LAXMI CHAND A

INDORE IMPROVEMENT TRUST, LNDORE AND ORS.

February 24, 1975

[K. K. MATHEW, V. K. KRISHNA IYER AND P. K. GOSWAMI, JJ.]

Madhya Pradesh Town lmprovemellt Trust Act 1960-W/Sether a ltousing B scheme can contain features of industrial and other 1zon-housi11g scheme-Malafide acquisition i11 the absence of any prol'ision whether tribunal can award fot, rest from the date of taking possession of t/1e property till the date of determination of 1compe11satio11.

The petitioner owned certain land. There was an earlier attempt to acquire the land of the petitioner by sanctioning a housing accommodation scheme by the Indore Improvfatent Trust under the Madhya Pradesh Town Improvement Trust C Act, 1960. The said scheme was, however, cancelled. The petitioner wanted to develop his land for industrial purposes and, therefore, obtained No Obji:ction Certificates from various Government Departments as well as from the Trust.

The petitioner got his land converted from agricultural purpose to industrial purpose subject to the limitation that the construction work had to be approv1:d by the Trust. The Trust, however, refused the No Obj'ection Certificate for development of the land on individual basis on the 2round that a scheme was being ' approved for the land in question and other neighbouring lands. The Trust framed a scheme which included the land of the Detitioner also. The Trust served a notice D to acquire the petitioner's land for the purpose of the scheme. The petitioner f submitted his objection stating that the land was being developed into industrial i area and several small scale industries were functioning there and, as such, deve- ~, lopment was alPady in progress. Thereafter, the Trust published a notice acquiring the said land.

Before the Trust could take possession of the petitioner's land the !letitioner filed a Writ Petition in this Court.

It was contended on behalf af the petitioners :

(1) The Housing Accommodation Scheme is invalid because it does not specify the class of inhabitants for whom the same has been made. -

(2) The scheme being a Housing Accommodation Scheme it is for residential oc:upation only and it is not competent to include plans for industrial purposes.

( 3) Section 31 of the Act does not empower the Trust to frame a F scheme for industrial purposes at all. ( 4) There is no application of the mind in terms of section 45 in :making the Scheme.

(5) Thi; acquisition of the land for the purpose of the Scheme is malafide. ( 6) Since the Act rr.akes no provision for payment of interest from the date of delivery of possession of the land to the Trust till the G determination of compensation by the Tribunal, acquisition of the land is violative of article 31 (2) of the Constitution.

Petitioner has not challenged vires of any provisions of the Act.

HELD : ( 1) Section 31 of the Act permits combining two or more schemes or supplementing some special features of a particular scheme in another scheme.

There is no bar in framing a housing accommodation cheme with somi: of the features of industrial scheme.

A housing accommodation scheme need not H necessarily be residential scheme only. It can admit of providing housing accommodation for any other purpose or object. There is nothing in section 31 or anv other provision o~ the Act disabling the Trust from framing schf:me for industrial purpose.

[690£-G]

L,\XMI CHAND v. INDORE IMPROVEMENT TRUST (Goswami, J.) 687

(2) Section 45 requires that while framini: the scheme the inherent utility, efficiency and adequacy of the scheme and the objections and representations of the perwns have to be taken into consideration. The scheme in question was open for inspection. There was no ambiguity or vagueness of the scheme or its purpose.

Where factual satisfaction is evident formal recitals being omitted may not matter.

At any rate, section 52 (2) puts a final seal of imprimatur on the scheme after publication of the sanction of the Government. [69 lC-D]

(3) Acquisition is not malafide .. No oblique motive can be inputed to the Trust in ma:ldng the impugned scheme. There is no allegation of malafide against the S:";~ G0vernment whose sanction was a pre-requisite for the acquisition.

The order of acquisition cannot, therefore. be characterised as ma/afide.

[6910-H]

(4) It is true that there is no provision for awarding interest unlike under the Land Acquisition .Act. It is submitted by the respondents that there is no bar under the Act against awarding interest by the Tribunal. It is not possible to hold that the compensation Tribunal which is at par with an arbitrator will be entitled to award interest without any express provision in the Act.

The petitioner is. therefore. ri2ht in their contention that this Act does not provide for awarding interest from the date of taking possession of the property to the date of determination of compensation.

However, it is not possible to quash the acquisition in the absence of a challen2e to the iires of the provisions of the Act. The law being valid the attack will revaperate upon the quantum of compensation pure and simple. It is sufficient to point out that the quantum of compensation cannot be challenged undflr Article 31 (2) of the Constitution.

[ 69~D; 694C-G]

ORIGINAL APPELLATE JURISDICTION: Writ Petitions Nos. 517 of 1972 & 240 of 1973.

Petition under Article 32 of the Constitution of India.

D. V. Patel (In WP. No. 240/73), S. P. Phadnis and S. K.

Gambltir, for the Petitioners (In both the Petitions).

I. N. Shroff, for the Respondent No. 1 (In WP. No. 517/72).

S. M. JaJ.n, for the Respondents Nos. 1-2 (In WP. No. 240/

~-3). .

The Judgment of the Court was delivered by

GOSWAMI, J. This judgment will govern Writ Petitions Nos. 517 of 1972 and 240 of 1973.

The applications are directed against what is described as a Housing Accommodation Scheme sanctioned by the Indore Improvement Trust (briefly the Trust) under tbe Madhya Pradesh Town Improvement Trust Al:t 1960 (briefly the Act). Brief facts of Writ Petition No. 517 of 1972 may alone be sufficient. There was an

erlicr attempt to acquire the land of the petitioner by sanctioning

a scheme in July 1961 but the same was cancelled some time in September 1962.

The petitioner personally wanted to develop his land for industrial purposes and with that end in view obtained No Objeclion Certificates from various Government Departments as well

as from the Trust.

The petitioner also succeeded in converting his patta from agricultural purpose to industrial purpose, subject. inter ali:1, to the lirnita lion that the construction work on the land shall be carried out in accordance with the plans sanctioned by fne . same

Improvement Trust (Annexure 'G'). Later, however, the petitioner found from a ktter of the Trust of October 26~ 1964,. that a scheme was being approved for his land a~ other ne1ghbun?g lands. and, therefore the Trust was unable to issue the No Ob1ection Certificate for deveiopment of his land on individual basis. The Trus~ framed a Scheme No, 62 under section 46(1_) of the Act and published a notice to that effect in the Gazette and in local newspapers in January

1965. The Scheme includes the land of the petitioner. The repre~ sentations which the petitioner made against the Scheme were of no avail.

The Trnst served a notice dated February 10, 1965, upon the petitio11er under section 48 (1) of the Act proposing to acquire his land for the purpose of the Scheme.

The petitioner submitted his objections on April 15, 1965, stating, inter alia, that the land was being developed into industrial area and several small scale industries were functioning there an!d as such development was already i~ progr-ess.

It was also stated that the land having been put to the use of industrial purposes could not be re-converted foi: the purposes of housing accommddation'. It was further stated that

the land was mortgaged to the State Bank for about Rs. 2 lakhs and the compensation that would be required to be paid by the Trust would be necessarily higher than in the case of other suitable vacant lands. The petitioner was given a hearing but ultimately the representations were rejected. Tue Trust duly applied to the State Government for sanction of the Scheme which was accorded on April 19, 1968, under section 51 of the Act. The Trust published a notice dated July 12, 1968, under section 68(1) of the Act focla ring its intention to acquire the land. The petitioner filed his ohjections under section 68(2) against the proposed acquisition of the land but these were rejected and the Trust obt~ sanction .of the

Stat; e Government (respondent No. 2) to '-<acquire the land under section 70 of the Act,. and the Notifiction was duly published on September 27, 1968.

