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1960 (12) TMI 104
Issues Involved:
1. Scope of enquiry permissible under Section 6-E(2)(b) of the United Provinces Industrial Disputes Act, 1947.
2. Extent of the jurisdiction of the Industrial Tribunal in holding such an enquiry.
3. Whether the Tribunal exceeded its jurisdiction in refusing to accord approval to the dismissal of workmen.
4. Allegations of victimization of a workman for trade union activities.
Issue-wise Detailed Analysis:
1. Scope of Enquiry Permissible under Section 6-E(2)(b):
The principal question raised in this appeal concerns the scope of the enquiry permissible under Section 6-E(2)(b) of the United Provinces Industrial Disputes Act, 1947, which is identical to Section 33(2)(b) of the Industrial Disputes Act, 1947. The object of Section 33 is to maintain the status quo during the pendency of industrial proceedings. Section 33(2) allows employers to alter conditions of service or dismiss workmen for misconduct not connected with the dispute, provided wages for one month are paid and an application for approval is made.
2. Extent of Jurisdiction of the Industrial Tribunal:
The Tribunal's jurisdiction under Section 33(2)(b) is limited to considering whether a prima facie case for approval is made out by the employer. The Tribunal must check if the standing orders justify the dismissal, whether a proper enquiry was held, whether wages for one month were paid, and whether an application for approval was made. The Tribunal's role is not to act as an appellate court and reassess the evidence or the merits of the findings from the domestic enquiry.
3. Tribunal Exceeding its Jurisdiction:
The Tribunal refused to accord approval to the dismissal of the workmen, citing inadequacies in the evidence and the enquiry process. However, it was found that the Tribunal exceeded its jurisdiction by acting as an appellate court, reviewing the adequacy and sufficiency of the evidence, which is outside its purview under Section 33(2)(b). The Tribunal should have confined itself to checking the procedural correctness and prima facie case rather than reassessing the facts.
4. Allegations of Victimization:
One of the dismissed workmen, Har Prasad, alleged victimization for his trade union activities. Although not recognized as a protected workman, the Tribunal considered his case separately and suggested victimization due to his union activities. However, the Supreme Court found that the evidence indicated Har Prasad's involvement in inciting the assault on the officers, justifying his dismissal. The Tribunal's decision to refuse approval based on alleged victimization was not supported by the evidence and exceeded its jurisdiction.
Conclusion:
The appeal was allowed, and the Tribunal's order was set aside. Approval was accorded to the action taken by the appellant under Section 6-E. The Tribunal had overstepped its jurisdiction by reassessing the merits of the domestic enquiry, which it was not authorized to do under Section 33(2)(b). The Supreme Court clarified the limited scope of the Tribunal's enquiry and emphasized the importance of adhering to procedural correctness rather than delving into the merits of the employer's decision.
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1960 (12) TMI 103
Issues Involved:
1. Petition for winding up the Company under Section 439 of the Indian Companies Act, 1956.
2. Allegations of oppression and prejudicial conduct by the majority shareholders.
3. Failure of the main object and substratum of the Company.
4. Introduction of new matters and allegations after the filing of the petition.
5. Alleged deadlock in the management of the Company.
Issue-wise Detailed Analysis:
1. Petition for Winding Up the Company:
The petitioners sought the winding up of the Akola Electric Supply Company (Private) Limited under Section 439 of the Indian Companies Act, 1956. The petition was initially rejected in limine but was later admitted by the Division Bench and sent for final hearing. The petitioners argued that the Company had failed in its primary objective of supplying electric energy due to the expiration of its license and the subsequent takeover by the Bombay State Electricity Board.
2. Allegations of Oppression and Prejudicial Conduct:
The petitioners alleged that the Brijlal group, which managed the Company, conducted themselves in an oppressive manner, particularly by not distributing dividends to the Bilasrai group. They claimed that this conduct was prejudicial to the interests of the Company. The respondents denied these allegations, asserting that the management was being run smoothly and economically, with no misconduct or misapplication of funds.
