do not think that there is anything in them in conflict with A what I propose to say in this judgment.

I would first observe that the offence does not, in my opinion, depend on the reaction of the woman subjected to the assault or use of criminal force. The words used in the section arc that the act has to be done "intending to outrage or knowing it to be B likely that he will thereby outrage her modesty". This intention or knowledge is the ingredient of the offence and not the woman's feelings. It would follow that if the intention or knowledge was not proved, proof of the fact that the woman felt that her modes ty had been outraged would not satisfy the necessary ingredient of the offence. Likewise. if the intention or knowledge was proved, the fact that the woman did not feel that her modesty had C been outraged would be irrelevant. for the necessary ingredient would then have been proved. The sense of modesty in all women is of course not the same; it varies from woman to woman. In many cases, the woman's sense of modesty would not be known to others. If the test of the offence was the reaction of the woman, then it would have to be proved that the offender knew the standard of the modesty of the woman concerned, as otherwise.

D it cJuld not be proved that he had intended to outrage "her" modesty or knew it to be likely that his act would have that effect.

This would be impossible to prove in the large majority of cases.

Hence, in my opinion. the reaction of the woman would be irrelevant.

Intention and knowledge are of course states of mind. They E arc nonetheless facts which can be proved. They cannot be proved by direct evidence. They have to be inferred from the drcumstances of each case. Such an inference. one way or the other. can only be made if a reasonable man would, on the facts of the case, make it. The question in each case must. in my opinion. be: will a reasonable man think that the act was done with the intention of outraging the modesty of the woman or ., with the knowledge that it was likely to do so'? The test of the outrage of modesty must, therefore. be whether a reasonable man will think that the act of the offender was intended to or was known to he likely to outrage the modesty of the woman.

In considering the question. he must imagine the woman to be a reasonable woman and keep in view all circumstances concern ing her. such as. her station and way of life and the known notions G of modesty of such a woman.

The expression "outrage her modesty" must be read with the words "intending to or knowing it to be likely that he will". So read. it would appear that though the modesty to be considered is of the woman concerned. lhe word "her" was not used to indicate her reaction. Read all together. the words indicate an act done with the intention or R knowledge that it was likely to outrage the woman's modesty, the emphasis being on the intention and knowledge.

A •

PUNJAB t'.

MAJOR SlNGH (Sark11r, 0; J.) 289

Another argument used to support the view, that the reaction of the woman concerned decided the question, was that the section occurred in a chapter of the Code dealing with offences affecting human body and not in the chapter dealing with offences relating to decency and morals. I think this argument is fallacious. None of the other offences against human body, which occur in the same chapter as s. 354, depends on individual reaction and therefore there is no reason to think that the offence defined in s. 354 depends on it. There is no incongruity in holding that the commission of an offence against human body does not depend on the reaction of the person against whom it is alleged to have been committed but on other things.

It will be remembered that the third learned Judge (Gurdev Singh, J.) had said that modesty in the section has W be understood as an attribute of a human female irrespective of the fact whether she has developed a sense of modesty or not. This view seems to me to be erroneous. In order that a reasonable man may think that an act was intended or must be taken ta have been known likely to outrage modesty. he has to consider whether the woman concerned had developed a sense of modesty and also the standard of that modesty. Without an idea of these, he cannot decide whether the alleged offender intended to outrage the woman's modesty or his act was likely to do so. I see no reason to think. as the learned Judge did, that such a view would defeat the object of the section. The learned Judge said that modesty had to be judged by the prevalent notions of modes ty. If this is so, it will also have to be decided what the prevalent notions of modesty in the society are. As such notions concerning a child may be different from those concerning a woman of mature age, these notions have to be decided in each case separately. To say that every female of whatever ge is possessed of modesty capable of being outraged seems to me to be laying down too rigid a rule which may be divorced from reality. There obviously is no universal standard of modesty.

If my reading of the section is correct, the question that remains to be decided is, whether a reasonable man would think that the female child on whom the offence was committed had modesty which the respondent intended to outrage by his act or knew it to be the likely result of it. I do not think a reasonable man would say that a female child of seven and a half months is possessed of womanly modesty. If she had not, there could be no question of the respondent having intended to outrage her modesty or having known that bis act was likely to _have that result. I would for this reason answer the question in the negative.

At the Bar, instances of various types of women were mentioned. Reference was made to an imbecile woman, a sleeping woman who does not wake up, a woman under the influence of drink or anaesthesa, an old woman and the like. I would point

SUPREME COURT REPORTS [1966L~UPP. _s.c.R.

out that we are not concerned in this case with any such woman.

A But as at present advised, I would venture to say that I feel no difficulty in applying the test of the outrage of modesty that I have indicated in this judgment to any of these cases with a satisfactory result. If it is proved that criminal force was used on a sleeping woman with intent to outrage her modesty, then the fact that she does not wake up nor feel that her modesty had B been outraged would be no defence to the person doing the act.

The woman's reaction would be -irrelevant in deciding the question of guilt.

Before concluding, I may point out that the respondent had been convicted by the trial court under s. 323 of the Code for the injury caused to the child and sentenced to rigorous imc prisonment for one year and a fine of Rs. 1 ,000 /- with a further period of imprisonment for three months in default of payment of the fine.-That sentence has been maintained by the High-court and as there was no appeal by the respondent to this Court, that sentence stands. -

I would, for these reasons, dismiss the appeal.

Mudholkar, J. It has been found as a fact by the _courts below that the respondent hadcaused injuries to the vagina of a seven and. a hall month old child by fingering. He has been held

guilty of an offence under s. 323, Indian Penal Code. The contention on behalf of the State who is the appellant before us is that the offence amounts to outraging the modesty of a woman and is thus punishable under s. 354; _Indian -Penal Code. The learned Sessions Judge and two of the three learned Judges of the High Court who heard the appeal against the decision of the Sessions Judge were of the view that a child_ seven and a haU month old being incapable of having a developed sense of modesty, the offence was not punishable under s. 354; The third learned Judge, Gurdev Singh, J., however, took a different view.

The learned Judge quoted the_ meaning of the word "modesty" given in the Oxford English Dictionary (1933 Edn.)-which is, "womanly propriety of behaviour, scrupulous chastity of thought, speech and conduct (in men or women) reserve or sense of shame proceeding from instinctive aversion to impure or coarse suggcstions"-and observed: "This obviously does not refer to a particular woman but_ to the accepted notions of womanly behaviour and conduct: It is in this sense that the modesty _ appears to have been used.in section 354 of the Indian Penal Code". The learned Judge then referred to s. 509 of the Penal Code in which also the word "modesty" appears and then proceeded to say:

"The object of this provision seems to have been to protect women against indecent behaviour of others which is -offensive to morality. The offences created by section -354 and section 509 of the Indian Penal Code are as much in the

...

\\\

PUNJAB t'. MAJOR SINGH \Mudholkar, J.) 291

interest of the women concerned as in the interest of public morality and decent behaviour. These offences are not only offences against the individual but against public morals and society as well, and that object can be achieved only if the word "modesty" is considered to be an attribute of a human female irrespective of fact whether the female concerned has developed enough understanding as to appreciate the nature of the act or to realise that it is offensive to decent female behaviour or sense of propriety concerning the relations of a famale with others".