Therefore the Trust published a Notification in the Government Gazette dated September 8, 1972, acquiring the said land and under section 71 (2) of the Act the land vested absolutely with the Trust free from encumbrances from the date of the

ublication. Before the Trust could take possession of the petitioner's land, he filed the writ application under article 32 of the Constitution and obtained Rule Nisi and interim stay of disposse!.sion was granted pending disposal of the matter.

Th~ , following are the common submissions made on behalf of the petitioners :-

1. The Housing Accommodation Scheme ls invalid because It. does not specify tile class of inhabitants for whom the same has been made.

2. Th~ , Scheme_ being a Housing Accommodation 11 Scheme, 1r: 1s. for residential oc.cupation only , and it is not competent to include plans for industrial purposes.

LAXMI CHAND v. INDORE IMPROVEMENT TRUST (Goswami, J.) 68 9

3. Section 3 J of the Act does not empower the Trust to frame a s::heme for industrial purposes at all. l

4. There is no application of the mind in terms of section 45 in making the Scheme.

5. The acquisition of the land for the purpose of the Scheme is ma/a fide.

6. Since the Act makes no provision for payment of interest from the date of delivery of possession of the land to the Trust to the determination of compensation by the Tribunal acquisition of the land is violative of Article 31(2) of the Constitution.

At the very outset it should be pointed out that the Petitioners have not challenged the vires of any provisions of the Act.

In order to appreciate the first three submissions, which may be taken up together, we may note a few relevant provisions of the

Act.

Chapter IV of the Act describes the contents of improvement schemes.

Section 30 provides that "an "improvement scheme may provide for all or any of the following matters, namely- * * * •

(i) the provision for accommodation for any class of

E inhabitants : "

Section 31 may be set out in full :

31. "Types of improvement schemes.-

An improvement scheme shall be of one of.the following types or _may combine any two or more of such types or of special features thereof, that is to say- ( a) a general improvement scheme;

(b) a re-building scheme;

(c) a re-housing scheme; t d) a street scheme; ( e) a deferred street scheme;

(f) a development scheme;

(g) a housing accommodation scheme;

(h) a town expansion scheme;

(i) a drainage or drainage including scheme; and

(j) a playground, stadium and scheme."

sewage disposal .

- recreation ground

Section 38. 'Housing accommodation scheme .. -

Whenever the Trust is of opinion that it is expedient and for the public advantage to provide housing accommodation for any class of the inhabitants within the Trnst area, the Trust may frame a housing accommodation scheme for such purpose." Section 39. "Town expansion scheme.- ( 1) Whenever the Trust is of opinion that it is expedient and for the public advantage to control and provide for the future improvement or expansion of a town to which this Act is applicable, the Trust may frame a town expansion si:heme for such town.

* *

(3) Such scheme shall show the methods in which it is proposed to lay out the area to be developed and the purposes for which the particular areas are to be utilised."

y * * * It is submitted on behalf of the petitioners, that the impugned scheme is not a housing accommodation scheme under setion 38 but a scheme purely for industrial purposes. It is pointoo out that ther.:: is no refere11ce in the Scheme to the class of inhabitants within the Tru5t area for whose accommodatiorl the Scheme has been framed under section 38.

Since it is a housing accommodation scheme it cannot include plans for industrial purposes.

The argument fails to take count of section 31 which pirmits in t.:rms for combining two or more schemes or supplementing some

speci~1l features of a particular scheme in another scheme. In other words section 31 envisages composite schemes.

Section 39 which provides for a town expansion scheme authorises under sub-section

(3) to.: indicate the method of layout as well as the purposes for which particular areas under the scheme may be utilised. This section goes to show that there is no legal bar in framing a housing accommodation, scheme with some of the features of a town expansion scheme which will even indicate the purposes for which particular areas may be utilised. There is nothing in the Act to ban industrial purposes from consideration under section: 39 (3). The fac:t that a scheme is described merely as a housing accommodation scheme does not prevent the adaptation of the scheme to the incidental require ..

ments which may be overlapping in another scheme.

We are also no: satisfi~ that housing aocommodationr scheme must lll!cessarily be a residential scheme only and that it cannot admit of providing housing accommodation for any other purpose or object.

The 1vfadhya Pradesh High Court took the same view in Beni Prasad Tandon and Others v. Jabalpur Improvement Trust, Jabalpur(').

Again it is difficult to appreciate how section 31 prevents the Trust from framing an industrial scheme.

We do not find anything in _:cction 31 or in any of the provisions of the Act disabling the

(l) [1970] M. P. L. J. 292.

LAXM! CHAND v. INDORE IMPROVEMENT TRUST (Goswami, J. 691

Tti.bt from framing a scheme for industrial purposes.

To ment.ion only section 39. i\ is clear that under that secuon a town expansion scheme may be framed even without the limits of the to:vn a!ld tt.at would indicate that a town expansion scheme may env1sae mdustrial expansion to meet the growin~ needs of th~ commumty.. '!'f e, thcrefol'.:, do not see any substance m the aforesaid three subnuss1ons. on behalf of the petitioners.

With regard to the fourth submission of the petitioners, it is difficult to accept the sme. Sectio°: 45 requires certin maters specified in (a) to (c) therem to be considered when frmmg an IJ?lJ>rovemet

scheme.

The specified matters touch on the mherent utility, efficiency and adequacy of the scheme and the objections and represen'.ations of the persons affected will be directed to negative such assumptions.

The Scheme in question was open to inspection. There was no ambiguity or vagueness about the Scheme or its purposes.

From even the nature of the representations and objections it is apparent that the Trust did have all relevant matters in their mind in framing the Scheme.

Indeed without actually taking into consi:- clei"C!tion the various matters specified in section 45 it may not be po, siblc to frame a scheme and finally to obtain sanction of the

Govmmcnt in the teeth of objections and representations against the same.

Where factual satisfaction is evident formal recitals being omitted may not matter.

At any rate sub-section (2) of section 52 puts a final seal of imprimatur on the scheme after _publication of the sanction of the Government.

The submission is, therefore, devoid of merit.

With regard to the fifth submission, which is actually urged by the petitioner in writ petition No. 517 of 1972, we are not satisfied that the acquisition of the land for the purpose of the present Scheme is ma/a {; de.

It is submitted that the Trust by formulating the present Scl; cme had an oblique motive to change the ownership of the land already under a private scheme for development to let it out to tenants who will run the existing enterprises already starwd 011 the land.

We are not satisfied that any oblique motive -can be attributed to the Trust in making the impugned Scheme. It is clear that the land was originally owned by the petitioner for agri1:ulural

purpJ~(::; and when he obtained a patta converting it to indusrial purpose. t-t was clearly made subject to a condition that construction work

n the land shall be carried out in accordance with the plans sanctloned by the Trust.

The petitioner had been given reasonable

opportrntty to sub!llit representations and was given a hearing by a Committee constituted under the Act.

The State Government on the application of the Trust examined the Scheme and sanctioned the acquisition of the land under section 70 when it was satisfied that t~~ acquisition was in public interest.

There is no particular

~.l!eptton of ml.a fide against the State Government whose sanction

wa~; a J;?Te r_eqms1te for the acuisition. The order of acquisition c,:nnot. the1efore, be characterised as ma/a fide and the submission fails.

With regard to the sixth and last submission there was al good deal of argument at the bar.

The respondents urged that this point was not specifically taken ln the petitions.

Under section 72(1) of

the Act where any land is acquired by the Trust it shall pay for such acquisition "compensation the amount of which shall be determined io accordance with the provisions hereinafter contained". Under

section 73 a Tribunal is constitutd for the purpose of determining the amount of compensation.

Section 77 provides for matters to be considered for determining compensation, namely, "firstly, the market value of the land at the date of the publication of fhe notification under sub-section ( 1) of section 68" and six other fa<tors.