3. Failure of the Main Object and Substratum of the Company:
The petitioners contended that the main object of the Company, which was to supply electric energy, had failed due to the expiration of the license and the Government's policy of taking over electric undertakings. They argued that the substratum of the Company had gone. The respondents countered that the Company had multiple objects, and the failure of one object did not mean the failure of the substratum. They also argued that the Company could still utilize the compensation money for new ventures within the objects of the Company.
4. Introduction of New Matters and Allegations:
During the hearing, the petitioners introduced new matters, including an affidavit and a letter (Ex. A) indicating that the compensation money might be used to discharge the Income Tax liabilities of the partners of Sarupchand Prithiraj. The respondents opposed this introduction, arguing that the petitioners should confine themselves to the original allegations. The court allowed the new matters, stating that they were relevant to determining whether the Company could start a new venture.
5. Alleged Deadlock in the Management of the Company:
The petitioners claimed that irreconcilable disputes between the Bilasrai and Brijlal groups had created a situation analogous to a deadlock in the management of the Company. The respondents denied this, stating that there was no deadlock and that the management was functioning smoothly. The court found that the disputes did not reflect a deadlock in the management and that the petitioners had other remedies available, such as suits for the recovery of dividends.
Conclusion:
The court concluded that the petitioners had failed to prove that the substratum of the Company had gone or that it was impossible for the Company to start a new venture. The court also found that the disputes between the shareholders did not amount to a deadlock in the management. Therefore, the petition for winding up the Company was dismissed with costs.
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1960 (12) TMI 102
The High Court of Calcutta dismissed an application under section 66(2) of the Income Tax Act, stating that the questions raised were factual and not legal. The court emphasized that the opinion of the Income Tax Officer is now the primary deciding factor regarding the reasonableness of allowances, following an amendment to the Income Tax Act. The court found no evidence of capricious or unjudicial behavior by the Income Tax Officer and dismissed the application.
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1960 (12) TMI 101
Issues Involved:
1. Winding up of the Palai Central Bank Ltd. under Section 38(3)(b)(iii) of the Banking Companies Act, 1949.
2. Validity of Section 38(3)(b)(iii) under Articles 14 and 19 of the Constitution.
3. Allegations of mala fide action by the Reserve Bank of India.
Issue-wise Detailed Analysis:
1. Winding up of the Palai Central Bank Ltd. under Section 38(3)(b)(iii) of the Banking Companies Act, 1949:
The Reserve Bank of India (RBI) sought the winding up of the Palai Central Bank Ltd. due to its unsound business practices. The company and some creditors opposed this, while a few creditors supported the application. The RBI had conducted multiple inspections revealing that a substantial portion of the company's advances were unsecured and either irrecoverable or "sticky." Additionally, many advances were to the directors or their relatives, and the company declared dividends without real profits, presenting a false financial picture. Despite repeated warnings and conditions imposed by the RBI, the company's position deteriorated, leading to a run on its deposits. Consequently, the RBI applied for winding up and the appointment of a provisional liquidator, which was granted ex parte.
2. Validity of Section 38(3)(b)(iii) under Articles 14 and 19 of the Constitution:
The company challenged Section 38(3)(b)(iii) on the grounds that it violated Articles 14 and 19 of the Constitution. The Court examined whether the classification under this section was reasonable and related to the statute's objective. It was argued that the RBI's subjective satisfaction under this provision was not amenable to judicial review. The Court held that the RBI's role as an impartial, expert body tasked with protecting depositors justified its discretionary power under the section. The provision was deemed necessary for swift and effective action to protect depositors, which could not wait for the judicial process. Thus, the Court found the section did not violate Articles 14 and 19, as it was reasonable and in the public interest.
3. Allegations of mala fide action by the Reserve Bank of India:
The company initially alleged mala fide action by the RBI but later abandoned this claim. The Court noted that the RBI had acted with due care and attention, providing the company with multiple opportunities to rectify its issues. The RBI's decision to apply for winding up was based on substantial evidence and was not hasty or ill-considered. The Court concluded that the RBI acted in good faith, fulfilling its duty to protect depositors.