S. B. Capoor J., one of the other two Judges, on the other hand, referred with approval to the following passage from the judgment of Jack J., in Soko v. Emperor('):

"Under section 354 it must be shown that the assault was made intending to outrage or knowing it to be likely to outrage the modesty of the girl. It is urged for the petitioner that the conduct of the girl shows that in fact her modesty was not outraged. There is no suggestion that she had any hesitation in telling her mother exactly what had happened. In the circumstances, I think that it is. therefore, doubtful whether in fact the modesty of the girl was outraged He also referred to two other decisions in Mt. Champa Pasin & Ors. v. Emperor(') and Girdham Gopal v. State(') and took the view that the authorities do not support the view that in construing s. 354, I.P.C. it is irrelevant to consider the age, physical condition or the subjective attitude of the woman against whom the assault has been committed or the criminal force used. The third Judge Mehar Singh J., in his judgment referring the case to a larger bench has quoted the following passage from Dr. Gaur's Penal Law of India, 7th Edn., Vol. 3, p. 1744:

"Ordinarily, then, women who are likely to be made victims of this offence are those who are young and who are old enough to feel the sense of modesty and the effect of the acts directed against it. But it does not deprive others of the protection from the licence of man, provided their sense of modesty is sufficiently developed". and observed that the opinion of the learned author tends to agree with the dictum of Jack J., in Soko's case(').

The respondent before us was unrepresented and considering the importance of the question we had requested Mr. A. S. R.

Chari to assist us by appearing amicus curiae. He drew our attention to the fact that the Sexual Offences Act, 1956 (4 & 5 Eliz. 2 c. 69) enacted by the British Parliament has used much H wider language in s. 14 which deals with indecent assault on

(') A.LR. 1933 0•1. 142. (') A.I.R. 1928 P•tna 326. (') ;\., l, R, 1953 M.B. 147.

SUPHEME OOL'RT REPORTS

[1966] SUPP.

8, C, I\.

women than that used in s. 354, I.P.C. He also said that in one A sense s. 354 can also be said to be wider than s. 14 of the British Act in that it is not CDnlined to 'exual o!Tcnces which is quite correct. The two provisions mn thus: -

Section 14 of the Sexual O!Tcnces Act. J 956:

"Indecent assault on a woman-(!) It is an offence, subject to the exception mentioned in sub-section (3) of this section for a person to make an indecent assault on a woman.

(2) A girl under the age of sixteen cannot in law give any consent which would prevent an act being an assault for the purposes of this section.

(3) Where a marriage is invalid under section two of the Marriage Act. 1949. or section one of the Age of Marriage Act, 1929 (the wife being a girl under the age of sixteen), the invalidity does not make the husband guilty of any offence under this section by reason of her incapacity to consent while under that age, if he believes her to be his wife and has reasonable cause for the belit>f''.

(4) A woman who is a defective cannot in law give any consent which would prevent an act being an assault for the purposes of this section. but a person is only to be treated as guilty of an indecent assault on a defective by reason of that incapacity to consent, if that person knew or had reason to suspect her to be a defective".

Section 354 of the Indian Panel Code reads thus:

"Assault or criminal force to woman with intent to outrage her modesty-Whoever assaults or uses criminal force to any woman. intending to outrage or knowing it to be likely that he will thereby outrage her modesty, shall be punished with imprisonment of either description for a term which may extend to two years. or with fine, or with both".

What is made an offence under s. 14 is the act of the culprit irrespective of its reaction on the woman. The question is whether under s. 354 the position is different. It speaks of outraging the modesty of a woman and at first hlush seems to require that the outrage must be felt by the victim herself. But such an interpretation would leave out of the purview of the section assaults. not only on girls of tender age hut on even grown up women when such a woman is sleeping and did not wake u; i or is under anaesthesia or stupor or is an idiot. It may also perhaps. under certain circumstances. exclude a case where the woman is of depraved moral character. Could it be said that the legislature intended that the doing of any act to or in the presence of any woman which according to the common notions of mankind is suggestive of sex, would~ be outside this section unless the woman

. .._

PUNJAB v. MAJOR SINGH (Bachawat, J.) 293

herself felt that it outraged her modesty? Again, if the sole test to be applied is the woman's reaction to particular act, would it not be a variable test depending upon the sensitivity or the upbringing of the woman? These considerations impel me to reject the test of a woman's individual reaction to the act of the accused.

I must, however, confess that it would not be easy to lay down a comprehensive test; but about this much I feel no difficulty. In my judgment when any act done to or in the presence of a woman is clearly suggestive of sex according to the common notions of mankind that act must fall within the mischief of this section.

What other kind of acts will also fall within it is not a matter for consideration in this case.

In this case the action of Major Singh in interfering\ with the vagina of the child was deliberate and he must be deemed to have intended to outrage her modesty. I would, therefore, allow the appeal, alter the conviction of the respondent to one under s. 354, I.P.C. and award him rigorous imprisonment to a term of two years and a fine of Rs. 1,000/- and in default rigorous imprisonment for a period of six months. Out of the fine, if realised, Rs. 500/- shall be paid as compensation to the child.

Bacbawat, I. Section 10 of the Indian Penal Code explains that "woman" denotes a female human being of any age.

The expression "woman" is used in s. 354 in conformity with this explanation, see s. 7. The offence punishable under s. 354 is an assault on or use of criminal force to a woman with the intention of outraging her modesty or with the knowledge of the likelihood of doing so. The Code does not define "modesty". What then is a woman's modesty?

I think that the essence of a woman's modesty is her sex.

The modesty of an adult female is writ large on her body. Young or old, intelligent or imbecile, awake or sleeping, the woman possesses a modesty capable of being outraged. Whoever uses criminal force to her with intent to outrage her modesty commits an offence punishable under s. 354. The culpable intention of the accused is the crux of the matter. The reaction of the woman is very relevant, but its absence is not always decisive, as, for example, when the accused with a corrupt mind stealthily touches the flesh of a sleeping woman. She may be an idiot, she may be under the spell of anaesthesia, she may be sleeping. she may be unable to appreciate the significance of the act; nevertheless, the offender is punishable under the section.

A female of tender age stands on a somewhat different footing. Her body is immature, and her sexual powers are dormant.

In this case, the victim is a baby seven and half months old. She has not yet developed a sense of shame and has no awareness of sex.

B Nevertheless, from her very birth she possesses the modesty which is the attribute of her sex. But cases must be rare indeed where the offender can be shown to have acted with the intention of

SUPRf:l.!E COURT REPORTS

(1966] SUPP. B.C.R.

Olltraging her modesty. Rarely docs a normal man use criminal A ... force to an infant girl for satisfying his lust. I regret to say that we have before us one of such rare cases. Let us reconstruct the scene. The time is 9-30 p.m. The respondent walks into the room where the baby is sleeping and switches off the light. He strips himself naked below the waist and kneels over her. In this indecent posture he gives vent to his unnatural lust, and in the process B

-"I ruptures the hymen and causes a tear r long inside her vagina.

He flees when the mother enters the room and puts on the light.