It is also provided in the same section that the Tribunal shall not take into consideration certain factors mentioned under eight heads. Under sub-sc;; tion (2) of section 77 "in addition to the market-value of the land as above provided, the Tribunal shall in every case award a sum of fifteen per cntum or such marke!;:.Yalue in consideration of the com pulsury nature of the acquisition". There being no provision foy payment of interest from the date of compulsory acquisition orthe land upto the date of payment, acquisition, it is submitted, is invalid in law. .

It is true that there is no provision for awarding interest unlike under th; Land Acquisition Act, 1894 (see sections 28 and 34 of that Act). It is, however, submitted on behalf of the respondents that there is no bar un, der the Act against awarding interest by the Tribunal even though there is no enabling express provision to that effect under the Act. lt is stated that the Tribunal under section 78 exercises pc, 1ers for summoning witnesses and enforcing attendance etc. in the same

mannr as provided in the case of civil courts under the Code of Civil

Procedure. Under section 147 an appeal from the Tribunal lies to the High Court in cases where the value of the claim exceeds Rs. 500/- and in any other case to the District Judge. It is, therefore, submitted that the Tribunal is empowered even as a civil court to award interest under section 34 of the Civil Procedure Code. Section 34 of the Civil

Procedure Code, however, authorises the court to award interest from the date ol the suit to the date of the decree and thereafter to the date of payment. Section 34, therefore, would not come to the aid of the Tribunal to award interest from the date of delivery of possession of the land to the date of determination of compensation.

The respondents relied upon the decision of this Court _in Sazilui'r Si11gh and Others v. Amrao Singh and Others( 1).

I~ this cas~. t:Hs Court had to deal with section 5 ( e) of the East Pun1ab Acqms1t1011 and Requisition of Immovable Property (Temporary Powers). Act, 1948 (briefly the Punjab Act.) which provided that an Arbitrator :in making his award shall have regard to the provisions of sub-sectiou(l) of section 23 of the Land Acquisition Act 1894 so far as the same can be made applicable. The submission in that case was that since sub-section (1) of section 23 is alone mentioned, sub-section .. (2) of section 23 is impliedly excluded and necessarily also section 28 and ----------

(!) [1961] 3 S. C. R. 676.

B ,

:~11 CHAND v. INDORE IMPROVEMENT TRUST (Goswami, J.) 6 93

section 34 stand excluded. The argument, therefore, was that ihc Tribunal was not empowered to award interest under the Punjab Act. Repelling the said argument this Court held as follows :-

"It would be legitimate to hold that by the application of s. 23(1) in terms the provisions of s. 23(2) are by necessary implication excluded. If the Jtegislature has provided that only one part of s. 23 should be applied it would be reasonable to hold that the other part of s. 23 was not intended to be applied; but we do not see how it would be reasonable to hold that by the application of s. 23 (1) the principles underlying the provisions of ss. 28 and 34 are also excluded. Therefore, it is necessary to examine this question on general grounds and principles without assuming that the application of these general considerations is excluded by any of the provisions of the Act". ·

, This Court finally held as follows :-

"The power to award interest on equitable grounds or under any other provisions of the law is expressly saved by the proviso to s. 1 (of the Interest Act 1839) ...... we have already seen that the right to receive interest in lieu of possession of immovable property taken away either by private treaty or by compulsory acquisition is generally regarded by juJicial decisions as aQ equitable right; and so, the proviso to s. 1 of the Interest Act saves the said right".

The Court in that case, therefore, awarded interest to the claimants.

The petitioners on the other hand drew our attention to a decision of this court in the Godhra Hectricity Co. Ltd. and another v. The State uf Gujarat and anpther (') where one of us Mathew J., speaking for the Court held as follows :- ·

'There can be no doubt about the correctness of the

genral rule under which a purchaser who takes possession is charged with interest on his purchase money from that time until it is paid. This rule has been applied to compulsory purposes (see Satinder Singh v. A mrao Singh) (supra).

But the question is whether the arbitrator has power under the A, ct to award interest on the purchase price.

In Toronto City Corpn. v.

Tomnto Rly. Corpn., [1925] AC 177 at op. 193-194 the Privy Council held that the general rule urer which a purchaser who takes possession is char!!ed with interest on his purchase money from that time until it is paid was well etablished, and had on many occasions been apolied to comoulsory purchases but the duty of the arbitrators in that case was not to determine all the rights of the comnany. but onlv to ascer'ain the actual value of certain prooerty at a certain time and that it was a iruism to sav that ucli nlue coulrl not inclnde interest uoon it 'mr! that th<" lihiFtv frir interest fay outside of th2 arbitra.- tion for its enforcement".

(.f) A. r. R. 1975 (January) S. C. 32.

SUPREME COURT REl:'ORTS

[1975J 3 S.C.R.

Although in the Godhra Electricity Co's case (supra) the Court

ha~; noticed the decision in Sa1u1der Sing/i's case (supra), it may b;

ob.; u.:d that the Courts attention in the latter case was not drawn to section 5 (g) of the Punjab Act to the following effr.ct :

'"Save as provided in this section an, d in any rules thereurq'1er, nothing in any law for the time being in force shall apply to arbitration under this section".

A.id thL' Court, therefore, in that case rendered the decision "without assuming that the applicatioq of these general considerations is l)XChided by an:y ot the provisions of the Act". In view cf the Godhra Electricity Co's case (supra) it is not possible to hold that the Com- :iensation Tribu01al, which is at par with an Arbitrator, will be entitled t:.i award interest without any express provision in the Act. This is particularly so since under the Act the Tribunal is entitled to take into consideration some given factors and to peremptorily ignore certain

other specified factors in determining the compensation. It has a1so been empowered to grant solatium as similarly provided for under the Land Acquisition Act. In the entire scheme of the self"contained Act, in absence of a provision to authorise the Tribunal to award interest, it is not possible to hold that it can award interest on the amo\Jmt of compensation determined by the Tribunal subsequent to the acquisition of the land. The petitioners are, therefore, right in their contention that this Act does not provide for awarding interest from the date of taking possession of the property to the date of determination of com- . pnation, which will always be bn a later date under the provisions of the Act (see sections 72 and 7 3) .

The petitioners, however, have an injirect object. They are not interested in the interest as sn:.:11 but want the land back and will not be satisfied unless the order of acquisition is quashed. Unfortunately,

however, it is not possible for this Court to quash the acquisition in these caes in absence of a challenge of the vires of the pro; isions of thL Act. Presumption of constitutionality will forbid casting an evil eye on the Act in absence of a clear challenge. The Act must be assumed to be valid for the purpose of these petitions and we will proceed on th::it basis. Then law being valid the attack will reverberate upon the quantum of compensation, pure and simple. It is sufficient to poi11t out that the quantum of compensation which may be determined

according to the provisions of the Act for acquisition of the land cannot be challenged under article 31 (2) of the Constitution. In that view of the matter this submission of the learned counsel also fails.

ln Writ Petition No. 240: of 1973, Mr. Patel additionally urged that publb; tion of the notice of the Scheme was not made in accordance with section 46 ( 2) of the Act which requires weekly publication in the Gazette for three consecutiv~. weeks. Apart from the fact, in this case. that the petitioner was well aware of the Scheme and submitted objecti<Jns and representations, section 52(2) appears to be conclusive on tlie question. That sub-section provides that the publication o[ a

~10tification by the Stte Government sanctioning the sche1:11e shall be

LAXMI CHA'.'iD v. INDORE IMPROVEMENT TRUST (Goswami, I.) 6 95

conclt1siH: evidence that the scheme has been duly framed and sane" tioned. In view of this, ticklish skirmishes over publication on technical grounds at a distant date are completely out of place. The submission is devoid of merit.

Jn the result both the Wit Petitions fail and are dismissed with no. order us to costs.

We sbould observe that Mr. Shroff pointed out th<.t in view of the decision of the Supreme Court in Satinder Singh's case (supra) ad another lkcision of the Madhya Pradesh High Court in Lakhania/ and others v. Town Improvement Trust, Jabalpur and others,(') the Tribunal has been always awarding interest in acquisition cases under the Act and he undertakes on behalf of the respondents, irrespective of our decision, to pay interest to the petitioners at 6% per annum from the date of actual deiivery of possession upto the dote of payment of the compensation.

