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1966 (2) TMI 84
Issues Involved:
1. Whether multiple declarations under Section 6 of the Land Acquisition Act, 1894 can be issued successively for different pieces of land within the same locality specified in a Section 4 notification.
2. Interpretation of Sections 4, 5A, and 6 of the Land Acquisition Act, 1894.
3. The impact of Section 17(4) on the issuance of multiple declarations under Section 6.
4. The relevance of Section 48 regarding the withdrawal from acquisition.
5. The application of Sections 49(2) and (3) in the context of multiple declarations under Section 6.
Issue-wise Detailed Analysis:
1. Multiple Declarations Under Section 6:
The primary question was whether successive declarations under Section 6 of the Land Acquisition Act, 1894, can be issued for different pieces of land within the same locality specified in a Section 4 notification. The court concluded that the Act contemplates only a single declaration under Section 6 for a notification under Section 4. The reasoning was that Sections 4, 5A, and 6 must be read together, and the Act's language does not support multiple declarations. The court emphasized that the Act should be interpreted to place the least burden on landowners, whose lands are being expropriated.
2. Interpretation of Sections 4, 5A, and 6:
The court held that Sections 4, 5A, and 6 are integrally connected. Section 4 specifies the locality, Section 5A provides for objections and their resolution, and Section 6 involves the declaration of specific lands needed for public purposes. Once a declaration under Section 6 is made, the notification under Section 4 is considered exhausted. The court found no provision in these sections that supports the idea of Section 4 being a "reservoir" for successive declarations under Section 6.
3. Impact of Section 17(4):
Section 17(4) allows the government to bypass Section 5A in cases of urgency and make a declaration under Section 6 immediately after a Section 4 notification. The court noted that while this might suggest the possibility of multiple declarations, it ultimately decided that Section 17(4) does not imply that multiple declarations under Section 6 are permissible. The court clarified that even if Section 17(4) allows for an urgent declaration, it does not change the fundamental requirement that a Section 4 notification can only support one Section 6 declaration.
4. Relevance of Section 48:
Section 48 provides the government with the power to withdraw from acquisition before taking possession. The appellants argued that this implies a Section 4 notification remains in force until withdrawal. The court rejected this argument, stating that a Section 4 notification is exhausted once a Section 6 declaration is made for the entire area covered by it. The court emphasized that Section 48 is about withdrawal from acquisition and does not affect the exhaustion of a Section 4 notification.
5. Application of Sections 49(2) and (3):
Sections 49(2) and (3) deal with claims for compensation due to severance of land. The appellants contended that these sections imply successive declarations under Section 6 are permissible. The court disagreed, stating that these provisions are special cases where the statute specifically allows for additional declarations. The court concluded that without such special provisions, the Act does not permit multiple declarations under Section 6.
Conclusion:
The court dismissed the appeal, affirming that only one declaration under Section 6 can follow a Section 4 notification. The judgment emphasized a strict interpretation of the Act to minimize the burden on landowners and ensure fair compensation, while also allowing the government to issue new Section 4 notifications if additional land is needed. The court's decision aligns with the principles of eminent domain, balancing public interest with the rights of landowners.
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1966 (2) TMI 83
Issues Involved:
1. Deduction of Rs. 54,989-6-0 as a trade loss under section 10(1) or an expenditure under section 10(2)(xv) of the Indian Income-tax Act.
2. Timing of the claim for deduction.
3. Entitlement to claim deduction for interest and litigation expenses.
Issue-Wise Detailed Analysis:
1. Deduction of Rs. 54,989-6-0 as a Trade Loss:
The assessee, a partnership firm, borrowed Rs. 1 lakh jointly with another firm, Sadasukh Gambhirchand. The assessee took Rs. 50,000, and Sadasukh Gambhirchand took the remaining Rs. 50,000. Sadasukh Gambhirchand failed to repay its share, leading the assessee to pay the entire loan amount. The assessee wrote off Rs. 54,989-6-0, including interest and litigation expenses, and claimed it as a deduction under section 10(1) of the Indian Income-tax Act. The Income-tax Officer disallowed the claim, but the Appellate Assistant Commissioner allowed it, considering it a permissible deduction under section 10(2)(xv). The Tribunal reversed this decision, stating that the claim should have been made in the year the payment was made to the bank, not in the assessment year 1956-57.
2. Timing of the Claim for Deduction:
The Tribunal held that the deduction should have been claimed in the year 1950 when the payment was made to the bank. However, the court found that the trading loss could be claimed in a later assessment year when it became clear that the recovery from Sadasukh Gambhirchand was impossible. The court cited the Supreme Court's decision in the Associated Banking Corporation of India Ltd. v. Commissioner of Income-tax, which established that a trading loss arises when there is no reasonable chance of recovery. The court concluded that the assessee was entitled to claim the deduction in the assessment year 1956-57 when it realized that recovery was impossible.
3. Entitlement to Claim Deduction for Interest and Litigation Expenses:
The court addressed the breakdown of the claimed amount: Rs. 50,369-13-6 for the half share of the loan, Rs. 2,031-9-0 for interest, and Rs. 2,587-15-6 for litigation expenses. The assessee conceded that it was not entitled to claim the interest amount but argued that litigation expenses should be deductible under section 10(2)(xv). The court disagreed, stating that the litigation expenses were not incurred wholly and exclusively for the business of the assessee. The expenditure was related to recovering a non-trading debt from Sadasukh Gambhirchand and, therefore, did not qualify for deduction under section 10(2)(xv).
Conclusion:
The court concluded that Rs. 50,369-13-6 is a proper deduction as a trading loss incurred on the ground of commercial expediency under section 10(1) of the Indian Income-tax Act. The assessee was not entitled to claim deductions for the interest and litigation expenses. The Commissioner was directed to pay the costs of the assessee.
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1966 (2) TMI 82
Issues Involved:
1. Applicability of Section 58K of the Indian Income-tax Act, 1922.
2. Deductibility of the sum transferred to the Regional Provident Fund Commissioner under Section 10(1) or Section 10(2)(xv) of the Indian Income-tax Act.