I think he outraged and intended to outrage whatever modesty the little victim was possessed of, and he is punishable for the offence under s. 354.

I agree with the order proposed by Mudholbr, J. c

ORDER

In view of the judgment of the majority, the appeal is allowed, the conviction of the respondent is altered to one under s. 354 I.P.C., and he is awarded rigorous imprisonment for a term of n' two years and a fine of Rs. 1,000 I, and in default, rigorous Imprisonment for a period of six months. Out of the fine, if realised, Rs. 500/· shall be paid as compensation to the chil<l.

• F

NALNIKANT AMBALAL M:ODY

1'.

COMMISSIONER OF INCOME-TAX, BOMBAY May 4, 1966

[A. K. SARKAR, C.J., J. R. MUDHOLKAR AND R. S. BACHAWAT, JJ.]

Indian Income-tax Acl 1922, ss. 46, 10, 12-0utstanding fees from !ega! profession received after cessation of practice-cash sy_stem of accounting-Receipts whether can be taxed under s. 12 income from 'other sources'.

The appellant an advocate who maintained his accounts on the cash system gave up practice when he was elevated to the Bench in

1957. Certain outstanding professional dues were however received by him in the accounting years 1958 and 1959. These receipts were shown by him as income in his return for the assessment years 1959-60 and W60-61 and were assessed by the Income-tax Officer. The appellant then went in revision to the Commissioner of Income-tax contending that the said receipts were not income and had been wrongiy taxed. The Commissioner having decided against him the appeJ, ant came to this Court under Art. 136 of the Constitution.

HELD: (i) The receipts in the present case were clearly the fruits of the assessee's professional act1vity and fell under the fourth head of s. 6 of the lndian Income-tax Act 1922. They were however not chargeable to tax under that head because under the corresponding computing section that is. s. 10, an income received by the assessee who kept his accounts on the cash basis in an accounting year in which the profession had not been earned on at all is not chargeable. [297 D-F]

Commissioner of Income Tax v. Express Newspapers Ltd., 53 I.T.R. 250, relied on.

(ii) The income could not be taxed under s. 12 either. Section 12 deals with income which is not included under any other preceding heads covered by ss. 7 to 10. If the income is so included, it falls outside s. 12. It follows that if, as in the present case, the income is profits and gains of profession it cannot come under s. 12. (301 E] The heads of income in s. 6 are mutually exclusive and it would be<incorrect to say that as the receipts could not be brought to tax under the fourth head they could not fall under that head and must therefore fall under the residuary head 'other sources'. There is no justification for the assumption that an income falling under one head has to be put under another head if it escapes taxation under the computing section corresponding to the former head. (298 A;

300 E-FJ The character of the income cannot change merely because the assessee received it at a certain time or adopted a certain system of accounting. (301 BJ

Section 4 does not say that whatever is included in total income must be brought to tax. The income has to be brought under one of the heads mentioned is s. 6 and can be charged to tax only if it is so chargeable under the computing section corresponding to

L/S5SCI .

A

MAJOR SINGH

A.K. SARKAR, C.J.

R. MUL>HOLKAR ASD R. S. BACHAWAT, JJ

Indian Penal Code

s. 354

Per Mudholkar, J.

s. 354

Indian Penal Code

Penal Code

s. 354

Penal Code

S. 354

s. 350

ss. 7 and 10

s. 354

s. 354

s. 323

s. 323

Indian Penal Code

s. 354

Penal Code

s. 354

section 354

Indian Penal Code

s. 509

Penal Code

section 509

Indian Penal Code

section 354

s. 354

I.P.C

s. 14

s. 354

I.P.C

s. 354

s. 14

Section 14

Age of Marriage Act, 1929

Section 354

s. 14

s. 354

s. 354

I.P.C

Section 10

Indian Penal Code

s. 354

s. 7

s. 354

s. 354

s. 354

s. 354

I.P.C

ss. 46, 10, 12

s. 12

Art. 136

s. 6

Income-tax Act 1922

s. 10

s. 12

Section 12

ss. 7 to 10

s. 12

s. 12

s. 6

Section 4

s. 6


NALNIKANT AMBALAL KODY

COMMISSIONER OF INCOME-TAX, BOMBAY

May 4~ 1966

[A. K. SARKAR. C.J., J. R. MUDHOLKAR AND R. S. BACHAWAT, JJ.]

Indian Income-tax Act 1922, ss. 46, 10, 12-0utstanding fees from legal profession received after cessatwn of practtce-cash sy.stem of accounting-Recetpts whether can be taxed under s. J.2 income from 'other sources'.

The appellant an advocate who maintained his accounts on the cash system gave up practice when he was elevated to the Bench in

1957. Certain outstandmg professional dues were however received by him in the accounting years 1958 and 1959. These receipts were shown by him as income in his return for the assessment years 1959-60 and 1!160-61 and were assessed by the Income-tax Officer. The appellant then went in revision to the Commissioner of Income-tax contending that the said receipts were not income and had been wrong'.iy taxed. The Commissioner having decided against him the D appe!J.ant came to this Court under Art. 136 of the Constitution.

HELD: (i) The recipts in the present case were clearly the fruits of the assessee's professional actlvity and fell under the fourth head of s. 6 of the Indian Income-tax Act 1922. They were however not chargeable to tax under that head because under the corresponding computing section that is. s. 10, an income received by the assessee who kept his accounts on the cash basis in an accoun~ ting year in which the profession had not been earned on at all is not chargeable. [297 D-F]

Commissioner of Income Tax v. Express Newspapers Ltd., 53 I.T.R. 250, relied on.

(ii) The income could not be taxed under s. 12 either. Section 12 deals with income which is not included under any other preceding heads covered by ss. 7 to 10. If the income is so included, it falls outside s. 12. It follows that if, as in the present case, the income is profits and gains of profession it cannot come under s. 12. [301 E] The heads of income in s. 6 are mutually exclusive and it would bet:incorrect to say that as the receipts could not be brought to tax under the fourth head they could not fall under that head and must therefore fall under the residuary head 'other sources'. There is no justification for the assumption that an income falling under one head has to be put under another head if it escapes taxation under the computing section corresponding to the former head. [298 A;

300 E-F] The character of the income cannot change merely because the assessee received it at a certain time or adopted a certain system of accounting. [301 B] Section 4 does not say that whatever is included in total income must be brought to tax. The income has to be brought under one of the heads mentioned is s. 6 and can be charged to tax only if it is so chargeable under the computing section corresponding to

LJS5SCI .

8UPRBW:E OOURT REPORTS

(1966] 8UPP. 8.C.R.

that head. Income which falls under the fourth head can be brought A to tax only if it can be so dona under the rules of computation laid down in s. 10. l298 G-299 B] .

In re: B. M. Kamdar, 14 I.T.R. ~0. not approved.

The United Commercia[ Bank v. The Commissioner of Income Tax, [1958] S.C.R. 79, Suhsbu111 House Estate Ltd., v. FTy, 15 Tax Cases 266 and Commissioner of Income-tax v.

Cocanada Pad~ ami Bank Ltd., 57 l.T.R. 306. relied on.