Conclusion:
The Court ordered the winding up of the Palai Central Bank Ltd., finding the RBI's application justified and the impugned provision of the Banking Companies Act constitutional. The Reserve Bank was awarded costs to be recovered from the opposing parties or the company's assets.
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1960 (12) TMI 100
Issues:
1. Validity of the agreement for purchase of the house in dispute.
2. Notice served by the respondents for arrears of rent and eviction.
3. Contention regarding the plaintiffs' entitlement to recover rent and eject the defendant.
4. Application of Section 4-A of the M.P. Accommodation Control Act.
5. Invocation of Section 53-A of the Transfer of Property Act.
6. Interpretation of Section 91 of the Indian Trusts Act.
7. Consideration of equities in favor of the appellant.
Detailed Analysis:
1. The defendant entered into an agreement to purchase a house from its owner but later, other parties purchased the same house with prior knowledge of the agreement. The defendant was then served with notices for arrears of rent and eviction by the new purchasers, leading to conflicting claims over the property.
2. The defendant argued that the new purchasers were not entitled to recover rent or eject him as they were aware of his prior agreement with the original owner. The defendant contended that he had offered to pay rent under protest, but the plaintiffs did not accept, raising questions about the validity of the eviction suit.
3. The trial court found that the plaintiffs were aware of the prior agreement between the defendant and the original owner, but still decreed the suit for ejectment based on non-payment of rent. The court also assessed the genuine requirement of the premises by the plaintiffs for their business.
4. On appeal, it was held that the defendant failed to establish a defense under Section 53-A of the Transfer of Property Act and could not rely on it since he remained in possession as a tenant even after the alleged agreement for sale. The court emphasized that the defendant's possession was not in part performance of the contract.
5. The court also discussed the application of Section 91 of the Indian Trusts Act, stating that a subsequent purchaser with notice of an existing contract must hold the property for the benefit of the prior agreement holder until a final decision is reached. However, it clarified that the defendant's possession as a tenant could not be altered solely based on the agreement for sale.
6. The judgment highlighted that until the defendant succeeded in the specific performance suit, he could not enforce equities against the plaintiffs, especially as his possession remained that of a tenant and not in part performance of the contract. The court emphasized the need for a final decision in the specific performance suit to determine the rights over the property.
7. Ultimately, the court dismissed the appeal, concluding that the defendant could not enforce his rights until the specific performance suit was successful, and his possession as a tenant did not grant him the authority to resist eviction based on the agreement for sale.
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1960 (12) TMI 99
Issues Involved:
1. Propriety and reasonableness of the demand for leave.
2. Jurisdiction of the Industrial Tribunal to make an award exceeding the provisions of Section 79 of the Factories Act, 1948.
3. Alleged discrimination between clerical staff and operatives.
4. Modern industrial thought on liberal leave provisions.
Detailed Analysis:
1. Propriety and Reasonableness of the Demand for Leave:
The Tribunal considered the appellant's contentions against the respondents' demands, reviewed awards or agreements in comparable concerns, and made its award. For privilege leave, the Tribunal ordered:
- Upto 3 completed years of service: 16 days per year.
- Upto 9 completed years of service: 22 days per year.
- Thereafter: One month for every 11 months of service.
Accumulation of privilege leave was allowed up to three years. For sick leave, the Tribunal ordered 15 days per year with full pay and dearness allowance, with a right to accumulate up to 45 days, and no medical certificate required for sick leave of three days or less. The Tribunal also made appropriate directions for leave in proportion to service duration.
2. Jurisdiction of the Industrial Tribunal to Make an Award Exceeding the Provisions of Section 79 of the Factories Act, 1948:
The appellant argued that Section 79 of the Factories Act, 1948, is exhaustive and self-contained regarding annual leave with wages, precluding any additions by the employer or Tribunal. The Court examined Section 79 and found it to be a minimum provision rather than a maximum. The Court emphasized the beneficent policy of the Act, favoring interpretations that further the Act's purpose and benefit employees. Sections 78 and 84 of the Act were also considered, indicating that the Act does not intend to standardize leave provisions strictly, allowing for more generous arrangements through laws, awards, agreements, or contracts.