Issue-wise Detailed Analysis:
1. Applicability of Section 58K of the Indian Income-tax Act, 1922:
The primary question was whether the provisions of Section 58K apply to the transfer of Rs. 3,01,772-1-7 to the Regional Provident Fund Commissioner. Section 58K(1) states that when an employer transfers a provident fund to trustees in trust for employees, the amount transferred is deemed to be capital expenditure. The assessee contended that this section did not apply as the transfer was not voluntary but mandated by the Employees' Provident Funds Act, 1952. It was argued that the transfer was not to trustees in the legal sense but to a statutory body. The court examined the nature of the transfer under the Employees' Provident Funds Act and the scheme framed thereunder, concluding that the transfer was not voluntary and did not create a trust in the legal sense. Therefore, Section 58K was not applicable.
2. Deductibility of the Sum Transferred under Section 10(1) or Section 10(2)(xv) of the Indian Income-tax Act:
The second issue was whether the sum of Rs. 3,01,772-1-7 could be allowed as a deduction under Section 10(1) or Section 10(2)(xv). Section 10(2)(xv) allows for the deduction of any expenditure laid out wholly and exclusively for the business, provided it is not capital expenditure. The Tribunal had earlier disallowed the deduction, considering it capital expenditure under Section 58K. However, since Section 58K was found inapplicable, the court examined whether the expenditure was revenue or capital in nature. It was determined that the expenditure was incurred to meet a statutory liability and was wholly and exclusively for the business. The court also considered Section 10(4)(c) and found that effective arrangements for tax deduction at source were made under Section 58H. Therefore, the expenditure was allowable as a deduction under Section 10(2)(xv).
Conclusion:
The court answered the first question in the negative, indicating that Section 58K did not apply. The second question was answered in the affirmative, allowing the deduction under Section 10(2)(xv). The Commissioner was directed to pay the costs of the assessee.
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1966 (2) TMI 81
Issues Involved:
1. Applicability of the Employees' Provident Funds Act, 1952 to the applicant company.
2. Validity of the sanction for prosecution.
3. Whether the trial Magistrate could take cognizance of the offences.
4. Whether the cold storage activity falls under the "Fruit and Vegetable Preservation Industry".
5. Whether the company is covered under Section 1(3)(b) of the Act through the notification dated 7-3-1962.
Detailed Analysis:
1. Applicability of the Employees' Provident Funds Act, 1952 to the Applicant Company
The primary issue was whether the applicant company, engaged in cold storage and ice manufacturing, was covered by the Employees' Provident Funds Act, 1952. The company argued that the Act did not apply to it, as it was not engaged in any industry specified in Schedule I of the Act. However, the court found that the company was engaged in activities that fell under the scope of the Act due to its involvement in the storage of goods, as specified in the notification dated 7-3-1962.
2. Validity of the Sanction for Prosecution
The applicant company contended that the sanction for prosecution was invalid as it did not specifically name the company, only the directors. The court held that the sanction mentioned the offences and the directors in their capacity as representatives of the company, which was sufficient. The court also noted that the sanction was based on the satisfaction of the appropriate authority and was not subject to challenge unless proven to be given mala fide, which was not the case here.
3. Whether the Trial Magistrate Could Take Cognizance of the Offences
The court examined whether the trial Magistrate could take cognizance of the offences without a valid sanction. It was held that the sanction provided was valid and that the Magistrate could take cognizance of the offences based on the report made by the Provident Fund Inspector. The court also clarified that it was not necessary for the sanction to name all offenders explicitly, as long as the offences were specified.
4. Whether the Cold Storage Activity Falls Under the "Fruit and Vegetable Preservation Industry"
The court analyzed whether the cold storage activity of the company fell under the "Fruit and Vegetable Preservation Industry" as specified in Schedule I of the Act. It was concluded that the cold storage activity did not amount to the preparation or production of frozen vegetables, as the potatoes stored were merely cooled and not frozen. Therefore, the company's cold storage activity did not fall under this category.
5. Whether the Company is Covered Under Section 1(3)(b) of the Act Through the Notification Dated 7-3-1962
The court examined whether the company was covered under Section 1(3)(b) of the Act, which applies to establishments specified by the Central Government through a notification. The notification dated 7-3-1962 included establishments engaged in the storage of goods. The court held that the applicant company's cold storage activity fell within the scope of this notification, making the Act applicable to the company. Additionally, the court noted that the company also engaged in the purchase and sale of potatoes, further bringing it under the purview of the Act.
Conclusion
The court dismissed all six revision applications, upholding the convictions and sentences imposed by the trial Magistrate and the Assistant Judge. The company was found to be covered by the Employees' Provident Funds Act, 1952, and was guilty of not complying with the requirements of the Act, including failing to deposit provident fund contributions, file returns, and pay administrative charges. The validity of the sanction for prosecution was confirmed, and the trial Magistrate was deemed competent to take cognizance of the offences.
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1966 (2) TMI 80
Issues Involved:
1. Deduction of interest paid on borrowings under Section 12(2) of the Income-tax Act.
2. Classification of income and related expenses under different sections of the Income-tax Act.
3. Determination of the primary objective of borrowing funds by the assessee.
Issue-wise Detailed Analysis:
1. Deduction of Interest Paid on Borrowings under Section 12(2) of the Income-tax Act:
The primary issue was whether the interest amount of Rs. 67,773 paid on borrowings by the assessee could be deducted from the dividend income under Section 12(2) of the Income-tax Act. The Tribunal had allowed this deduction, reasoning that the dividends were earned from shares purchased using borrowed funds, and thus, the interest paid was necessary to earn the dividend income. However, the High Court disagreed, emphasizing that the expenditure must be incurred "solely for the purpose of making or earning such income." The Court concluded that the interest paid on the borrowings was not incurred solely for earning dividend income, but for the business of trading in shares and securities. Therefore, the interest could not be deducted under Section 12(2).
2. Classification of Income and Related Expenses under Different Sections of the Income-tax Act:
The Court analyzed the classification of income and expenses under different sections. The assessee had income from three sources: business, securities, and dividends. The Income-tax Officer allowed the interest deduction against business income under Section 10, not under Section 12(2). The Court supported this view, noting that the interest on borrowed capital used for business purposes falls under Section 10(2)(iii), which allows deduction of interest paid on capital borrowed for the business. The Court highlighted the legislative history, noting that income from dividends is computed under Section 12, while income from interest on securities is computed under Section 8. The Court emphasized that the purpose of the expenditure determines its classification.