Probhat Chandra Barua v. King Emperor. a7 l.A. 228, distin auished.

Per Bachawat J. {dissentin.o)- The receipts in question were chargeable under B. 12.

Any income chargeable under a specific head can be charged only C under that head, and no part of that income can be charged again under s. 12. But any part of the total income of the assessee not asse~ sable under a specific head is assessable under the residuary head

:overed by s. 12. [305 C]

The income in question was not exempt under s. 4(3). The receipts ~- were liable to be included in total income under s. 4. 'This income tould not be incJuded under s. 10 owing to the method of accountini D adopted by the assessee. Nor did it fall under any other head. It fol- !owed that the income must fall unacr the residuary head specified in s. 12. This was not a case where tnc Revenue had taxed or could tax the income under s. 10 and again sought to tax the income Wlder s. 12. [306 C, G-H] avtL APPELLATE JURJSDlCTlO!'oi: Civil Appeab Nos. 731-73~ of 1964.

Appeals by special leave from the order dated January 29, 1963 of the Commissioner of Income-tax, Bombay Cityl, in No. 1/RP/BBY/40 and 41 of 1961.

N. A. Palkhivala. T. A. Ramachandran, S. P. Mehta and

0. C. Mathur, for the appellant.

Sarjoo Prasad, R. Ganapathy lyer and R. N. Sachthey, for r the respondent. • The Judgment of SARKAR., C.J. and MUDHOLKAR, J. was de!ivered by SA~KAR, C.J. BACHAWAT, J. delivered a dissenting Opinion.

Sarkar, C.J. The assessee was an advocate of the High Court of Bombay and was practising his profession there till March l.

G 1957 when he was elevated to th~ Bench of that Court. He then '>. ceased to carry on his profession and has not resumed it since. As an advocate he had been assessed to income-tax on his professional income, his accounting years for the assessmentc; being the calendar years. When he was raised to the Bench. various fees for professional work done by him were outstanding. In the years 1958 B and 1959 during no part of wllich he had carried on any profession. he received certain mnneys on account of these outstanding f~.

.A.MBAI.AL MOD"'r L C. I. T. (Sa.r!t-at, C. J .) 297

His accounts had always been kept on the cash basis. The question is. whether he is liable to pay income-tax on these receipts.

We shall first make a few general observations. Section 6 of the Income-tax Act, 1922 specifies six sources or heads of income which are chargeable to tax. In order to be chargeable. an income has to be brought under one of these six heads. S. 6 also provides that the chargeability to tax shall be in the manner provided in ss. 7 to 12B of the Act. Each of these sections lays down the rules for computing income for the purpose of chargeability to tax under one or other of the heads mentioned in s. 6. An income falling under any head can only be charged to tax if it is so chargeable under the corresponding computing section. The fourth head of income in s. 6 is "Profits and gains of business, profession or vocation" and the fifth head "income from other sources.,. The fifth head is the residuary head embracing all sources of income other than those specifically mentioned in the section under the other heads. Then we observe that the several heads of income mentioned in s. 6 are mutually exclusive; a particular income can come only under one of them: The United Commercial Bank v.

The Commissioner of Income Tax( 1).

We now turn to the present case. The receipts in the present case are the outstanding rlues of professional work done.

They were clearly the fruits of the assessee's professional activity.

They were the profits and gains of a profession. They would fall under the fourth head. viz., "Profits and gains of business. profession or vocation". They were not. however. chargeable to tax under that head because under the corresponding computing section. that is. s. 10, an income recdved by an assessee who kept his accounts on the cash basis in an accounting year in which the profession had not been carried on at all is not chargeable and the income in the present case was so received. This is reasonably clear and not in dispute: see Commissioner of Income Tax v. Express

Newspapers Ltd.e).

Can the receipts then be income falling under the residuary head of income and charged to tax as such? The Commissioner of Income-tax from whose decision the present appeal has been taken by the assessee, held that it was chargeable under that head. He came to that conclusion on what he thought were the general principles and also on the authority of a certain observation of Chagla. J. in Re. B. M. Kamdare). The observation of Chagla. J. does not seem to us to be of much assistance for the decision in that case was not based on it nor is it supported by reasons. We find ourselves unable to agree with the learned Judge. We may add that apart from the observation in Kamdar's case e), there does not appear to be any direct authority supporting the view of the Commissioner.

(') rt958] S.C.R. 79. (I) fl9134] 53 I.T.R. 250: [1964] 8 S.C.R. 1H9.

(') 14 J, T.R. 10. l.!S3SCI-2l(il)

SUPREME OOURT REPORTS J . (l966)~SUPP, S.C.R. . . :, ..

As to the general principles, we first observe that as the heads of income are mutually exclusive, if the receipts can be brought under the fourth head, they cannot be brought under the residuary head. It is said by the Revenue that as the receipts cannot be brought to tax under the fourth head they cannot fall under that head and must therefore fall under the residuary head. This argument assumes. in our view, without justification, that an income falling under one head has to be put under another head if it is not chargeable under the computing section corresponding to the former head. If the contention of the revenue is right. the position would appear to be that professional income of an assessee who keeps his account on the cash basis would fall under the fourth head if it was received in a year in which the profession was being carried on. but it wouJd take a different character and fall under the residuary head if received in a year in which the profession was not being carried on. We are unable to agree that this is a natural reading of the provisions regarding the heads of income in the Act. Whether an income falls under one head or another has to be decided according to the common notions of practical men for the Act does not provide any guidance in the matter. The question under which head an income comes cannot depend on when it was received. If it was the fruit of professional activity. it has always to be brought under the fourth head irrespective of the time when it was received. There is neither authority nor principle for the proposition thaL an income arising from a particular head ceases to arise from that head because it is received at a certain time. The time of the receipt of the income has nothing to do with the question under which particular head of income it shouJd be assessed.

It is then said that the receipts had to be included in the total income stated in s. 4 and since they do not fall under the exceptions mentioned in that section, they must be liable to tax and, therefore, they must be considered as income under the residuary head as they could no~ otherwise be brought to tax. This contention seems to us to be iU-founded. \Vhile it is true that under s. 4 the receipts are liable to be includ.d in the total income and they do not come under any-:ot the exceptions, the contention is based on the assumption that whatever is included in total iucome under s. 4 must be liable to tax. We find no warranty for this assumption. Section 4 docs not say that whatever is included in total income must be brought to tax. It does not refer at all to chargeability to tax. Section 3 states that "Tax .... .. shall be charged ...... in accordance with. and subject to the provisions. of this Act in respect of the total income". This section does not, in our opinion, provide that the entire total income shall be chargeable to tax. It says that the chargeability of an income to tax has to be in accordance with. and subject to the provisions of the Act.

The income has therefore to be brought under one of the heads fn s. 6 and can be charged to tax only if it is so chargeable under

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AMB.ALAL MODY v. C. I. T. (Sarkar~ 0. J.) 299

the computing section corresponding to that head. Income which comes under the fourth head, that is~ professional income, can be brought to tax only if it can be so done under the rules of coput.a~ tion laid down in s. 10. If it cannot be so brought to tax~ 1t will escape taxation even if it be included in total income under s. 4.