P.H.P.

Petitions dismissed.

(!) [1970] M. P. L. J. 316.

LAXMI CHAND

INDORE IMPROVEMENT TRUST, INDORE AND ORS

February 24, 1975

K. K. MATHEW

V. K. KRISHNA IYER

P. K. GOSWAMI, JJ.

Indore Improvfatent Trust

Section 31

section 45

article 31

Section 31

section 31

Section 45

section 52

Article 31

Article 32

Constitution of India

D. V. Patel

S. P. Phadnis

S. K.

Gambltir

I. N. Shroff

S. M. JaJ.n

GOSWAMI

October 26~ 1964

section 46(1_)

February 10, 1965

section 48

April 15, 1965

April 19, 1968

section 51

July 12, 1968

section 68(1)

section 68(2)

section 70

September 27, 1968

September 8, 1972

section 71

article 32

Section 3

section 45

Article 31(2)

Chapter IV of the Act

Section 30

Section 31

Section 38

Section 39

section 38

section 31

section 31

Section 39

1vfadhya Pradesh High Court

section 31

section 39

section 45

section 52

section 70

section 72(1)

section 73

Section 77

section 68

section 77

Land Acquisition Act, 1894

sections 28 and 34

section 78

section 147

section 34

Section 34

Section 34

section 5

section 23

Land Acquisition Act 1894

section 23

section 23

section 28

[1961] 3 S. C. R. 676

section 34

s. 23(1)

s. 23(2)

s. 23

s. 23

s. 23

ss. 28 and 34

s. 1

Interest Act 1839

s. 1

Interest Act

Mathew

SUPREME COURT REl:'ORTS

[1975J 3 S.C.R.

Godhra Electricity Co

Sa1u1der Sing

section 5

sections 72 and 7

article 31

Patel

section 46

section 52(2)

Shroff

Supreme Court

Satinder Singh's

Madhya Pradesh High Court


COMMISSIONER OF INCOME TAX (CENTRAL) DELHI A

\I.

HARPRASAD & CO. (P) LTD.

February 25, 1975

[Y. V. CHANDRACHUD, R. S. SARKARIA AND A. C. GUPTA, JJ.]

Income-tax Act (ll of 1922) Sections 128, 22(2A), 24(2A) & (2B)- B Capital loss incurred in 1/te year when capital gains were not exigible to taxlf could be set against capital gains in subsequent years.

By the Income-tax and Excess Profit Tax (Amendment) Act, 1947 s. 12B was inserted in the Indian Income-tax Act, 1922 .. making capital gains which arise after March 31. 1946, taxable. The same A':t inserted sub-sections (2A) and (2B) in s. 2.4 of the Income-tax Act.

As a result of the Indian Finance Act, 1949 which restricted the operation of s. 12B to capital gains ari.sing before April l, 1948, a.nd the Finance (No. 3) Act of 1956 which restored C tax on capital gains with effect from. April l, 1948 capital gains arisinll from

1-4-1948 to 31-3-1956 were not taxable.

For the assessment vear J 955-56 which relates to the period when ce.pital gains were not taxable the assessee claimed a loss of Rs. 84,862/- arisini: from the 5a\e of certain sharc:s.

The Income-tax Officer disallowed the loss on the ground that it was a los.s of capital nature.

The Appellate Assistant Commissioner, .in appeal, held that the assessee's claim was exaggerated, that the. actual .lo!! wa, only Rs. 28,662/- and agreed with the Income-tax Officer that the IO!s D was not a revenue loss but a capital loss.

Before the Tribunal the assessee contended that the amount of Rs. 28,662/. which had been held to be a capital IE>ss by the authorities ihould be allowed to be carried forward and set off agairat profits and gains under the head "Capital gains" earned in future as laid down in. s. 24(2A) and (2B).

The Tribunal held in favour of the ass(:ssee.

The High C0urt, in reference, confirmed the order of the Tribunal holding that the effe:t of sub-section:; (2A) and (28) of s. 24 read with sections 6 and 12B was that if a capital loss was incurred in a Year in which a. cpital gain did not attract tax under section l 2B even then such loss would still be loss £ under the head 'capital iains' and if in a subsequent year the assessee had any profit under that head it would still be carried forward and set off against the taxable capital gain.

Allowing the appeal to this Court, HELD : (1) From the charging provision of the Indian Income-tax Act it is discernible that the word5 'income' or 'profits and gains' should be understood as including losses, so that both must enter into computation, wherever it becomes material, of the taxable income of the assessee. Although s. 6 classifies F income under six heads the main charging provision is s. 3 which levies incometax as only one tax on the 'total income' of the assessee a5 defined in s. 2(15).

An income in order to come within the purview of that definition must satisfy two conditions, (a) it rnust comprise the 'total amount of income. profits. and gains refeued to in s. 4(1), and (b) it must be computed in the manner laid down in the Act. If either of these conditions fails the income will not be a part of the total income that can be brought tu charge. [702F-703BI

(2) The concept of arry forward of loss does not stand in vacuo.

Itf: sole G purpose is to set off the loss against the profits of a subsequent year.

Set off implies that the tax is exigible and the assessee wants to adjust the loss a1ainst prcfit tn reduce the tax demand.

Tt follows that if such set off is not nermissible or possible owi11g to the income or profits of the subsequent year being from a non-.taxable source, then~ would be no point in allowing the loss to be carried forward.

Also, if the Joss arising in the previouJ year was under a hea•i not chargeable to tax it covld not be allowed to be carried forward and absorbed ag<tinst income in a subsequent year from a taxabb source. [704C-E]

(3) Capital gains would be covered bv the definition of income ins. 2(6C) II only if they were chargeable under s. l 2B.

But s. 12B was not operative in the vears 1948 to 1956. Thus in the relevant previous year and the asses~; ment year or even in he subsequent yeac, 'capital gains' or 'capital losses' did not

form par: of the total income of the assessee which could be brought to charge and were, therefore, not required to be computed under the Act.

That is condition (b) which 'total income' must satisfy is not satisfied in the present case. l.703B-D]

(4) Under s. 22(2A) it is a condition precedent to the carry forward and set off of the loss that the assesse must file a return either in response to a general notice, under s. 22( 1) or voluntarily, without any individual notice unuer subsectio•1 (2). If he does not file the return for the year in which the loss wa.q i"ncurred and get the loss computed by the Income-tax Officer, th~ right to carry forward the loss v.'ill also be lost.

But if the loss is from a source or head of income not liable to tax or exempt from tax neither the assessee is required to show the same in the. return nor is the Income-tax Officer under any obligation to compute or assess it, much less for the purpose of carry-farward. [7030-F]

( 5) In the instant case, the asscssee in his return had not shown any 'capital loss' but claimed the loss as a revenue loss.

The Income-tax Officer should have rejected the asmsee's claim to carry forward the loss merely on the ground that it was not a revenue loss and he need not have given a finding that it was a capital loss, because 'capital gains' were not taxable during the year. [703F-Ci]

( 6) Section 24 (2) expressly refers to loss, 'in any busines$; profession or vocation'. It does not cover a capital loss under the head 'capital gains' which at the relevant time were not chargeable and did not enter into computation of the total income of the assesee. Therefore, under s. 24(1) and (2) the assessee had no independent right to carry forward his capita I loss even if it could not be set off owing to the non-taxability of capital gains against future profits in the immediate subsequent years.

[704B-C]

(7) Assuming, therefore, that the assessee in the subsequent years 1955-56 and 19 56-57 when the capital gains were not taxable made huge capital gains he would not be obliged to show those capital gains in his return. Therefore, the loss suffered by him in the relevant assessment year in the instlmt case could not be absorbed or set off against such capital gains.