3. Determination of the Primary Objective of Borrowing Funds by the Assessee:
The Court examined the primary objective behind the assessee's borrowing. The Income-tax Officer and the Appellate Assistant Commissioner found that the borrowings were for the purpose of dealing in shares and securities, not for earning dividend income. The Court agreed, noting that the assessee's main business was trading in shares and securities, and the dividend income was incidental. The Court emphasized that the object of the borrowing was crucial in determining the admissibility of the deduction. Since the borrowings were for business purposes, the interest paid could not be considered an expenditure solely for earning dividend income.
Conclusion:
The High Court concluded that the interest of Rs. 67,773 paid on borrowings could not be deducted from the dividend income under Section 12(2) of the Income-tax Act. The Court emphasized that the expenditure must be incurred solely for earning the specific income, and in this case, the borrowings were for the business of trading in shares and securities. The Court answered the referred question in the negative and directed the assessee to pay the costs of the Commissioner.
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1966 (2) TMI 79
Issues Involved:
1. Validity of Rule 27 of the Bank of Patiala (Staff) Rules, 1954.
2. Authority of the Board of Directors to frame rules after the termination of the President's rule in PEPSU.
3. Whether the Regulation Order had the force of rules framed under Article 309.
4. Whether Rule 27 violated Article 311 of the Constitution.
5. Whether the Staff rules were discriminatory and violated Article 14.
6. Proper constitution of the Board of Directors when framing the Staff rules.
Issue-wise Detailed Analysis:
1. Validity of Rule 27 of the Bank of Patiala (Staff) Rules, 1954:
The appellant challenged the validity of Rule 27, which provided for compulsory retirement, arguing it amounted to 'dismissal or removal' under Article 311 of the Constitution. The Court held that Rule 27 did not amount to dismissal or removal as it was another mode of retirement, enforceable between the age of superannuation and the minimum period of service indicated in the rule. Thus, the rule was upheld.
2. Authority of the Board of Directors to Frame Rules After the Termination of the President's Rule in PEPSU:
The appellant argued that the delegation of power to the Board lapsed with the termination of the President's rule. The Court held that the Regulation Order, though published later, came into operation on February 27, 1954, before the termination of the President's rule. The Court construed the expression 'things done' in Article 357(2) liberally, concluding that the Regulation Order, including the delegation of power to the Board, continued to be in operation beyond the specified period.
3. Whether the Regulation Order Had the Force of Rules Framed Under Article 309:
The appellant contended that the Patiala Services Regulations were existing laws made by the Maharaja and could not be changed to the disadvantage of public servants. The Court found that the Regulation Order was validly made and considered it unnecessary to determine whether it had the force of rules framed under Article 309.
4. Whether Rule 27 Violated Article 311 of the Constitution:
The appellant argued that Rule 27 was unconstitutional under Article 311. The Court referred to previous judgments, stating that compulsory retirement under a valid rule did not amount to removal under Article 311(2). Since Rule 27 provided for compulsory retirement without stigma and within the prescribed period, it did not violate Article 311.
5. Whether the Staff Rules Were Discriminatory and Violated Article 14:
The appellant claimed that different rules for different public servants in the same State were discriminatory. The Court rejected this argument, citing precedents that upheld geographical classification based on historical reasons. The differentiation in rules was thus not considered discriminatory.
6. Proper Constitution of the Board of Directors When Framing the Staff Rules:
The appellant argued that the Staff rules were invalid as they were framed by only four members instead of the required six. The Court held that a majority of the members of the corporation is entitled to exercise its powers, and this rule applied equally to a company. Therefore, the Staff rules were validly made by the Board of Directors.
Conclusion:
The appeal was dismissed, and the Court upheld the validity of Rule 27 and the authority of the Board of Directors to frame the Staff rules. The Court found no violation of Articles 311 or 14 and confirmed that the rules were properly made by the Board.
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1966 (2) TMI 78
Issues Involved:
1. Entitlement to registration of the new firm for the assessment year 1956-57.
2. Competency of the appeal against the penalty imposed under section 46(1).
Detailed Analysis:
1. Entitlement to Registration of the New Firm for the Assessment Year 1956-57:
Material Facts:
The assessee-firm, M/s. Bhausa Ganusa Pawar & Co., consisted of four partners and was granted registration under section 26A of the Indian Income-tax Act, 1922, up to the assessment year 1955-56. One partner, R.S. Pawar, died on February 3, 1956, after the close of the relevant account year (S.Y. 2011). The surviving partners formed a new partnership, including major sons of the deceased partner and another partner, and admitted two minor sons of the deceased to the benefits of the partnership. The new partnership executed a deed on June 28, 1956, and applied for registration under section 26A on June 30, 1956.
Income-tax Officer's Grounds for Refusal:
The Income-tax Officer refused registration on four grounds:
(i) The partnership deed of June 28, 1956, was not operative in the account year S.Y. 2011.
(ii) An application for renewal of the old firm should have been submitted, signed by the living partners and the legal representative of the deceased partner.
(iii) The old firm's deed did not mention the business continuation in the event of a partner's death.
(iv) The firm to be registered for the assessment year 1956-57 should have been the one in existence during the account year S.Y. 2011.
Appellate Assistant Commissioner's View:
The Appellate Assistant Commissioner allowed the appeal, stating that the new firm, constituted immediately after the death of the partner, was entitled to registration as it was the firm on which the assessment had to be made.
Tribunal's Decision:
The Tribunal reversed the Appellate Assistant Commissioner's decision, holding that the firm entitled to registration was the old firm, and no proper application for registration of the old firm was made.
High Court's Analysis:
The court analyzed whether the new firm, constituted after the death of a partner, was entitled to registration for the assessment year 1956-57. The court emphasized that the firm entitled to registration must be the one in existence during the account year. The court noted that the death of a partner resulted in the dissolution of the old firm, and the new firm was a separate entity. The application for registration was made by the new firm and not the old firm, and it was not signed by the legal representatives of the deceased partner. The court held that the application did not comply with the requirements for the registration of the old firm.
Conclusion:
The court answered the first question in the negative, stating that the new firm was not entitled to registration for the assessment year 1956-57 based on the deed made on June 28, 1956, as the old firm was in existence during the material account year.