Furthennore, the expression "total income" in s. 3 has to be understood as it is defined in s. 205). Under that definition. total income means "total amount of income, profits and gains referred to in sub-s. ( l) of s. 4 computed in the manner laid down in this Act'\ that is, computed for the purpose of chargeability under one of the sections from s. 7 to s. 12-B. The receipts in the present case, as we have shown, can only be computed for chargeability to tax, if at all, under s. 10 as income under the fourth head. If they cannot be brought to tax by computation under that section. they would not be included in "total income" as that word is understood in the Act for the purpose of chargeability. That all income included in total income is not chargeable to tax may be illustrated by referring to income from the SO'!JfCe mentioned in the third head in s. 6, namely, "Income from property". The corresponding computing section iss. 9 which says that tax shall be payable on income under this head in respect of bona fide annual value of property.

Jt is conceivable that income. actually received from the property in a year may exceed the notional figure. The excess would certainly be liable to be included in total income under s. 4. It however, cannot be brought to tax as income under the head "other sources", see Salisbury House Estate, Ltd. v. FryC). It is an income which cannot be taxed at all though it is included in total income as defined in s. 4.

In Probhat Chandra Barua v. King Emperor(2) it was no doubt said that s. 12 which is the computing section in respect of the residuary head of income. was clear and emphatic and expressly framed so as to make the head of "Other sources" describe a true residuary group embracing within it all sources of income, profits . and gains. provided the Act applies to them. that is, provided they are liable to be included in total income under s. 4 which deals with income to which the Act applies. We are in full agreement with that observation but we do not think tijat it affords any support to the contention that all income liable to be included within total income under s. 4 must be brought to tax. The observation must be read keeping in mind the undisputed principle that a source of income cannot be brought under the residuary head if it comes under any of the specific heads, for the Judicial Committee could not have overlooked that principle. If we do that, it will be clear that all that the Judicial Committee said was that all sources of income which do not come under any of the other heads of income can be brought under the residuary head. The words used are "embracing ... all sources of income" and not aii income. It did not say that an

(1) 15 T.C. 266.

(S) 57 I., A. 228.

soo

~UPRP!II~ OOURT 1\P.P<'>~TS f1966J 8UPP. 8.C.B.

income liable to b~ included in the total income is chargeable to tnx as income under the residuary head if it is not chargeable under a specific head under which it normally falls. In Probhat Chandra

Barva's case(') the Judicial Committee was not concerned with that aspect of the matter; the only question before it was, whether zamindari and certain other income fel1 under the third head of income from property, as the word 'property' was understood in the Act.

Another aspect of Probhat Chandra Barua's cascn requires a mention. The question that there arose, as we have just now said, was, whether the Income--tax Act did not impose a tax on the income of a zamindar derived from his zamindari and certain other properties. It was said on behalf of the assessee that the zamindari and the other income being income from property fel1 under the third head and could be brought to tax only under the correspond ing computing section, s. 9. It was pointed out that the income could not be chnrged to tax under that section because it dealt only with income from house property which the income concerned was not.

It was then said that the income could not be ta,; cd under the residuary head because it was really income from property and could be taxed only as such. The Judicial Committee did not accept this contention. It took the view that the word 'property' in the third head "Income from property .. had to be interpreted as restricted only to that kind of property which is described in the computing section, s. 9 and as that section deals only with house property the income from zamindari and other properties did not fall under the head .. Income from property". It, therefore. found no difficulty in holding that the 7amindari income was income from the residuary source. We find no support in this case for the view that an income which is admittedly under a specific head can be brought to tax under the residuary bead if it cannot be so brought under the computing section corresponding to that head. That case only held that zamindari income was not income which fe11 under the head ••rncome from property•• and that it could never so fall. It provide~ no warranty for the contention that an income from one source may. in certain circumstances. be treated as income from a different source. which is the contention of the Revenue in the present case.

We think it right also to observe that if the receipt'\ in the present case could be treated as income from the residuary source. the position would be most anomalous. We have earlier said that if that were so. the placing of an income under this head wouh! depend on the act of the assessee, it would depend on the time when the assessee chose to receive it. That we conceive is not u situation which the Act contemplates. But there is another nnd stronger reason to show that the Act did not contemplate it. Suppose the assessee had kept his accounts on the mercantile basis.

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AMBALAL MODY fl. O. T. T. (Sa.rka.r, C. J.) 301

A He would then have been charged to tax on these receipts in the year when the income accrued which must have been a year when he was carrying on his profession as an advocate. It could not then have been said that the receipts should be taken under the head

"other sources". If we are tO accept the contention of the Revenue, we have to hold that the method of book-keeping followed by an B assessee would decide under which head a particular income will go. If the Revenue is right, the income of the assessee would go under the fourth head if the method of accounting was mercantile and it would go under the fifth head if the accounting was the cash basis. We are whollv unable to take the view that such can be the position under the Act. The heads of income must be decided from the nature of the income by applying practical notions C and not by reference to an assessee's treatment of income: see Commissioner of Income-tax v. Cocanada Radhaswami Bank

Ltd.(l).

It now remains to see whether s. 12 justifies a view contrary to that which we have taken. It lays down the rules for computation of income under the head "Other sources". It says that tax under the head "Income from other sources" shall be payable in respect of income of every kind which may be included in the total income if not included under any of the preceding heads. It seems to us dear that the words "if not included under any of the preceding heads"-which refer to the heads considered in ss. 7 to 10-refer to income and not to a head of income. S. 12, therefore. deals with income which is not included under any of the preceding heads.

If the income is so included, it falls outside s. 12. Whether an income is included under any of the preceding heads would depend on what kind of income it was. It follows that if the income is profits and gains of profession. it cannot come under s. 12. Section

12 does not say that an income which escapes taxation under n preceding head will be computed under it for chargeability to tax.

It only says-and this is most important-that an income shall be chargeable to tax under the head "other sources" if it does not come under any other head of income mentioned in the Act.

Section 12 therefore does not assist the contention of the Revenue

thl:lt professional income which cannot be brought to tax under s. 10 may be so brought under s. 12.

For these reasons we have come to the conc1usion that thr 6 receipts were not chargeable to tax either under the head of pro# fessional income or under the residuary head. It was not said thal the receipts might be brought to tax under any other hetJd. In our opinion. therefore. the receipts were not chargeable to tax at all.

H We accordingly allow these appeals with costs. --------------------------- ..

(1) 57 I.T.R. 306: [196:1] 3 S.C.R. 619.

8'0PlUDO OOURT REPORTS

(1966) BUPP, S.C.R.

Bachwat, J. These appeals raise the question whether the professional income of an assessee whose accounts are kept on a cash basis, received by him during his life-time after the discontinuance of the profession and after the close of the accounting year in which the profession is discontinued. is assessable to income-tax either under s. 10 or under s. 12 of the lndinn Income-tax Act. 1922.

The assessee was practising as an advocate in the High Court of Bombay till March I, 1957 when he was appointed a Judge of the High Court at Bombay. His method of accounting was cash, and his accounting year was the Calendar year. The relevant orders of the Income-ta~ Officer suggest that his accounting year was the financial year ending on March 31. but it is now the common case of both the assessee and the Revenue that the accounting year was the Calendar year.