3. Alleged Discrimination Between Clerical Staff and Operatives:
The appellant argued that providing privilege leave to clerical staff while denying it to operatives would create discontent and disturb industrial peace. The Court noted that a distinction between operatives and clerical staff is generally made in practice and comparable concerns, and such a distinction is justifiable. The appellant's own standing orders also made different provisions for the two categories of employees. Therefore, the Court found no issue of discrimination in the Tribunal's award.
4. Modern Industrial Thought on Liberal Leave Provisions:
The appellant contended that liberal leave provisions are opposed to modern industrial thought and should be discouraged. The Court acknowledged that industrial adjudication should consider national economy needs and avoid unduly generous leave provisions that could affect production. However, the Court deferred to the Tribunal's familiarity with trends in comparable concerns and found no basis for interference. The Tribunal had considered relevant factors, previous decisions, and prevailing agreements in making its award.
Conclusion:
The Court dismissed the appeal, upholding the Tribunal's award on all counts. The provisions for privilege leave and sick leave were deemed reasonable and in line with the Act's beneficent policy. The Court found no discrimination between clerical staff and operatives and no grounds to alter the Tribunal's decision based on modern industrial thought. The appeal was dismissed with costs.
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1960 (12) TMI 98
Issues:
Whether a dispute regarding bonus payment by employees of a General Insurance Company can be referred to an Industrial Tribunal under the Industrial Disputes Act, 1947.
Analysis:
1. The dispute arose when the workmen of an Insurance Company claimed additional bonus for the years 1954 and 1955, which was referred to the Industrial Tribunal. The Tribunal dismissed the reference based on a preliminary objection raised by the respondent regarding the limitations imposed by section 40C of the Insurance Act. The Tribunal also considered the relevance of section 31A of the Insurance Act in prohibiting the payment of bonus by insurers. The appellants challenged this decision before the Supreme Court.
2. The appellants claimed additional bonus based on the available surplus of the respondent company, which the Tribunal did not consider due to the preliminary objection. The respondent had already paid bonus equivalent to two months' basic wages for each of the years in question.
3. The respondent's preliminary objection was based on section 31A(1)(c) of the Insurance Act, which prohibits insurers from employing individuals whose remuneration includes a commission or bonus related to the general insurance business. The Tribunal found that the bonus claimed by the appellants would constitute a part of their remuneration, which is prohibited by this provision.
4. An exception to this prohibition is proviso (vii) to section 31A(1)(c), which allows the payment of bonus to salaried employees of Insurance Companies on a uniform basis, subject to the Central Government's approval. The Central Government can prescribe the maximum amount of bonus that can be paid by the insurer.
5. The provision ensures that the Central Government has the authority to decide whether bonus should be paid by an insurer based on its financial position. The legislative intent was to supervise and regulate the payment of bonus by Insurance Companies, with the Central Government having the final say on the matter.
6. The appellants argued that proviso (vii) does not bar the Central Government from referring an industrial dispute regarding bonus for adjudication under the Industrial Disputes Act. However, the Court found that the legislative intent was to exclude the intervention of Industrial Tribunals in bonus payment matters and keep it within the Central Government's discretion.
7. The Court emphasized that the payment of bonus by insurers is conditioned by the provisions of section 31A(1)(c) and proviso (vii), and the intervention of Industrial Tribunals was not intended. The Court noted that if an insurer refuses to comply with the Central Government's decision, there might be a lacuna in the law that the legislature should address.
8. Referring to a similar case involving the Banking Companies Act, the Court held that bonus payment constitutes additional remuneration and falls within the prohibition of section 31A(1)(c). The Court upheld the Tribunal's decision to dismiss the reference and did not consider other arguments raised under section 40C of the Act.