2. Competency of the Appeal Against the Penalty Imposed Under Section 46(1):
Material Facts:
The Income-tax Officer imposed a penalty of Rs. 3,400 on the assessee for defaulting on the tax payment. The assessee appealed against the penalty but did not pay the tax amount before the appeal hearing. The Appellate Assistant Commissioner rejected the appeal as incompetent due to non-payment of tax.
Assessee's Contention:
The assessee contended that the tax demand arose due to the refusal of registration, and since the Appellate Assistant Commissioner had directed the grant of registration on the same day, the tax demand was quashed, making the penalty unjustified.
Tribunal's Decision:
The Tribunal dismissed the appeal, stating that the appeal was incompetent as the tax was not paid.
High Court's Analysis:
The court considered whether the appeal against the penalty was properly rejected due to non-payment of tax. The court noted that the appeal was filed before the tax was paid, and even though the registration was directed to be granted on the same day, the tax was not paid at the time of the appeal hearing.
Conclusion:
The court answered the second question in the affirmative, holding that the appeal against the penalty was properly rejected by the Appellate Assistant Commissioner as being incompetent due to non-payment of tax.
Final Judgment:
The High Court answered both questions against the assessee, holding that the new firm was not entitled to registration for the assessment year 1956-57, and the appeal against the penalty was properly rejected as incompetent. The assessee was ordered to pay the costs of the department.
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1966 (2) TMI 77
Issues Involved:
1. Whether the net income received by the assessee in the assessment years 1958-59 and 1959-60 on account of interest on securities is exempt from tax under section 14(3) of the Income-tax Act.
Detailed Analysis:
Issue 1: Tax Exemption on Interest on Securities
The primary question referred to the High Court was whether the net income received by the assessee in the assessment years 1958-59 and 1959-60 on account of interest on securities is exempt from tax under section 14(3) of the Income-tax Act.
The assessee, a co-operative society engaged in banking, claimed exemption under section 14(3)(i) of the Income-tax Act for the interest earned on government securities held as part of its banking business. The Commissioner of Income-tax contended that the income was chargeable under section 8 and, since the total income exceeded Rs. 20,000, the exemption under clause (iv) of section 14(3) was not applicable.
The court analyzed the structure of the Income-tax Act, specifically the heads of income listed under section 6, which includes:
1. Salaries.
2. Interest on securities.
3. Income from property.
4. Profits and gains of business, profession or vocation.
5. Income from other sources.
6. Capital gains.
The court emphasized that these heads are mutually exclusive, and income must be categorized under one specific head for tax computation purposes. The court noted that while interest on securities and income from property could also be profits and gains of business, they should be computed under the specific heads of sections 8 and 9, respectively, rather than under section 10.
The court referenced several Supreme Court decisions to support its analysis:
- United Commercial Bank Ltd. v. Commissioner of Income-tax: The Supreme Court held that interest on securities held as stock-in-trade of a banking business is to be taxed under section 8 and not under section 10.
- Commissioner of Income-tax v. Chugandas and Co.: The court held that income from interest on securities, even if earned in the course of business, should be shown under the head "interest on securities" for tax purposes.
- Commissioner of Income-tax v. Cocanada Radhaswami Bank Ltd.: The court reiterated that interest on securities forming part of trading assets is part of business income, but for tax computation, it falls under section 8.
The court concluded that the phrase "profits and gains of business" in section 14(3)(i) includes income from interest on securities held as stock-in-trade, even if it is chargeable under section 8. The court clarified that the exemption under section 14(3)(i) is not confined to income computed under section 10 and applies to all profits and gains of business.
The court further explained that the clauses under section 14(3) enumerate different sources of exempted income for a banking co-operative society. The fact that the income exceeds Rs. 20,000 and is not exempt under clause (iv) does not preclude it from being exempt under clause (i) if applicable.
The court also discussed the distinction between the heads of income and the clauses of exemption, emphasizing that while an income cannot be charged under two heads, it can be exempt under multiple clauses. The court rejected the argument that clause (iv) is more specific than clause (i) and excludes it.
In conclusion, the court held that the interest on securities earned by the assessee, a banking co-operative society, is exempt from tax under section 14(3)(i) of the Income-tax Act, despite being chargeable under section 8. The court directed that a copy of the judgment be sent to the Income-tax Appellate Tribunal and awarded costs to the assessee.
Separate Judgments:
- M.C. Desai C.J. delivered the detailed judgment.
- S.C. Manchanda J. concurred with the judgment.
Final Decision:
The net income received by the assessee in the assessment years 1958-59 and 1959-60 on account of interest on securities is exempt from tax under section 14(3)(i) of the Income-tax Act.
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1966 (2) TMI 76
Whether the cancellation was done after liability of the assurer under the policy had commenced or the loss had become inevitable?
Held that:- As concerned with two dates in particular and they are June 18, 1950 when Ghose visited Dhulian and July 6 when the policy was cancelled. The houses according to Lalchand Jain (P.W. 1) were 400/500 feet away when the proposal was made. The river remained calm till the second week of June. It only began to rise in the third week of June. Thus on June 18, when Ghose visited the place, there was no flood and no erosion. Ghose's report has not been produced but he could have only estimated the possibility of loss and no more. Even in the third week of June there was no erosion and it began by the end of June. Even on July 15 the distance between the river and the houses was 250 feet (see Q. 179). As the rate of erosion was about 20/25 feet per day (vide Bijoy Kumar P.W. 4) the houses were 400/500 feet away even on July 6. In these circumstances, it cannot be said that the loss had commenced or that it had become so certain as to be inevitable or that the cancellation was done in anticipation and with knowledge of inevitable loss. The cancellation was done at a time when no one could say with any degree of certainty that the houses were in such danger that the loss had commenced or became inevitable. There is no evidence to establish this. The assurers were, therefore, within their rights under condition 10 of the policy to cancel it. As the policy was not ready they were justified in executing it and cancelling it. The right of the plaintiff to the policy and to enforce it was lost by the legal action of cancellations. Appeal allowed.
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1966 (2) TMI 75
Whether the Municipality had not established the precondition for the re-assessment?