In the assessment year, 1958-59, the assessee was assessed to income-tax in respect of the entire professional income received by

him, during the Calendar year including the income received after

March 1, 1957. It js not disputed that the assessee was liable to pay tax in respect of the income received by him between March I, 1957 and December 31, 1957.

During the Calendar years, 1958 and 1959, the assessee received the sums of Rs. 30,570 and Rs. 15,240 respectively on account of professional fees for work done by him before March

l. 1957. In the returns for the assessment years, 1959-60 and 1960- 61, the assessee included the aforesaid two sums as his income from profession. By his orders dated May 30, J 960 and October 26, 1960, the Income-tax Officer subjected the aforesaid two sums to tax treating them as receiptc; of fees for professional services rendered in the earlier years and as part of the total income of the assessee. On ApriJ 4, 1961, the assessee filed two revision petitions before the Commissioner of Income-tax, Bombay City I. under s. 33'-A contending that the aforesaid two sums were no part of his

total income of the relevant accounting years and were included in his returns through an error and asking for their exclusion from bis assessable income for the relevant assessment years.

By a common order dated January 29, 1963, the Commissioner of Income-tax held that the two sums were assessable on general principles and also on the authority of the decision in Re. B. M.

Kamdar('). and rejected the revision petitions. From this order. the assessee now appeals to this Court by special leave.

The first question is whether the two sums were assessable to

ta~ under s. 10 of the Indian Income-ta~ Act, 1922. Section 10(1) provides:

"The tax shall be payable by an assessee under the head 'Profits and gains of business. profession or vocation' in respect of the profits and gains of any business, profession or vocation carried on by him."

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Section 10 applies to the profits and gains of any business, profes sion or vocation carried on by the assessee. Considering that the subject-matter of charge is income of the previous year, the expression "carried on by him" must mean "carried on by him at any time during the previous year." To attract s. 10(1). it is not essential that the assessee should have carried on the profession throughout the entire previous year or at the time when he realised the outstanding professional fees~ it is sufficient that he carried on the profession at any time during the accounting year in which he realised his fees, see in re. Kamdar(').

On the other hand. the section does not apply to the profits and gains of any profession which was not carried on by the assessee at any time during the prev1ous year.

Our attention was drawn to several decisions of this Court dea1ing with s. 10(2)(viii) and the second proviso to s. 10(2)(vii). In Commssioner of Income-tax v. Express Newspapers LtdC) and Commissioner of Income-tax v. Ajax Products Lttl.(3), this Court held that one of the essential conditions of the applicability of the second proviso to s. 10(2)(vii) is that during the entire previous year or a part of it the business shall have been carried on by the assessee. In the Express Newspapers Ltd. casee). at page 259. Subba

Rao. J. said: ''Under section 10(1), as we have already pointed out, the necessary condition for the application of the section is that the assessee should have carried on the business for some part of the accounting year., These observations support the conclusion that the profits and gains of a business or profession are not chargeable under s. 10(1), if the assessee did not carry on the business or profession during any part of the previous year.

In the instant case, the assessee discontinued his profession as soon as he became a Judge of the Bombay High Court. He could not carry on the profession after he became a Judge. It is not possible to hold that he continued to carry on the profession merely because he continued to realise his outstanding fees. It follows that the assessee did not carry on his profession as an advocate at any time during the Calendar years, 1958 and 1959.

The receipts of the outstanding professional fees during 1958 and 1959 were not profits and gains of a profession carried on by the assessee during those years, and were not assessable to tax under s. 10(1).

Section 13 provides that except where the proviso to that section is applicable. the income for the purposes of s. 10 must be computed in accordance with the method of accounting regularly H employed by the assessee. Section 13 is mandatory. In the instant

(l) [1946] I.T.R. 10.

(1) [1964} 53 I.T.R. 260, [1964]8 S.C.R. 189.

{8) [1965] 55 I.T.R. 74:1: [1965] I S.C.R. 700.

30-1

~L~REKE COURT REPORT~

[1008] 8UPP. 8.0.11..

case, <.ts the assessee employed the cash method of accounting and A as the proviso to s. 133 did not apply, his professional income during 1957 and the previous accounting years had to be computed on the cash basis. The Revenue had no option in the matter.

Had the assessee adopted the mercantile method of accounting. the entire income of the assessee arising from his profession before

March 1. 1957 would have been included in his assessable income 8 for those years. and no portion of it would have escaped assessmt.!nt under s. J 0. Rut as the assessee adopted the cash method of accounting. the outtamling fees could not be included in the as;, essment for those years. The question is whether this income now escapes taxati_on altogether. There is no doubt that by the method of accounting employed by the assessee. he has chosen to treat th~ receipts in question as income of the accounting years~ C 1958 and 1959.

The Revenue cbims that the income was assessable to tax Ut'!dcr s. 12. On behalf of the assessee, Mr. Palkhiwala submitted tlnt (I) the income from the defunct source of profession. though not assessable under s. J 0, continued to faH under the head covered by s. I 0 and the residuary head under s. 12 was not attmcted. (2) D s. 12 covers residual heads and not residual receipts. and (3) that if s. 12 were applied to this income. the assessee wollld suffer in~

justice because the deductibns properly allowable under s. 10 in respect of the income could not be allowed. On the other hnnd, Mr. Sarjoo Prasad appearing on behalf of the Revenue st1bmitted that the receipts in question were part of the total income of the asc; essec for the relevant accounting years chargeable under s. 3 E read with ss. 2(15) and 4. and as the income was not exempt from tax and as it did not fall under s. 10 or any other head, it must be assessed to tax under s. 12. In support of his contention. Mr.

Snrjoo Prasad relied upon the opinion of Chagla. J. in rl'.

K amdar( 1 ) at p. 58.

By s. 3 read with ss. 2( 15) and 4. income-ta1. is charged for every year in accordance with and subject to the provisions of the Act in respect of the total income of any previous year of the assessee computed in the manner laid down in the Act, including all incoiTle, profits and gains from whatever source derived, which accrue or arise or are received or are deemed to accrue. arise or to be received as provided by s. 4~ I) and which are not exempted under s. 4(3). The crucial words in s. 4 are •'from whntever source derived". The nature of the source docs not affect the chargeability of the income. Section 6 sets out the heads of income chargeable to tax. The several heads arc dealt with specifically in sg. 7, 8. 9. 10 and 12. Income is classified under different heads for the purpose of computing the net income under each head after making suitable deductions. Income, profits and gains from wh:\tever source derived. included in the total income falJ under one -------------------------

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(Badmrot, J .)

head or the other. If any part of the total income does not fall under the specific heads under ss. 7. 8, 9 and 10, it must faU

under the residuary head under s. 12. Section 12( 1) provides :

"The tax shall be payable by an assessee under the bead 'Income from other sources' in respect of income, profits and gains of every kind which may be included in his total income (if not included under any of the preceding heads)." Income, profits and gains of every kind are covered by s. 12. pro

vided two ccmditions are satisfied, viz., (l) they are not included under any of the preceding heads and (2) they may be included in the total income of an assessee. Any income chargeable under a specific head can be charged only under that head, and no part of that income can be charged again under s. 12. But any part of the total income of the assessee not assessable under a specific head is assessable under the residuary head covered by s. 12.