9. Consequently, the Court dismissed the appeal, upholding the Tribunal's decision, and ordered no costs to be paid.
10. In conclusion, the Court affirmed that the legislative intent was to regulate bonus payments by Insurance Companies through the Central Government, and the Industrial Tribunals were not intended to intervene in such matters.
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1960 (12) TMI 97
Issues Involved:
1. Relief under Section 25(4) of the Indian Income-tax Act.
2. Determination of succession to business.
3. Identity and continuity of business operations.
4. Treatment of assets, liabilities, and goodwill.
Issue-wise Detailed Analysis:
1. Relief under Section 25(4) of the Indian Income-tax Act:
The primary question was whether the assessee, K.H. Chambers, was entitled to relief under Section 25(4) of the Indian Income-tax Act. The department initially denied this relief, asserting that there was no succession to the business by K.H. Chambers in 1932, as the business conducted by him was not considered a continuation of the business previously run by G.A. Chambers.
2. Determination of Succession to Business:
The court examined whether K.H. Chambers succeeded to the business of G.A. Chambers in 1932. The Income-tax Officer concluded that G.A. Chambers had closed his business, and K.H. Chambers commenced a new business, despite dealing in similar lines. This conclusion was supported by the division of assets and liabilities, where significant portions were retained by G.A. Chambers, and the trade name "Chambers and Co." was not transferred to K.H. Chambers. The Tribunal upheld this view, stating that the identity of the son's business with that of the father was lost on 30th November 1932, as the business was not transferred intact.
3. Identity and Continuity of Business Operations:
The court considered several factors indicating continuity:
- K.H. Chambers continued operating the same lines of business as Chambers and Co.
- He used the same premises, telephone number, post box number, codes, and trade marks.
- Important sections of the staff from Chambers and Co. were retained.
- G.A. Chambers facilitated the transfer of the agency of the Liverpool and London and Globe Insurance Company to K.H. Chambers' business.
The court noted that the decisions in similar cases, such as Jitanram Nirmalram v. Commissioner of Income-tax and Commissioner of Income-tax v. Mansookhlal Zaveri, supported the view that substantial identity or similarity in the nature and extent of activities could constitute succession.
4. Treatment of Assets, Liabilities, and Goodwill:
The division of assets and liabilities between G.A. Chambers and K.H. Chambers was scrutinized. A large volume of liabilities and assets were retained by G.A. Chambers, while K.H. Chambers took over some liabilities, stock-in-trade, and outstandings. The department argued that the retention of the trade name "Chambers and Co." by G.A. Chambers indicated no transfer of goodwill. However, the court found that the goodwill and connections of Chambers and Co. were effectively transferred to K.H. Chambers, despite the non-transfer of the trade name.
The court emphasized that the father's suggestion to discontinue the business was not implemented, and the business was continued by the son with the father's support in discharging liabilities. The court concluded that there was a real succession to the business within the meaning of Section 25(4) of the Act.
Conclusion:
The court answered the referred question in the negative, ruling in favor of the assessee, K.H. Chambers. The court held that there was a succession to the business, entitling the assessee to relief under Section 25(4) of the Indian Income-tax Act. The assessee was also entitled to costs.
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1960 (12) TMI 96
Issues Involved:
1. Whether the loss of cash by dacoity is admissible as a deduction under section 10(1) of the Income-tax Act in computing the assessee's income from banking business.
Issue-wise Detailed Analysis:
1. Admissibility of Loss of Cash by Dacoity as Deduction under Section 10(1) of the Income-tax Act:
The primary issue in this case is whether the loss of Rs. 1,06,000 by dacoity can be deducted under section 10(1) of the Income-tax Act while computing the assessee's income from banking business. The assessee, a public limited company engaged in banking, claimed the loss as a deduction for the assessment year 1952-53. The Income-tax Officer and the Appellate Assistant Commissioner disallowed this deduction, asserting that the loss was not incidental to the business of the bank. The Tribunal, however, recognized the cash as the stock-in-trade of the bank.