Held that:- The burden is certainly upon the Commissioners before they could amend the valuation and the assessment already made to establish that the previous assessment was in-correctly made by reason of fraud, misrepresentation or mistake. The High Court said that not a word had been said in the evidence adduced by the parties that the rental taken into consideration by the Special Officer while making the re-assessment in 1952 did not exist at the time of the periodical revisional assessment. This observation was made on the assumption that the burden was upon the assessee. Indeed, when the appellant filed a petition in the suit under Order XI of the Code of Civil Procedure for the discovery of the relevant records of the three assessments and though the learned Munsif made an order directing the Municipality to do so, it failed to produce them. In the circumstances we must hold that the Municipality had not established the precondition for the re-assessment, namely, that the original periodical revisional assessment was vitiated by fraud, misrepresentation or mistake. Appeal allowed.
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1966 (2) TMI 74
Whether in a service where recruitment is partly by promotion and partly by direct recruitment, the system of fixing seniority by rotation is followed and that this is being done in a number of services under the Union?
Held that:- The present method by which the respondent puts a direct recruit from the grade of Appraiser, though he is promoted later, above a promote who is promoted to the grade of Principal Appraiser on an earlier date clearly denies equality of opportunity where the grade of Principal Appraiser has only one source of recruitment, namely, from the grade of Appraisers. In such a case the seniority in the grade of Principal Appraisers most be determined according to the. date of continuous appointment in that grade irrespective of whether the person promoted to that grade from the Appraisers' grade is a direct recruit or a promotee. This will as we have already said be subject to the government's right to revert any one promoted as a Principal Appraiser if he is not found fit for the post during the period of probation. The petition therefore will have to be allowed. with respect to the method by which seniority is fixed in the grade. of Principal Appraisers. That method denies equality of oppor- tunity of employment to the Appraisers who are the only source of' recruitment to the grade of Principal Appraisers. What the impugned method seeks to do is to introduce a kind of reservation in respect of the two categories of Appraisers from which the promotions are made, and that cannot be done when the source of promotion is one. Appraisers is concerned but allow it so far as the seniority of Principal Appraisers is concerned and the method used by the respondent in that connection must be struck down, and we further direct the determination of their seniority in the manner we have stated above. Appeal allowed in part.
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1966 (2) TMI 73
Issues Involved:
1. Taxability of undrawn and unpaid wages, salary, and bonus under Section 10(2A) of the Indian Income-tax Act, 1922.
2. Interpretation of "remission or cessation" of liability under Section 10(2A).
3. Impact of the method of accounting on tax liability.
4. Applicability of the Bombay Labour Welfare Funds Act, 1953.
Detailed Analysis:
1. Taxability of Undrawn and Unpaid Wages, Salary, and Bonus under Section 10(2A) of the Indian Income-tax Act, 1922:
The primary issue was whether the amount of Rs. 5,929, which was undrawn and unpaid to employees but previously allowed as deductions, could be assessed as income under Section 10(2A) for the assessment year 1958-59. The Income-tax Officer included this amount in the assessee's total income, a decision upheld by the Appellate Assistant Commissioner and the Tribunal. The Tribunal reasoned that the company had obtained a benefit when it transferred the undrawn amounts to its profit and loss account, treating it as if available for distribution as dividends.
2. Interpretation of "Remission or Cessation" of Liability under Section 10(2A):
The court examined whether the mere reversal of accounting entries constituted "remission or cessation" of the liability. The assessee argued that the liability for wages, salaries, and bonuses had neither been remitted by the employees nor ceased to exist. The court agreed, stating that the mere reversal of entries could not effectuate a remission or cessation of liability. The court emphasized that remission must be granted by the creditor and cessation could not be achieved unilaterally by the debtor.
3. Impact of the Method of Accounting on Tax Liability:
The court analyzed the relevance of the mercantile system of accounting adopted by the assessee. The court noted that while Section 13 of the Income-tax Act requires income computation according to the method of accounting regularly employed by the assessee, this does not mean that entries in the assessee's books are decisive of liability or income. The court referenced the Kohinoor Mills case, which held that the expiry of the limitation period does not constitute cessation of liability.
4. Applicability of the Bombay Labour Welfare Funds Act, 1953:
The court also considered the implications of the Bombay Labour Welfare Funds Act, 1953. According to this Act, unpaid accumulations, defined as payments due to employees but unpaid for more than three years, must be transferred to the Labour Welfare Fund. The court noted that the amount of Rs. 5,929 fell within this definition and had not been transferred due to a lacuna in the Act, which was later rectified by the Amending Act of 1961. Thus, the liability had not ceased, and the amount was not taxable under Section 10(2A).
Conclusion:
The court concluded that the amount of Rs. 5,929 could not be taxed under Section 10(2A) as there was no "remission or cessation" of liability. The transfer of entries in the books of account did not constitute a cessation of liability. The court answered the referred question in the negative, ruling in favor of the assessee and directing the Commissioner to pay the costs of the assessee.
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1966 (2) TMI 72
Issues Involved
1. Whether the sum of Rs. 41,125 refunded to the assessee by the Bombay Sales Tax Authorities was assessable to tax as the income of the assessee for the assessment year 1958-59.
2. Competence of the Appellate Assistant Commissioner to enhance the assessment.
3. Nature of the refund amount - whether it was a trading receipt or a liability.
4. Applicability of various legal precedents and statutory provisions.
Detailed Analysis
1. Assessability of the Refund Amount as Income
The primary issue was whether the sum of Rs. 41,125 refunded to the assessee by the Bombay Sales Tax Authorities was assessable to tax as the income of the assessee. The court analyzed the nature of the refund and determined that the refund constituted a trading receipt. The court emphasized that the transaction between the assessee and its buyers was a trade transaction, and the inclusion of sales tax in the price did not change the character of the transaction. The court cited the Supreme Court's decision in Tata Iron and Steel Co. v. Bihar State, which clarified that sales tax, even when shown separately, is part of the consideration for the sale of goods. Thus, the refund of sales tax was considered part of the assessee's income.
2. Competence of the Appellate Assistant Commissioner to Enhance the Assessment
The assessee contended that the Appellate Assistant Commissioner was not competent to enhance the assessment. However, the court did not find merit in this contention. The Appellate Assistant Commissioner had included the refunded amount in the total income of the assessee and allowed a deduction for legal expenses incurred in recovering the refund. The court upheld the Appellate Assistant Commissioner's competence to enhance the assessment.