[704F]

C!VIL APPELLATE JURISDICTION : Civil Appeal No. 494 of 1970.

From the judgment and order dated the 24th January, 1969 of the Delhi High Court in Income Tax Ref. No. 51 of 1966.

V. C. Desai, !. Ramamurthy and R. N. Sachthey, for the-appellant.

A. K. Sen and H. K. PUl'i, for the respondent.

The Judgment of the Co'CI't was delivered by SARKARIA, J.-This appeal is directed against the Judgment, dated 24-1-1969, of the High Court of Delhi answering in the affirmative the following question referred to it under s. 66 (1) of the India•, Incometax Act, 1922 (for short, the Act) by the Commissioner of Income-tax:

"Whether on the facts and in the circumstances of the case the capital loss of R.~. 28,662/- could be determined and carried forward in accordance with thr provisions of Section

24 of the Indian Income-tax Act, 192:.t, when the provisions of section 12B of the Income-tax Act, 1922 itself were not applicable in the assessment year 1955-56."

The assessee (respondent) is a Private Limited Company.

The assessment year under tderence is 1955-56 and the relevaQ.t previous year is from 1-5-1953 to 30-4-1954. On lC\-1-1952 the assessee pur-

14-470SupCf/75

198 SUPREME COUllT REPORTS [1975] 3 s.c.R.

chased 112-4shar1es of M/s. Intercontin'!nt Travancore Pvt. Ltd. at a cost of Rs. 1,12,400/- from M/s. Escorts (A&M) Ltd. In the rek:- vant accounting year ending on 304-1953 the assessee received 562 bonus sh:i.res from the same company. It thus acquired a total number of 1686 shares. On 3-9-53, i.e. during the relevant previous year the assessee sold all these 1686 shares !o M/s. Escorts (Agents) Ltd. for Rs. 84,300 and claimed a loss of Rs. 84,862/- in the income-tax return filed by it.

The Income-tax Officer disallowed the entire loss of Rs. 84,862 on the ground that it was a loss of a capital nature.

The assessee carried an appeal to the Appellate Assistant Commii,- sioner and contended that this loss of Rs. 84, 862 /- was a revenue l0!1s . arisin)!; out of dealing in shares. The Appellate Assistant Commissioncr

found that the assessee's claim was exaggerated and that the actual lrn!S was to the tune of Rs. 28,662/- only. He furthtr held that this l0!1s of Rs. 28,662/- was not a 'revenue loss' but a 'capital loss' arising out

of change of investments.

Against the decision of the Appellate As~:stant Commissioner tr.e assessee preferred an appeal before the Tribunal, challenging the findings of the Commissioner both in regard to the amount of loss and rts nature. At the stage of arguments before the Tribunal, the assessee's C..ounsel did not press these grounds of appeal but took up the plea that the amount of Rs. 28,662/- which had been held to be a "capital 10s.!.'' by the authorities below, should be allowed to be carried forward and set off against profits and gains, if any, under the head "capital gairu" earned in futr.re, as laid down in sub-sections (2A) & (2B) of s. 24 of the Act.

Despite objection from the Departmental Representativ1~, the Tribunal allowed this new ground to be raised with the ob&ervation that ft was "a pure question of law and did not require investigation of any fresh fact". It further accepted the contention of the asessee and directed that the "capital loss" of Rs. 28,662/- should be carried forward and et off agairu.t "capital gains" it any, in future.

At the instance of the Commissioner of Income-tax, the Tribunal referred the above question (set out at the commencement of this judgment) to the High Court under~- 66(1) of the 1922 Act.

It was contended before the High Court on behalf ot the Revenue that the expression "capital gains" in sub-section (2A) of s. 24 has reference only to section 12B so that the loss suffered in the year i.n which. the profits under Che head "capital gains" were not taxable, could not fall within sub-section (2A) of s. 24, S. K. Kapoor J., speaking for the Division Bench, rejected this contention in these tenns :·

"This argument overlooks the fact that the head of income chargeable to income-tax are set out in section 6.

lion 12-B deals only with the computation of capital gains and with their taxability if they arise during a particular period.

As a matter of fact, section 12B itself refers to

ection 6 inasmuch as it says that "the tax shall be payable by an assessee under the head "capital gains". This obviously has reference to the Vlth head in section 6. The effect of

sub-section (2A) and (2B) of section 24 read with section 6 and 12B, therefoce, is that if a .capital !oss is incurred in a year in which a capital gain did not attract tax under section 12B such loss would still be loss under the head "capital gains" and if in subsequent year the assessce has any profit under that head it can still be carriM forward and set oft' against the taxable capital gain. The Tribunal, was in my opinion, right in c.oming to the conclusion that it did.'.'

Hence this appeal by the Commissioner of Income-tax (Central) Delhi.

Capiwl Gains Tax for the first time was introdued by the Incomctax and Excess Profit Tax (Amendment) Act, 1947 (No. 22 of

1947) which inserted section 12B in' the Act.

This section made taxable "capitai £ains" which arose after March 31, 1946 The same Act of 194 7 added as the Vlth heali "capital gains" in 5. 6 of the Act. It also inserted sub-sections (2A) and (2B) ins. 24 of the Act.

The Indian Finance Act, 1949 virtually abolished the levy and restricted the operation of s. 12B to "capital gains" arisin9 before the 1st April, 1948. But s. 12B in its restricted form, andi the VIth head, 'capital gains' in s. 6, and sub-sections (2A) and (2B) of s. 24 were not deleted and continued to form part of thr. Act. The Finance (No.

3) Act, 1956 reintroduced the "capital gains" tax with effect from the 31st March, 1956. It substantially altered the old section 12B and brought it into its present form. As. a result of Finance Act (3) of 1956 "capital gains" again became taxable in the assessment year 1957-

58. The position that emerges is that "capital gains" arising, between 1-4-1948 and 31-3-1956, were not taxable. The capital loss in question relates to this period.

Mr. V. S. Desai, learned Counsel for the appellant contends that accordir1g to the scheme of the Act a "capital Joss" occurring in a previous year, could be allowed to be carried forward and set off against the capital gains of a subsequent year, only if the income 'lllder that head was taxable in the relevant previous and subsequent years. Since during the period from 1-4-1948 to 31-3-1956, capital gains (plu$) or capita! gains (minus) did not enter into computation of the total income of the assessee chargeable to tax under s. 3 read with s. 12B of the Act, the question of carrying forward such loss did not arise, much Jess could such a loss be set off against the profits of any 6Ubsequent year.

As against this, Sbri Ashok Sen, learned Counsel for the assessee maintains that a right to carry forward a loss under any of the heads enumerated in s. 6, is. not dependent upon the taxability of income under that head; it is sufficient if at the relevant time "capital 9ain~" is one of the heads cf income recognized by the charging s. 6 and the loss is adjustable ae:ainst "capital rrains", if anv, in future under s. 24.

H The argument proceeds; thats. 6(vi) was not lying inert on the statute boo]< but was operative, throughout, for the purpose of calculating the losses under that head. Shri Sen compared the non-taxability of

capital gains during the: period from 1-4-1948 to 31-3-1956, to a tax holiday for those years. Another illustration given by the learn.ed Counsel is of a person whose total income falls entirely on the negative

side on account of losses suffered by him under any of the heads of income given in s. 6. Such a person notwithstanding the fact that he had no assessable income has a ri3ht to file a return and get his losses

conputed by the Income-tax Officer merely for the purpose of carrying forward the loss. The Income-tax Oillcer, it is added, ca1mot ignore th:! return filed by the assessec, voluntarily, showing losses even though such a return is filed beyond time. ln this connection, Shri Sen has referred to Commissioner of fllcome-tax, Punjab

v. Kulu Vai/ey Transport Co. Ltd.('), Jaikisha11 Gopikishan and Sons v. Commissioner vf Income-tax, .M.P.(2) and Commissioner of Income-1ax, M .. dhya Pradesh v. Khushal Chaid Daga(8).