Referring to similar words in s. 12(1), as it stood before its amend~

ment in 1939, Lord RusseH observed in Probhai Chandra Barua

v. The King Emperor(~):-

"These words appear to their Lordship!S clear and emphatict and expressly framed so as to make the sixth head mentioned in s. 6 describe a true residuary group embracing within it all the sources of inct:>me. profits and gains provided the Act applies to them i.e., provided that they accrue or arise or are received in British India or are deemed to accrue or arise or to be received in British India, as provided by s. 4, sub-s. (1). and are not exempted by virtue of s. 4. sub-s. (3)." Referring to the words "income. profits and gains'' in s. 12, Lord Russell said in Gopdb Saran Narain Shigh v. Income-tax Commis sioner(2):

"The word 'income• is not limited by the words 'profits' and 'gains'. Anything which can properly be described as income is taxable under the Act unless specially exempted." And Sarkar, J. said in Sultan Brothers v. Commissioner of Jncometat'):

"Section 12 is the residuary section covering income, profits and gains of every kind not assessable under any of G the heads specified earlier." Section 6 gives the short label of each head, but the actual contents of the several heads are to be found in ss. 7, 8. 9, I 0 lHld 12. Take the head "(iii) Income from propertyn In s. 6.

Section 9 shows that only income from buildings or lands appurtenant thereto, of which the assessee is the owner, falJs under this R head. Income from other properties, e.g., land not appurtenant to

(1) fl9301 L.R. 57 LA. 228,239.

(~) [1935} L.R. 62 I.A. 207, .213.

(8) (1964J 51 I.T.R. 35'!, 3:>7: [1964] 5 s.c.R. so:-.

306 l"PREME COURT REPORTS

[1966] SUPP. S.C.R.

a building is outside the purview of this head and falls under s. 12. & Again. take the head ''(iv> Profits and gains of business, profession or vocation." Section I 0 on its proper construction applies only to the profits and gains of a business, profession or vocation carried on by the assessee during any part of the previous year. Profits and gains of business, profession or vocation of the assessee which was not carried on by him during any part of the previous year being B outside the purview of s. 10 must necessarily fall under s. 12.

Mr. Palkhiwala conceded that the receipts in question were the income of the assessee. He also admitted that the income was not exempt from tax under sub-s. (3) of s. 4. The income was received by the assessee in the taxable territories during the rele~ vant previous years. The receipts are, therefore. liable to be in~ c eluded in the total income. We have found that this income cannot be included under s. 10. It is common case that it cannot be included under any other head. It follows that the income must fall under the residuary head specified in s. 12.

Section 12 dealing with the residuary head is framed in general terms and in computing the income under this head. requires deduction of any expenditure (not being in the nature of capital D expenditure) incurred solely for the purpose of making or earni.ng such income. As the income in the present case falls under s. 12, the allowance for the necessary expenditure must necessarily be given under this head and not under s. 10. There is no question of the assessee suffering an injustice by not being given the allowances under s. 10. He cannot be given the allowances under s. 10, as the income does not fall under that section.

Counsel rightly submitted that s. 12 covers residual heads and not residual receipts. In this connection, he relied upon Salisbury /louse Estates Ltd. v. FryC). That case decided that the variou~ Schedules of the English Income-tax Act, 1918 are mutually ex~ elusive, Sch. A must be applied to the class of income faiHng under it and no pay of this income is chargeable under Sch. D.

F This decision received the approval of this Court in United Com~ mercia/ Bank Ltd. v. The Commissioner oj lnco;;;,•tax('). On the principle of this decision. if a particular income is taxable as income from property under s. 9. any residunl receipt from the property in excess of the annual value assessed under s. 9 cannot be assessed again as residual income under s. 12. This principle has no application to the case before us. Th~ relevant professional G income of the assessee is not taxable under s. 10 or under any other specific head, and it must. therefore, be taxed under s. 12. This is not a case where the revenue has taxed or can tax the incomeunder s. 10 and again seeks to tax the income under s. 12.

Mr. Palkhiwala next referred us to several English decisions in support of his contention that the receipts of the professional

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(1) til T.C. 266.

(I) [I9'8) S.C.H. 79.

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income after the discontinuance of the profession are not assessable to income-tax. Rowlatt, J. in Bennett v. Ogston(l) said:

"When a trader or a follower of a profession or vocation dies or goes out of business-because Mr. Needham is quite right in saying the same observations apply here-and there remain to be collected sums owing for goods supplied during the existence of the business or for services rendered by the professional man during the course of his life or his business, there is no question of assessing those receipts to Income Tax~ they are the receipts of the business while it lasted, they are arrears of that business. they represent money which was earned during the life of the business and are taken to be covered by the assessment made during the life of the business, whether that assessment was made on the basis of bookings or on the basis of receipts." These observations received the approval of the House of Lords in Purchase v. Stainer's Executors(2) and Carson v. Cheyney's

Executors(3). In the last two cases, the Court held that the pr~ fessional earnings of a deceased individual realised by his executor were not liable to income-tax either under Case II or under Cases III and VI of Schedule D of the English Income-tax Act, 1918.

In Cheyney's case(s). the professional earner had died in one of the assessment years and part of his earnings had been realised by his executor during the same assessment year. It is remarkable, however, that in Cheyney's case(3) at p. 265 Lord Reid said:

"In my opinion, the ground of judgment in this House in

Stainer's case was that payments which are the fruit of professional activity are only taxable under Case II and cannot be taxed under Case III, even when it is no longer possible when they fall due to tax them under Case II. and when looked at by themselves and without regard to their source they would fall within Case III. I am not sure that I fully appreciate the rea sons for the decision, but I have no doubt that that is what was decided, and I am bound by that decision whether I agree with it or not." The rule in Stainer's case(!), rests on shaky foundations and has been subjected to criticism even in England. The rule is subject to exceptions in England, and as pointed out by Jenkins, L. J. in Stainer's case(!) is subject to the application of Rule 18 of the General Rules. The Indian Income-tax Act, 1922 is not pari materia, the scheme is in many respects different from the scheme of the English Act, and I think that the rule in Stainer's caseC) is not applicable to the Indian Act.

In England, the tax is on the current year's income, the Revenue has the option to assess the

(1) J5 T.C. 374,378.

(1) [1951] 32 T.C. 367.

( 8) [1960] 38 T.C. 240.

SOB ~UP~EME OOURT Rltl'OR1'$ (196~) 8UPP, 8.0.i.

income on the accrual basis, and even if it chooses to make an asses_sment on the cash basis, the entire accrued income might be constdered to be covered by the assessment. But under the Indian law. the tax is on the previous year's income, the Revenue has no option to assess the income from a business or profession on the accrual basis if the accounts of the assessee are regularly kept on the cash basis, and the assessmenl on the cash basis cannot cover the receipts in the subsequent years.