3. Nature of the Refund Amount
The assessee argued that the refund was not a trading receipt but a liability, relying on the decision in Morley v. Tattersall. The court distinguished this case by stating that the amount refunded was part of the consideration for the sale of goods and not merely a deposit or liability. The court referred to the Supreme Court's decision in Punjab Distilling Industries Ltd. v. Commissioner of Income-tax, which held that amounts collected as security deposits were part of the trading transaction and assessable as income. Similarly, the refunded sales tax was part of the trading receipt.
4. Applicability of Legal Precedents and Statutory Provisions
The court examined various legal precedents and statutory provisions to determine the nature of the refund. The court referred to the decisions in Bijoy Singh Dhudhuria v. Commissioner of Income-tax and Provat Kumar Mitter v. Commissioner of Income-tax to distinguish between diversion of income before it reaches the assessee and application of income after it reaches the assessee. The court concluded that the sales tax collected and subsequently refunded was part of the trading receipt and assessable as income.
The court also analyzed the provisions of the Bombay Sales Tax Act, particularly sections 5, 6, 8, 9, and 21. The court noted that the liability to pay sales tax was on the dealer, and the amount collected as sales tax formed part of the consideration for the sale of goods. The court rejected the assessee's contention that the refund was a liability and not assessable as income.
Conclusion
The court concluded that the sum of Rs. 41,125 refunded to the assessee by the Bombay Sales Tax Authorities was assessable to tax as the income of the assessee for the assessment year 1958-59. The court upheld the decision of the Tribunal and answered the reference in the affirmative, awarding costs to the revenue.
Separate Judgment by D. Basu, J.
D. Basu, J., concurred with the answer proposed by Ray, J., and provided a summary of the discussion. He emphasized that the refund received by the assessee was not a liability but a trading receipt. He reiterated that the purchasers were not liable under the statute to pay the tax, and the dealer was not merely a collector. The refund was received as a result of a change in government policy and was not subject to any statutory obligation to be returned to the purchasers. Therefore, the refund was assessable as income.
Final Decision
Reference answered in the affirmative.
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1966 (2) TMI 71
Issues:
1. Suit for recovery of amounts from sales tax department.
2. Exemption from sales tax for agricultural implements.
3. Question of limitation under section 24 of the Hyderabad General Sales Tax Act.
4. Application of section 14 of the Limitation Act for computing the period.
5. Interpretation of section 2(f) of item 29 of Schedule I for exemption.
Analysis:
1. The appellant filed a suit against the Government of Andhra Pradesh for the recovery of amounts wrongfully levied by the Sales Tax Officer. The appellant, a partnership firm dealing in agricultural implements, claimed exemption from sales tax under section 2(f) of item 29 of Schedule I. Despite various appeals and petitions, the High Court dismissed the writ petition, prompting the appellant to file a suit challenging the arbitrary assessment and lack of jurisdiction by the authorities.
2. The defendant argued that the appellant was not solely dealing in agricultural implements from scrap iron but also in goods manufactured from iron and steel. The Sales Tax Authorities assessed the appellant to the best of their judgment due to non-payment of tax and failure to provide necessary statements and account books. The suit was contended to be time-barred under section 24 of the Hyderabad General Sales Tax Act.
3. The question of limitation arose concerning the filing of the suit within six months from the date of the act complained of, as per section 24 of the Act. The appellant invoked section 14 of the Limitation Act, arguing for the exclusion of the time spent pursuing the matter in the High Court through a writ petition. The court analyzed precedents and held that the suit was within time, considering the nature of relief sought.
4. The court examined the application of section 2(f) of item 29 of Schedule I, which exempts agricultural implements manufactured from raw iron and steel from sales tax. The appellant's claim for exemption hinged on proving the manufacturing process from scrap iron. However, the Sales Tax Authorities based their assessment on personal inspection due to the appellant's failure to provide necessary documentation. The court upheld the assessment as not arbitrary, given the lack of reliable data from the appellant.
5. Ultimately, the court dismissed the appeal, affirming the lower court's decision not to interfere with the Sales Tax Authorities' findings. The appellant's failure to produce adequate evidence resulted in the authorities rightfully assessing the tax. The court upheld the imposition of tax as per the provisions of the Hyderabad General Sales Tax Act.
This detailed analysis covers the key issues involved in the legal judgment, outlining the arguments presented by both parties and the court's reasoning leading to the dismissal of the appeal.
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1966 (2) TMI 70
Issues:
1. Whether the summonses issued to Commercial Tax Officers directing them to produce certain documents are valid under section 94 of the Code of Criminal Procedure.
2. Whether the documents called for are protected against disclosure under section 25(1) of the Bengal Finance (Sales Tax) Act, 1941.
3. Whether the documents protected under section 25(1) are liable to be disclosed under section 25(3) of the Act.
4. Whether the documents maintained by the department, such as issue ledgers and certain seized documents, are protected against disclosure.
5. Whether the sales tax files and assessment orders of certain dealers are protected under section 25(1) and liable to be disclosed.
6. Whether surrendered declaration forms are protected under section 25 of the Act.
7. Whether the summonses issued were in accordance with the law and if the order requiring disclosure of certain documents should be upheld with modifications.
Analysis:
The judgment by the High Court of Calcutta involved a case where Commercial Tax Officers petitioned against an order requiring them to produce documents in connection with a criminal case. The summonses were issued under section 94 of the Code of Criminal Procedure. The petitioners argued that the summonses were invalid as the documents were protected under section 25(1) of the Bengal Finance (Sales Tax) Act, 1941. The court examined various documents called for, including issue ledgers, correspondence files, seized documents, sales tax files, assessment orders, and surrendered declaration forms.
The court determined that documents like sales tax returns of certain dealers were protected under section 25(1) and not liable to be disclosed unless the prosecution was related to those specific documents. However, documents like issue ledgers and seized documents were not protected as they were maintained by the department and did not contain protected statements. The court also clarified that assessment orders and sales tax files were not explicitly protected under section 25(1) and therefore were liable to be disclosed. Surrendered declaration forms were deemed not protected under the Act.