Before dealing with the contentions canvassed, it will &c appropriate to have a clear idea of the terms 'income', 'total income', 'computation of total income', 'carrying forward' of a loss and its purpose, in the context of the scheme of the Act.

Section 2 Cl. ( 15) defines "total income" to mean total amount of income, profits and gains referred to in sub-section ( 1) of sectio11 4 computed in the manner laiJ down in this Act. Section 3, captioned as 'Charge of Income-tax!', emphasises that the income-tax shall be charged in respect of the total income of the previous year of, every assessee. Section 4 defines the ambit of that total i11come. Section 6 enumerates six heads of incone, profits and gains chargeable to incometax. They are :

" ( i) Salaries.

(ii) Interest on securities.

(iii) Income from property.

(iv) Profits and gains of business, profession or vocation.

(v) Income from other sources.

(vi) Capital gains."

Sections 7, 8, 9, W, 12 and 12B relate to payability and computation of tax under the various heads of income. The material part of s. I 2B at the relevant time was as follows :

"12B ,(1) The tax shall be payable by an assessee under the head "Capital gains" in espect of any profits or gains arising from the sale, exchange or trnnsfer of a capital asst effected after the 3 I st day of March I 946 and before the 1st day of April, 1948 and such profits and gains shall be deemed to be income of the previous yenr in which the sale, exchange or transfer took place." '

l l 7 7, f. T. R. 518 (S.C.).

(2) B4. !. T. R.(~5

(3) 41. l. T. R. 177 (S.C.)

Section 22(1) requires a general notice to be published requiring every person whose total income during the previous year exceeds the maximum non-taxable limit to file a return. Sub-sction (2) of this section enables the income-tax Officer to issue no.ice to any such person requiring him to furnish a return. Sub-section (2A)-which was inserted by !he Income-tax Amendment Act 25 of 1953 with effect from 1-4-1952-provides:

i.If any person who has not been served with a notice under sub-section (2) has sustained a loss of profits or gains in aey year under the head Profits and gains of business, profession or vocation, and such loss or any part thereof would ordinarily have been carried forward under sub-s. (2) of section 24, he shall, if he is to be entitled to the benefit of the carry forward of loss in any subsequent assssment, furnish within the time specified in the general notice given under sub-s. ( 1 ) all the particulars required under the prescribed form of return." The material purt of s. 24 runs thus :

"24. ( 1 ) Where any assessce sustains a loss of profits or gains in any year under any of the heads mentioned ; n section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year :

* * ..

Provided that in computing the profits and gains chargcabl<: under the head "Profits and Gains of business, profession or voc, ation", any loss sustained in speculative transaction which a1e in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions : * * • ( 2) Where any asscssee sustains a Joss of profits or ga; ns in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March 1940, in any business, profession or vocation. and the loss cannot be wholly set off under sub-section ( 1), so much of the loss as is not so set off or the whole Joss where the assessee had no other head of income shall be carried forward to the following year, and ( i) where the loss was sustained bv him in a business consisting of speculative transactions, it shall be set off only against the profits and galns. if .iny, of any business in speculative transaction carried on by him in that year; H

(ii) where the loss was sustained by him in any other business, profession or vocation, it shall be set off against the profits and gains, if any. of anv business, profession or vocation carried on by him in that year provided that the business, profession or vocation in which the loss was originally sustained continued to be carried on by him in that year; ar.d

if the loss in either case cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year and so on ..... . * * * 2A. NcJtwithstanding anything contained in sub-section ( 1 ) , where the loss sustained is a loss falling under the head "Capital gains'', such loss shall not be set off except against any profits and gains falling under that head.

2B. Wherean assessee sustains a loss such as is referred c to in sub-s1ction (2A) and the loss cannot be wholly set off in accordance with the provisions of that sub-section, the portion not so set ofl' sha!l be carded forward to the following year and set oft against capital gains for that year, and if it cannot be so sd off, the amount thereof not so set oft shall be carried forward to the following year and so on, so however, that no such loss shall be so carried forward for more than D six years :

Provided that where the loss sustained in any previous year does not exceed fifteen thousand rupees, it shall not be carried forward.

(3) When; in the course of the assessment of the t'Otal income of any assessee, it is established that a loss of profits or gains has taken place which he is entitled to have set off under the provisions of this section. the Income-tax, Office~ shall notify to the assessee by ord<:r in writing the amount of the loss as computed by him for the purposes of this section."

sction 2( 6C) provides that 'income' includes (among other things)-" (vi) any capital gai.n chargeahle under Section 128."'

From the charging provisions of the Act, it is discernible that the words 'income' or 'profits and gains'. should be understood as including losses also, so that, in one sense 'prots ar; d gains' represent 'plus income' whereas losses represent 'minus income' (1).

In other \\'ords, Io's is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computaiion, wherever it beC'Jmes material, in the same mode of the taxable income of i:he

assessee.

Although s. 6 classifies income under six heads, the main charging provision is s. 3 which levies income-tax, as only one tax,

on the 'total income' of the assessee 3.S defined in s. 2 (15). An income

in orcier to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the "total amount of income, H ... ------- (I) CIT v. Ktwamchand Prem Chand 40 ITR 106 (SC): CIT v. E!phinston Spinning & Weai'ing Mi/is; 40 !TR 142'f:).

c.r.T. v. JfA.1U'ARSAD & co. (Sarkaria, .'.) 703

profits and gains referred to in s. 4( 1) ." Secoridly, it must be "co~ puted in the manner laid down in the Act". If either of these cond1tio, ns fails, the income will not be a part of the "total income" th!\t c!'ln be brought to charge.

Now, capital gains would be covered by the definition of 'income' in sub-section (6C) of s. 2, only if they were chargeable undr s. 12B.

As noticed already, s.12B as modified by the Finance Act, 1949, Jid not charg,. any 'capital gains' arising between 1-4-1948 to 1-4-19?7 lnJced s. 12B was not operative in these years (1948-57). Durmg this pe'riod, "capital gains", whether on the positive or the negative side, could not be computed a.nd charged under s. 12B or any other provisions of the Act. In the instant case, the second condition, name-. ly, "the manner of computation laid down in the Act" which-to use the words of Stone C.J. (1)-"forms an integral part of the definition of 'total income' " was not satisfied. Thus in the relevant previous year and the assessment year, or even in the subsequent year, capital gains or ''capital los..es" did not form part of the "total income" of the assessee which could be brought to charge, and were, therefore, not required to be computed unjer tho Act.

Before the insertion of sub-section (2A) in s. 22 by the amendment of 1-4-1952, an assessee was entitled to carry forward a !os• even if ho had submitted no return for the year in which the loss was

sutained. After the enactment of sub-section (2A), it is a condition precedent to the carry-forward and set off of the loss, that the assessee must file a return either in response to a general n'Otice under sub-section (1) of s. 22 or voluntarily, without any individual notice 1mder 1mb-section (2) of that section. If he does not file the return for the year in which the loss was incurred and get the loss computed oy the Income-tax Officer, the right to carry forward the loss will also be lost.

But if the loss is from a source or head of income not liable to tax or congenitally exempt from income-tax, neither the assessee is required to show the same in the return, nor is the Income-tax Officer under any obligati'On to compute or assess it, much less for the purpose of "carry forward". It is noteworthy that in the instant case, tile assessec in his return had not shown any "capital losses". He had claimed this loss as a revenue loss. The Income-tax Officer could, therefore, reject the assessee's claim to carry forward the loss, merely on the ground that it was not a "revenue l'Oss''. His further finding that it was !\ "capital loss" was only incidental and, in fact, Wl'lS n_ot nccess.a; t.