Moreover, it is impossible to say under the Indian law that aU receipts of outstanding professional fees after the retirement of the assessee from profession escape taxation. Beyond doubt, the receipt of the professional fees in tho accounting year during which the assessee ried on the profession is assessable under s. 10, though at the time of the receipt he has retired from the profession.

The decision in The Commissioner of Income-tax, Bombay City I. Bombay v. Amarchand N. ShroOC> is entirely distinguishable.

In that case. this Court held that the income of a deceased solicitor received by his heirs subsequent to the previous year in which he died was not Hable to be assessed to income-tax under s. 24B as his income in the hands of his heirs, and apart from s. 248. no assessment can be made in respect of a person after his death. In the instant case. the assessee is alive. and no ques1ion of assessment under s. 24B arises.

Neither side relied on s. 250>. and. in my opinion. rightly.

That sub-section gives an option to the Revenue to make an R assessment in the year of the discontinuance of the business or profession on the basis of the income of the period between the end of the previous year and the date of the discontinuance in addition to the assessment, if any, made on the basis of the income of the previous year. The sub-section docs not preclude the Revenue from making an assessment on the professional income under any other section of the Act.

Our attention was drawn to s. 176(4) of the Income-tax Act,

1961. which provides:

"Where any profession is discontinued in any year on account of the cessation of the profession by, or the retirement or death of, the person carrying on the profession. any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly "in the year of receipt, if such sum would have been included in the total income of the aforesaid person bad it been received before such discontinuance."

(L) {1003] Supp. l S.C.R. 6!)9.

--.(

AMDALAT~ MODY v. 0. I. '1'. (Ba.chawat, J.)

The note on cl. 178 of the Income--tax Bill, 1961 suggests that this sub-section was passed with a view to give effect to the follo.wing recommendations of the Direct Taxes Administration Enqmry Committee in paragraph 7.81(11) of its Report:

"There is no provision in the law at present to assess the income received after the cessation of practice or re tirement or death of the assessees carrying on a profession, like Solicitors. Advocates, Doctors. Consulting Surveyors. Engineers etc. The law should be amended in such a way that even on the assessee's cessation of his vocation or retirement from the profession or death income received after such cessation. retirement or death would be taxed."

The Repon does not purport to base its opinion on any judicial decision. The assumption in this Report that there is no provision in the Indian Income-tax Act to assess the entire income received after the retirement or death of professional men cannot be wholly correct, because. beyond doubt, the income received n after the retirement in an accounting year during any part of which the assessee practised his profession is assessable under s. I 0 and the income received after his death by his legal representative during the previous year in which he practised his profession is assessable in the hands of the legal representative under s. 24B.

Moreover, the Report is silent on the question of the assessment of the outstanding profits of business realised by a trader after the E discontinuance of his business. In this case. we are concerned with the interpretation of the Indian Incometax Act. 1922, and the question is whether we can take into account the provision of the later Act in interpretin, g the earlier Act.

In Craies on Statute Law, 6th Edn, p. 146. the law is stated thus:

"Except as a parliamentary exposition, subsequent Acts are not to be relied on as an aid to the construction of prior unambiguous Acts. A later statute may not be referred to interpret the clear terms of an earlier Act which the later act does not amend. even although both Acts are to be construed as one. unless the later Act expressly interprets the earlier Act; but if the earlier Act is ambiguous. the later Act may throw light on it. as where a particular construction of the earlier Act will render the later incorporated Act in effectual."

This passage is fully supported by the decision of the House of Lords in Kirkness v. John Hudson & Co.(!). In Hariprasad Shiv- H sltankar Shukla v. A. D. Divikar(i). this Court gave effect to the

(l) [1005) A.O. 696: [if.l51l] 2 All. E.R. lUi~.

(2) [19 ~'i] 8.C.R. 12 l ,14.0.

SUPREHB OOURT RBPORT8

(1966) SUPP. B.C.R.

plain meaning of an unamended Act, though on the interpretation given by it a later amendment would become largely unnecessary, and quoted with approval t:he following passage in the opinion of Lord Atkinson in Ormond Investment Co. Limited v. Bells(~): "An Act of Parliament does not alter the law by merely betraying an erroneous opinion of it., I do not find any ambiguity in the clear terms of ss. 2(15), 3, 4, 6, 10, 12 and 13 of the Indian Incometax Act, 1922 and the later Act cannot be used as an aid to their construction. On the construction of the Indian Income-tax Act,

1922. I hold that the profession income of an assessee whose accounts were kept on a cash basis received by him during his lifetime after the discontinuance of the profession and after the dose of the accountmg year in which the profession was discontinued, is assessable to income-tax under s. 12 of the Act.

In the result, the appeals arc dismissed. There will be no order as to costs.

ORDER

In accordance with the Judgment of the majority the appeals are allowed with costs.

NALNIKANT AMBALAL KODY

COMMISSIONER OF INCOME-TAX, BOMBAY

A. K. SARKAR

R. MUDHOLKAR

R. S. BACHAWAT, JJ.

Indian Income-tax Act 1922

ss. 46, 10, 12

Art. 136

s. 6

Indian Income-tax Act 1922

s. 10

s. 12

Section 12

ss. 7 to 10

s. 12

s. 12

s. 6

Section 4

s. 6

s. 10

s. 12

s. 12

s. 4(3)

s. 4

s. 10

s. 12

s. 10

s. 12

Section 6

Income-tax Act, 1922

S. 6

ss. 7 to 12B

s. 6

s. 6

s. 6

s. 10

[1964] 8 S.C.R. 1

s. 4

s. 4

s. 4

Section 4

Section 3

s. 6

s. 10

s. 4

s. 3

s. 205

s. 4

s. 7

s. 12

s. 10

s. 6

s. 4

s. 4

s. 12

s. 4

s. 4

s. 9

s. 9

s. 12

ss. 7 to 10

S. 12

s. 12

s. 12

Section

12

Section 12

s. 10

s. 12

s. 10

s. 12

Income-tax Act

s. 33

s. 10

Section 10(1)

Section 10

s. 10(1)

s. 10(2)(viii)

s. 10(2)(vii)

s. 10(2)(vii)

section 10(1)

s. 10(1)

s. 10(1)

Section 13

s. 10

Section 13

s. 133

s. 12

s. 12

s. 12

s. 12

s. 10

s. 3

ss. 2(15) and 4

s. 10

s. 12

s. 3

ss. 2( 15) and 4

s. 4

s. 4(3)

s. 4

Section 6

ss. 7

s. 12

Section 12( 1)

s. 12

s. 12

s. 12

s. 12(1)

s. 6

s. 4

s. 4

s. 12

Section 12

Section 6

ss. 7, 8

s. 6

Section 9

L.R. 62 I.A. 207

s. 12

s. 10

s. 12

s. 4

s. 10

s. 12

Section 12

s. 12

s. 10

s. 10

s. 10

s. 12

s. 9

s. 9

s. 12

s. 10

s. 12

s. 10

s. 12

Indian Income-tax Act, 1922

s. 10

s. 24B

s. 248

s. 24B

s. 250

s. 176(4)

Income-tax Act

cl. 178

Income-tax Act

s. 24B

ss. 2(15), 3, 4, 6, 10, 12 and 13

Indian Incometax Act, 1922

s. 12