Ultimately, the court upheld the order requiring disclosure of most documents called for, except for correspondence files and sales tax returns of specific mills. The court modified the order to exclude these protected documents from disclosure. Despite some discrepancies in the summonses issued, the court decided not to set aside the order entirely and discharged the rule with the mentioned modifications. Both judges, Mukherji T.P. and Dutt R.N., agreed on the decision, and the rule was discharged accordingly.
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1966 (2) TMI 69
Issues Involved:
1. Whether the appellate authority failed to exercise its discretionary power as conferred by law.
2. Whether the petitioner can invoke the writ jurisdiction of the High Court under Article 226 of the Constitution when a regular appeal is available.
Issue-wise Detailed Analysis:
1. Failure to Exercise Discretionary Power:
The petitioner argued that the appellate authority did not apply its mind to the facts and circumstances of the case to determine whether it was a fit case for exercising its discretion to stay the payment of tax pending appeal. According to Section 19(1)(b) of the Andhra Pradesh General Sales Tax Act, the appellate authority has the discretion to stay the payment of the whole or part of the tax assessed. This discretion is not absolute and must be exercised judicially, not arbitrarily or capriciously. The appellate authority must consider all the circumstances of the case and come to a conclusion based on the facts presented.
The judgment highlighted that the appellate authority failed to consider the grounds raised in the appeals and the reasons given in support of the plea for stay. The record disclosed that the appellate authority did not advert to the facts of the case and merely issued a notice to the petitioner to pay the balance of tax within 10 days, without a speaking order or indication that the plea for stay was considered.
The court referred to several precedents, including Vetcha Sreeramamurthy v. Income-tax Officer and E. Krishnappa Naicker v. The Deputy Commercial Tax Officer, to support the conclusion that the discretionary power conferred by statute is coupled with a duty to exercise it properly and with judicious care. The appellate authority's failure to do so rendered its order amenable to writ jurisdiction.
2. Invocation of Writ Jurisdiction under Article 226:
The second issue was whether the petitioner could invoke the writ jurisdiction of the High Court under Article 226 of the Constitution when a regular appeal was available. The respondent contended that the petitioner had an effective remedy available by way of appeal to the Appellate Tribunal and, therefore, could not invoke the writ jurisdiction.
The court held that it is within its powers to interfere with the order passed by the appellate authority in its extraordinary jurisdiction, especially when the appellate authority failed to exercise its discretion properly. The court noted that the remedy of appeal to the Appellate Tribunal was not quite handy and was onerous, thus justifying the invocation of writ jurisdiction.
The court concluded that the appellate authority failed to discharge its duty by not considering the plea for stay and summarily rejecting the appeals. Therefore, the writ petitions were allowed, and the order dated 31st July 1963, rejecting the appeal, was quashed. The appellate authority was directed to deal with the appeals in accordance with law from the stage immediately prior to the notice dated 20th May 1963.
Conclusion:
The petitions were allowed with costs, and the appellate authority was directed to reconsider the appeals in accordance with law, ensuring that the discretionary power is exercised judiciously. The court emphasized the duty of the appellate authority to apply its mind to the facts and circumstances of each case before making a decision.
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1966 (2) TMI 68
Issues:
1. Validity of the assessment order by the Deputy Commissioner of Sales Tax.
2. Interpretation of rule 33(1) of the General Sales Tax Rules.
3. Jurisdiction of the Deputy Commissioner to issue notice after the lapse of three years from the close of the assessment year.
Analysis:
1. The petitioner, a licensee under section 9 of the General Sales Tax Act, submitted a return for the year 1955-56 claiming exemption as a commission agent. The Sales Tax Officer granted exemption, imposing only a license fee. However, more than three years later, the Deputy Commissioner assessed the petitioner on the entire turnover, leading to a series of appeals. The High Court, in T.R.C. No. 45 of 1963, set aside the assessment orders as unsustainable, emphasizing the importance of rule 33(1) in completing assessments before 31st March of the relevant year.
2. The High Court clarified that the earlier judgment was misinterpreted, stating that any fresh assessment post 31st March, 1959, was invalid as per rule 33(1) of the General Sales Tax Rules. The Court highlighted that the turnover for the year had escaped assessment, and no action could be taken after the lapse of three years from the assessment year's close. Therefore, the Deputy Commissioner's actions post-March 1959 were deemed without jurisdiction, leading to the dismissal of the assessment orders.
3. The Court affirmed that the assessment orders by the Deputy Commissioner, which were based on a notice issued after the three-year limit, were legally unsustainable. The judgment emphasized the importance of adhering to statutory timelines for assessments and the jurisdictional limits of tax authorities. Consequently, the petition for reviewing the order was dismissed, with no costs imposed, as the original assessment was found to be in violation of rule 33(1) and lacking jurisdiction due to the timing of the notice served on the assessee.
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1966 (2) TMI 67
Issues:
1. Validity of assessment orders exhibits P-3 and P-4.
2. Interpretation of rule 33 of the General Sales Tax Rules regarding escaped assessment.
3. Application of rule 33 to assessments made after remand by appellate authority.
4. Jurisdiction of revenue recovery proceedings.
Analysis:
1. The writ petition sought to quash assessment orders exhibits P-3 and P-4 and restrain the recovery of tax. The petitioner, a non-resident dealer, was assessed for the year 1957-58 under the General Sales Tax Act. The initial assessment was set aside by the Appellate Assistant Commissioner, leading to a fresh assessment by the Sales Tax Officer. The petitioner challenged the subsequent orders, arguing they were barred by the time-limit specified in rule 33 of the General Sales Tax Rules.
2. The petitioner contended that the assessment order exhibit P-3 was beyond the time-limit prescribed by rule 33, making the proceedings illegal. The court considered the interpretation of rule 33, which allows for escaped assessments within three years. The government argued that rule 33 did not apply to assessments made after remand by appellate authorities. However, relying on Supreme Court decisions, the court held that assessments, whether original or after remand, must comply with the statutory time limits, as indicated by the provisions of the statute or rules.
3. The court rejected the government's argument that rule 33 did not apply to assessments post-remand. Citing Supreme Court decisions, the court emphasized that assessments by the Sales Tax Officer, whether suo motu or post-remand, must adhere to the statutory time limits. The court concluded that the assessments evidenced by exhibits P-3 and P-4 were beyond the period indicated by rule 33, entitling the petitioner to the relief of quashing those orders.