From what has been said above, it follows as a necessary corollary. that during the period s. 12B did not make income under the head, 'capital gains' charneable, an assessee was neither required to show income under that head in his return, nor entitled to file a return showing "capital losses" merely for the purpose of getting the same computed and carried forward. Sub-section (2A) of s. 22 would not give him such a right because the operation of that sub-section is, in terms, confined to (i) a l'OSs which is sustained "under the head 'profita and gains' of business, profession or vocation" and would ordinarily

(1) In re Kamdar [1946] LT.IC 10, 21.

have been carried forward under sub-section (2) of s. 24, and (ii) to "income" which falls within the definition of 'total income. Both these conditions necessary for the application of the sub-section are lacking in the present case.

Nor do we find any substance in the contention that under sub-sec tion (2) read with sub-section (1) of s. 24, the assessee had an independent right to carry forward his capital loss, even if it could not be set off, owing to the non-tax.ibility of capital gain&, against future profits, il any, in the immediate subse<J.uent years. Sub-section (2) cif s, 24 expressly refers to loss 'in any business, profession or vocation'. lt does not cover a. "capital l•oss", or the minus income u11der the head 'capital gains' which at the relevant time, were not chargeable and did not enter into computation of the 'total income' of the assessee under the Act.

Jt may be remembered that the concept of carry forward of loss does not stand in vacuo. It involves the notion of set off. Its sole purpose is to set off the loss against the profits of a subsequent year. It presupposes the permissibilil y and possibility of the carried-forward Joss being absorbed or set off against the profits and gains, il' any, of the subsequent year. Set Dff implies that the tax is exigible and the as, essee wants to ajust the Joss agaii1st profit to reduce the taxdemand. It follows that if such set-off is not permissible or , posible owing to the income or profits of the subsequent year being from a non-taxable source, there would be no point in allowing the loss to be "carried forward". Conversely, if the loss arising in the previous year was under a head not chargeable to tax, it could not be allr, wed to be carried forward and absorbed against income in a subsequent year. from a taxable source.

Now let us test the claim of the assessee in the light of the abuve principles. 111e "cap.ital loss" of Rs. 28,662/- in the present case, was sustained in September 1953, that is, in the previous year 1953-54.

Let us assume that in the subsequent years 195.S-56 and 1956-57 when the capital gains were not taxable, he made huge capital gains far exceedin.~ this loss, could he be obliged to show those capital f!ains i!Jr. his return? Could the Joss of the year 1953-54 be absorbed or set off against sur; h capital gains of the subsequent years? The answer is cmpha1ically in the negative.

The cases cited by Shri Sen are not relevant. In all those cases, the heads of income under which the losses were sustained, were chargeable to tax. None of them was a case of 'capital loss' pert~1in ing to the period, 1948 to 1957.

For the foregoing reasons, we are of the opinion that the H:igh Court was in error in answering the question referred to it, in favour of the assessee. We would reverse that answer in favour of the Re,•enue.

In the result, the dppeal is accepted with costs.

V.P.S.

Appeal allowed.

HARPRASAD & CO. (P) LTD

February 25, 1975

Y. V. CHANDRACHUD

R. S. SARKARIA

A. C. GUPTA, JJ.

Income-tax Act

Sections 128, 22(2A), 24(2A)

s. 12B

Indian Income-tax Act, 1922

s. 2

Income-tax Act

s. 12B

s. 24(2A)

s. 24

sections 6 and 12B

s. 6

s. 3

s. 2(15)

s. 4(1)

s. 12B

s. 22(2A)

s. 22( 1)

Section 24

s. 24(1)

V. C. Desai

. Ramamurthy

R. N. Sachthey

A. K. Sen

H. K. PUl'i

SARKARIA

s. 66

Incometax Act, 1922

Section

24

Income-tax Act

section 12B

Income-tax Act, 1922

s. 24

s. 24

section 12B

s. 24

S. K. Kapoor

section 6

section 12B

section 6

section 24

section 6 and 12B

section 12B

Capiwl Gains Tax

section 12B

Indian Finance Act, 1949

s. 12B

1st April, 1948

s. 12B

s. 6

s. 24

31st March, 1956

section 12B

V. S. Desai

s. 3

s. 12B

Ashok Sen

s. 6

s. 6

s. 24

Sen

s. 6

Section 2

Section 3

Section 4

Section 6

Sections 7, 8, 9

1st day of April, 1948

Section 22(1)

Income-tax Amendment Act

section 24

s. 24

section 6

31st day of March 1940

1 ) Where any assessce sustains a loss of profits or gains in any year under any of the heads mentioned ; n section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year :

  ..

Provided that in computing the profits and gains chargcabl<: under the head "Profits and Gains of business, profession or voc, ation", any loss sustained in speculative transaction which a1e in the nature of a business shall not be taken into account except to the extent of the amount of profits and gains, if any, in any other business consisting of speculative transactions :   • ( 2) Where any asscssee sustains a Joss of profits or ga; ns in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March 1940, in any business, profession or vocation.

Section 128

s. 6

s. 3

s. 2

s. 4( 1)

s. 2

s. 12B

Finance Act, 1949

s. 12B

s. 12B

s. 22

s. 22

s. 12B

s. 22

s. 24

s. 24


RANI INDER KUMAR! ETC. ETC. v.

STATE OF RAJASTHAN & ANR.

February 25, 1975

[K. K. MATHEW, P. K. GOSWAMI AND N. L. UNTWALIA, JJ.]

Rajasthar. Cash Jagirs Abolition Act, 1958-S. 3 Constitutiona/ va/idi!Y of- Delay i:: approachinR the Court-Effect of.

By s. 3 of the Rajasthan Cash Jagirs Abolition Act: 1958 all cash jagirs sanctioned to the former princes were abolished. Sub-s. (2) of s. 3 provided for payment of .cmpensation. The petitioners received compensation from 1958 to 1970. Jn 1970, however, they questioned the validity of s. 3 on the ground that it is violative of ar:icles 31 and 19( 1) ( f) of the Constitution.

Di>missing the petitions.

HELD : The petitioners have approached the court after inordinate de Jay and eve.11 then after enjoying the full benefit under the Act. The petitioners rnnnot be alJowed to blow hot and cold in the same breath.

Right to the compensation, of wha1ever nature or content. flowed from !he abolition of the cash jagirs under the Act and acceptance. of compmJation gave .a quietus to the daim to have the Act adjudged s ultra rires.

The founda~1on of the compensation was the abolition of cash j8girs. [707G; Fl

State of Madhya Pradesh v. Ranojirao Shirulc & Anr. [19681 3' S.C.R. 489, distinguished.

ORIGINAL JURISDICTION: Writ Petitions Nos. 610 to 614 of 1970.

Petitions under Art. 32 of tlie Constitution of India.

E Mohan Behari L., I, for the petitioners.

L. M. Singhvi and S. M. Jain, for the respondents.

fhe Judgment of the Court was delivered by

C:oswAMI, J.-By the above Writ Petitions the constitutional validity of the Rajasthan Cash Jagirs Abolition Act, 1958 (Act No. 29 of 1958) is challenged as violative of the petitioners' fundamental righl:i. under articles 14, 19(1) (f) and 31 of the Constitution.

The facts of Writ Petition No. 610 of 1970 may alone be sufficient. The petitioner states that in view of the near relationship as well as in lieu of her husband's share in the parental jagir of Riri the Maharaja of Bikaner sanctioned a separate cash grant to her husband, Maharaj Chander Singh ji, of Rs. 1200/- per annum on May 23,

1942. This amount was continuously paid to her husband by the State of Bikaner and was later raised to Rs. 2400/- per annum with effect from February 2, 1943. This grant of Rs. 2400/- with an addition of Rs. 600/- as pearness allowance was shared between her and her husband under the order of the Prime Minister of Bikaner State dated September '18, 1942. This payment of Rs. 1500/~ per annum was continued to be received by the petitioner through Bikaner Treasury upto the formation of the State of Rajasthan, on April 7,

1949. After the death of her husband on May 6, 1951, the payment

of her grant was continued. The Stat.e of Rajasthan being the. sccei

sor to the former Bikaner State recognised this grant and contmued to make payment to the petitioner. It appears that after the death of her husband it was decided in December 1953 that no payment should be made to her thereafter and the regular payments received by hr after the ~':ath of l.1er husband would not be recovered. On the petir tioners representation, however, the grant was restored an? was allowed to continue till its discontinuance by the act of the legislature.