The assessee argued that:
(a) The cash is the stock-in-trade of the banking company, and its loss should be deductible regardless of the circumstances.
(b) The loss of cash was incidental to the banking business and should be admissible as a commercial loss.
The Tribunal's order confirmed that the cash lost in the dacoity was indeed the stock-in-trade of the bank, referencing established precedents like Arunachalam Chettiar v. Commissioner of Income-tax and Commissioner of Income-tax v. Subramanya Pillai, which affirm that money is the stock-in-trade and circulating capital in banking and money-lending businesses.
The court examined the principles laid down in Badridas Daga v. Commissioner of Income-tax, which stated that a loss must directly arise from the business and be incidental to it to be deductible. The court noted that while Badridas Daga dealt with embezzlement, it also discussed theft, emphasizing that a loss must spring directly from the business operations and not merely be connected to it.
The court also considered the case of Motipur Sugar Factory Ltd. v. Commissioner of Income-tax, where the loss of money during statutory-required cash dispatches was deemed incidental to the business and deductible. The court found this case analogous to the present one, as maintaining cash reserves is essential for banking operations under statutory requirements like section 24 of the Banking Companies Act, 1949.
The court distinguished the present case from Ramaswami Chettiar v. Commissioner of Income-tax, where the loss was considered non-deductible as it was seen as a personal loss rather than a business loss. The court reasoned that for a public bank, the cash held is part of the circulating capital, not personal funds.
The court also referenced Pohoomal Bros. v. Commissioner of Income-tax, where the loss of stock-in-trade due to enemy action was deemed a trading loss and deductible.
Ultimately, the court concluded that the loss by dacoity, although not frequent, is incidental to the banking business due to the inherent risks of handling large sums of cash. Thus, the loss should be deductible under section 10(1) of the Income-tax Act.
Separate Judgment:
Upadhya J.:
Upadhya J. concurred with the analysis, emphasizing that the loss was suffered in due course of business and pertained to the stock-in-trade of the bank. Ignoring such a loss would be against commercial propriety and common sense. Therefore, the deduction should be allowed to determine the true profits of the assessee.
Conclusion:
The court answered the referred question in the affirmative, allowing the loss of Rs. 1,06,000 by dacoity as a deductible expense under section 10(1) of the Income-tax Act in computing the assessee's income from banking business.
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1960 (12) TMI 95
Issues Involved:
1. Assessability of profit under the second proviso to section 10(2)(vii) of the Income-tax Act.
2. Validity of the Tribunal's estimation of the sale value of the buildings.
Issue-wise Detailed Analysis:
1. Assessability of Profit under the Second Proviso to Section 10(2)(vii) of the Income-tax Act:
The Department claimed that the profits from the sale of the company's factory premises and machinery should be taxed under the second proviso to section 10(2)(vii) for the assessment year 1956-57. The assessee contended against this, but the Tribunal sustained the Department's claim.
The original cost and written down value of the buildings and machinery were considered, and the sale resulted in an excess realization over the written down value. The Income-tax Officer initially rejected the valuation agreed upon by the vendor and vendee, suspecting collusion and manipulation. However, the Appellate Assistant Commissioner found the valuation genuine and fixed the taxable profits at Rs. 3,23,461. The Tribunal partially allowed the Department's appeal, estimating the profits at Rs. 4,25,050.
The Supreme Court's decision in Liquidators of Pursa Ltd. v. Commissioner of Income-tax was referenced, which examined the scope of the second proviso before its amendment in 1949. The Supreme Court held that the sale by a company in the course of winding up was not an operation in furtherance of the business and that the machinery and plant must be used for the purpose of the business during the accounting year for the second proviso to apply. The amendment in 1949 allowed the proviso to apply even if the sale occurred after the cessation of business, but the assessee must have carried on the business during some portion of the year of sale.