4. The court did not delve into the petitioner's argument regarding the jurisdiction of revenue recovery proceedings, as the main issue of the validity of assessment orders was resolved in favor of the petitioner. Ultimately, the court allowed the writ petition, quashed exhibits P-3 and P-4, and made no order as to costs, concluding the matter in favor of the petitioner.
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1966 (2) TMI 66
Issues Involved:
(a) Applicability of section 29 of the Limitation Act to revision applications under the Bengal Finance (Sales Tax) Act, 1941.
(b) Whether section 29 of the Limitation Act enlarges the scope of section 12(2) to include revision applications.
(c) Whether the requirement of rule 62 to accompany a revision application with a certified copy of the order justifies excluding the time taken to obtain such a copy for calculating limitation.
Issue-wise Detailed Analysis:
1. Applicability of Section 29 of the Limitation Act:
The first issue was whether section 29 of the Limitation Act applies to revision applications under the Bengal Finance (Sales Tax) Act, 1941. It was conceded on behalf of the State that section 29 does indeed apply to such revision applications. Therefore, this question was answered affirmatively.
2. Enlargement of Scope of Section 12(2) by Section 29:
The second issue involved whether section 29 of the Limitation Act enlarges the scope of section 12(2) to include revision applications. The State argued that section 12(2) is limited to appeals, applications for leave to appeal, and applications for review of judgment, and does not extend to revision applications. However, it was noted that if the rules require a certified copy to accompany a revision petition and the time to obtain such a copy is not excluded, it would result in hardship to applicants. Various High Courts had differing views on this matter. The judgment concluded that "revision" in the said Act is comprehended within the term "appeal" in section 12(2) of the Limitation Act. Consequently, the time requisite for obtaining certified copies of the order sought to be revised must be excluded under section 12(2) read with section 29 of the Limitation Act. Thus, the second question was answered as follows: "Section 29 of the Limitation Act does not enlarge the scope of section 12(2) of the said Act, but the petitioner is entitled to exclude the time spent in obtaining the certified copy of the impugned order, under section 12(2) of the Limitation Act."
3. Exclusion of Time Based on Rule 62 Requirement:
The third issue was whether the requirement of rule 62, that every revision application should be accompanied by a certified copy of the order, justifies excluding the time taken in obtaining such a copy for calculating limitation. The judgment concluded that the mere requirement of rule 62 does not permit a petitioner to exclude the time requisite for obtaining a certified copy in computing the period of limitation. Therefore, this question was answered in the negative.
Conclusion:
The reference was answered with the following conclusions:
1. Section 29 of the Limitation Act applies to revision applications under the Bengal Finance (Sales Tax) Act, 1941.
2. Section 29 does not enlarge the scope of section 12(2) of the Limitation Act, but the petitioner is entitled to exclude the time spent in obtaining the certified copy of the impugned order under section 12(2) of the Limitation Act.
3. The requirement of rule 62 does not justify excluding the time taken to obtain a certified copy for calculating limitation.
Both parties were left to bear their own costs.
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1966 (2) TMI 65
Issues Involved:
1. Validity of Section 3-D of the U.P. Sales Tax Act.
2. Validity of Notification No. ST-7122/X-900(16)/64.
3. Delegation of legislative power to the State Government.
4. Infringement of Article 14 of the Constitution.
5. Procedural fairness in assessment under Rule 41(3).
Issue-wise Detailed Analysis:
1. Validity of Section 3-D of the U.P. Sales Tax Act:
The petitioner challenged Section 3-D on the grounds that it delegated the power to levy purchase tax to the State Government without reserving any control or check on its exercise. It was argued that the Legislature did not lay down any principle for the guidance of the State Government. The Court held that the U.P. Legislature had the exclusive power to make laws for U.P. with respect to taxes on the purchase of goods under Article 246(3) of the Constitution. The Court found that the legislative policy and principle were sufficiently enunciated in the statement of objects and reasons for the enactment of Section 3-D, providing guidance to the State Government. The Court concluded that the discretion conferred on the State Government was not unguided, thus rejecting the argument of unconstitutional delegation of legislative power.
2. Validity of Notification No. ST-7122/X-900(16)/64:
The petitioner argued that the notification increased the tax on pulses from 1 paisa per rupee to 1.5 paise per rupee without proper legislative authority. The Court found that the notification was issued in exercise of the powers conferred by Section 3-D(1) and was within the limits prescribed by the Legislature. The Court held that the tax was imposed by the Legislature through Section 3-D, and the notification merely specified the goods and rates, thus upholding the validity of the notification.
3. Delegation of legislative power to the State Government:
The petitioner contended that the Legislature had delegated its essential legislative function to the State Government, which amounted to unconstitutional delegation. The Court referred to various precedents, including Vasanlal Maganbhai v. State of Bombay and Hrishanker Bagla v. State of Madhya Pradesh, to establish that the Legislature can delegate subsidiary powers to the State Government provided it lays down the legislative policy and principle. The Court found that the legislative policy and principle were sufficiently enunciated, and the delegation of power to the State Government was valid.
4. Infringement of Article 14 of the Constitution:
The petitioner argued that Section 3-D and the notification infringed Article 14 by giving arbitrary power to the State Government to distinguish between dealers. The Court held that there was no discrimination between dealers in respect of the same goods; both were charged under Section 3 or Section 3-D at the same rate. The Court found that the classification of goods for taxation purposes was rational and had a nexus with the object of the law. The Court concluded that the provisions did not infringe Article 14.
5. Procedural fairness in assessment under Rule 41(3):
In Petition No. 3579, the petitioner contended that it was assessed without being given an opportunity to be heard as required under Rule 41(3). The Court found that the assessment order was a provisional assessment under Rule 41(3), which did not require an enquiry unless deemed necessary by the Sales Tax Officer. The Court held that the final assessment under sub-rule (5) would provide an opportunity for the petitioner to be heard. The Court concluded that there was no infringement of the principles of natural justice.
Conclusion:
The Court dismissed the petitions, upholding the validity of Section 3-D and the notification issued under it. The Court found that the delegation of power to the State Government was valid and did not infringe Article 14. The Court also held that the procedural fairness in assessment under Rule 41(3) was maintained.
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