Anm:xure 'C' to the petition shows the order .of the Acc:?untant General of Raja:sthan to the Treasury Officer, B1kaner, conveymg the sanction of the Governor for the continuance of the grant of Rs. 125/- per month to the petitioner from the date the same had bee.n discontinued "till the cash jagirs are resumed". This order is dat1d June s. 1958.

The Rajasthan Cash Jagirs Abolition Act, 1958 (briefly the Act) received the assent of the President on July 13, 1958.

Section :~ (a) of the Act defines cash jagir to mean "any grant of money by way of jagir or otherwise, made or recognised to have been

nuide by tho Government in any part of the State or y the Ruler of D a convenanting State without any consideration or in lieu of jagir rei; umed or abolished otherwise than under the Rajasthan Land Reforms and Resumption of Jagirs Act, 1952 ....... "

Section 3 which provides for abolition of cash jagirs reads thus :

3 (I) "Notwithstanding anything to the contrary contained in any law, sanad, c.rder, custom or usage in force in any part of the State, alJ payments of money on account of cash jagirs to which this Act applies, that wero being made or enforced at the commencement of this Act, shall be dfacontinued on and from the 1st day of April, 1958 211d all rnch cash jagirs shall stand abolished as from that day.

(2) Notwithstanding such discontinuance and abolition the State Government shall continue to make payments by way of compensation in accordance with scale laid down in

the Second Schedule, and the provisions of the Rajasthan Pensions Act, 1958, shall apply to such payments".

The Second Schedule \Shows, inter alia, that if the monthlv rate of the grant exceeds Rs. 50/- but does not exceed Rs. 250j'. the grantee will be paid the compensation for a period of twelve years frotn the !st day of April, 1958.

Setion 6 ( 2), which is also under attack, provides that "nothing in this Act or in the rules made there-under shall affect such other grants .of oney a~ the S!ate Government may, from time to time, by n.o!Ifkat10n 1~ the Official Gazette, declare to be exempt from the prov1s1ons of this Act, and the provisions of the Rajasthan Pensions Act, 1958, shall appl•1 to such exempted grants of money".

RANI INDER KUMARI v. RAJASTHAN (Goswami J.) 707

It is coi:tended on behalf of the petitioners that section 3 of the Act is violative of articles 31 and 19(1)(£) of the Constitution and sectiolli 6(2) is violative of article 14 of the Constitution. According to the petitioners their cases are covered by a decision of this Court in State of Madhya, Pradesh v. Ranojirao Shinde & Anr.,( 1 ) where this Court held lhe Madhya Pradesh Aboiition of Cash Grants Act, 1963, to be violative of article 31(2) or in the alternative of article 190) (f) of the Constitution.

Before we proceed fUrther we have to state that the petitioners have an insurmountable obstacle to get over in these petitions. In Madhya Pradesh cas0 . (supra) the petitione; s therein approached the

Hi~ Court soon after the, promu!gation of the particular Act in 1963 and the High Court accepted their conteution that tho Act was ultra. iiru of article. 19(1) (f) of the Constitution and was not saved by sub-article (5) thereof.

The State of Madhya Pradesh appeared to thi• Court by a certificate obtain, ed from the High Ceurt under article

I 33(l)(c) and this Court in the above mentioned decision dismissed the State's appeals. In the present case the petitioners took advantage of tho provisions of the Act, particularly sub-section (2) of section 3 by which payments by way of compensation were allowed .'1otwithstaadini; the abolition of the grant under sub-section (1) of section

3. So far as the abolition of the cash jagirs was concerned it was complete on and from the 1st day of April, 1958 under sub-section ( l) of section 3 of the Act. The petitioners had been in enjoyment of the compensation in accordance with the scale laid down in the Second Schedule from the inception of the Act which abolished the cash jagirs on and from 1st April, 1958, till 31st March, 1970, and approached this Court under article 32 of the Constitution on October 12, 1970, when under sub-section (2) of section 3 the compensation was discontinued.

The petitioners cannot be allowed to blow hot and cold in the sa111e breath. Right to the compensation, of whatever nature or content, flowed from the abolition of the cash jagirs underthe Act.

Acceptance of the compensation under the Act for the full length of the period of twelve years completely neg1tives the scope of attack upon the abolition of the grant. The foundation of the compensation is the abolition of the cash jagirs. Section 3(2) under which the compoosation is available is integrally connected with section 3 (1) which has 11bolishecl the cash jagirs from a specified date and it is only on such abolition that compenstion is rendered possible. Acceptance of compensation, therefore, gives a quietus to the claim to have the Act adjudged as ultra vires. The petitioners cannot eat a cake and have it. At any rate the petitioners have aporoached the court after inordinate delay and even then after enjoying the full ben~-fit under the Act. The petitions, therefore, cannot be entertained.

The petitioners also contend that section 6(2) of the Act is discriminatory and is violative of the equality clause under article 14 af the Constitution. Section 6 i5 a saving provision.

The case of the-

(1)(1968]3 S.C. R. 489.

petitioners is that a go0d number of persons have been exempted from the operation of the abolition of the grant. It is submitted that

whllc under section 6(1) there is guidance with regard to the exemption, there is none whatsoever under section 6(2). Whatever the :merit of this submission, the petitioners are not going to be benefited by striking down section 6 (2) of the Act. Assuming it is ultra vires, section 6(2) is clearly severable from the rest of the provisions. On the other hand, depending upon:· this provision, the petitioners may be able to receive appropriate consideration from the Government to b;: included in the list of exemptees. Indeed,, Dr.

Singhvi, the learned Advocate General, gave us to understand that he would himself recommend the case of three of the petitioners as deserving consid(; ration under section 6(2). We do not know whether the other two petitioners may also be able to convince the Government about the merit of thir case for equal consideration. We assume that under these provisions the Government has certain principles on whic:h it acts to give relief to the needy. It is, therefore, idle for the petitioners to have a decision from this Court to strike down a provision which may u!(im::i•cly be to their aid. We are not, therefore, inclined to pas on this submission advanced by the petitioners. In the result the petitions fail and are dismis,; ed, but in the entire circumstances of the case the parties will bear their own costs.

P.B.R.

Petition dismissed.

D 1,

RANI INDER KUMAR! ETC. ETC

STATE OF RAJASTHAN & ANR

K. K. MATHEW

P. K. GOSWAMI

N. L. UNTWALIA, JJ.

Cash Jagirs Abolition Act, 1958

S. 3

s. 3

s. 3

s. 3

Art. 32

Constitution of India

E Mohan Behari L.

L. M. Singhvi

S. M. Jain

oswAMI

articles 14, 19(1)

Riri

Bikaner

Maharaj Chander Singh ji

May 23,

1942

State of Bikaner

February 2, 1943

State of Rajasthan

April 7,

1949

May 6, 1951

s. 1958

July 13, 1958

Section 3

1st day of April, 1958

Second Schedule

Rajasthan Pensions Act, 1958

Second Schedule

Rajasthan Pensions Act, 1958

section 3

articles 31 and 19(1)(£)

article 14

article 31(2)

article 190

Madhya Pradesh

State of Madhya Pradesh

section 3

section

3

section 3

Second Schedule

1st April, 1958

31st March, 1970

article 32

October 12, 1970

section 3

Section 3(2)

section 3

section 6(2)

article 14

Section 6

section 6(1)

section 6(2)

section 6

section 6(2)

Singhvi

section 6(2)