In this case, the assessee company ceased its business in December 1954 and did not carry on any business in 1955, the year of the sale. Therefore, 1955 could not be considered the "previous year" for the assessment year 1956-57. The existence of the business and the "previous year" must be factual, not fictional. The proviso did not enact a fiction that the assessee shall be deemed to carry on the business in the year of sale.
The Department's alternative argument that the profits should be taxable under section 12 as income from other sources was not considered, as it was a new claim involving fresh investigation of facts.
The court concluded that no portion of the sale proceeds realized by the assessee company in 1955 was assessable to tax as income deemed under the second proviso to section 10(2)(vii) to be profits of any business of the assessee.
2. Validity of the Tribunal's Estimation of the Sale Value of the Buildings:
The second question was whether there were materials for the Tribunal estimating the sale value of the buildings at Rs. 2,32,973. The Appellate Assistant Commissioner accepted the experts' valuation, finding no collusion or manipulation. The Tribunal did not reject the genuineness of the experts' valuation but estimated the sale value of the buildings based on the replacement cost, considering the rise in prices and depreciation.
The court found that the Tribunal had no material basis for its estimate of the sale value or the profits realized by the sale of the buildings. The experts' valuation represented the real market value, and there was no evidence to the contrary.
The court answered the second question in the negative, stating that the sale value of the buildings was Rs. 1,31,732 as disclosed by the assessee and accepted by the Appellate Assistant Commissioner.
Conclusion:
The court held that the assessee was not liable to be taxed under the second proviso to section 10(2)(vii) for the assessment year 1956-57, as the company did not carry on any business during the year of sale. The Tribunal's estimation of the sale value of the buildings was not supported by material evidence, and the genuine valuation by the experts was accepted. The assessee was entitled to the costs of the reference.
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1960 (12) TMI 94
Issues Involved:
1. Entitlement to relief under section 25(3) of the Income-tax Act for foreign businesses.
2. Entitlement to relief under section 25(3) for rental income from house properties owned by the foreign firm.
3. Taxability of amounts recovered under the Malayan Debtor and Creditor Ordinance in the assessment year 1952-53.
Detailed Analysis:
Issue 1: Entitlement to Relief Under Section 25(3) for Foreign Businesses
The primary question was whether the assessee is entitled to both parts of the relief under section 25(3) of the Income-tax Act for its foreign businesses in Penang, Ipoh, and Kambar. The court examined whether the foreign business was ever charged under the Indian Income-tax Act, 1918. It was established that the assessee was taxed on remittances received from foreign business profits under the 1918 Act. However, the court emphasized that the tax was on the remittance and not on the business income itself. The court referenced the decision in Commissioner of Income-tax v. S.V.R.M. Palaniappa Chettiar, which held that relief under section 25(4) (similar to section 25(3)) is only permissible if the business itself was charged to tax under the 1918 Act, not merely the remittances. Consequently, the court concluded that the assessee's foreign business was not charged under the 1918 Act, and thus, the assessee was not entitled to relief under section 25(3). The court answered this question in favor of the department and against the assessee.
Issue 2: Entitlement to Relief Under Section 25(3) for Rental Income from House Properties
The second issue was whether the assessee is entitled to relief under section 25(3) concerning rental income from house properties owned by the foreign firm. The court noted that income from house property is charged under section 9 of the Act, which is a separate head of charge distinct from business income under section 10. The court reiterated that section 25(3) deals only with business, profession, or vocation, and property income cannot be categorized as business income. Therefore, the Tribunal was correct in excluding the property income from the relief under section 25(3). The court upheld the Tribunal's decision on this point.
Issue 3: Taxability of Amounts Recovered Under the Malayan Debtor and Creditor Ordinance
The third issue was whether the amount of $32,097 recovered under the Malayan Debtor and Creditor Ordinance was assessable in the year 1952-53. The Tribunal had followed the decision in M.L.M. Muthiah Chettiar v. Commissioner of Income-tax, which provided a formula for giving relief to the assessee. The court found that the Tribunal's formula was consistent with the established decision and thus answered this question against the department and in favor of the assessee.
Conclusion
The court ruled that the assessee was not entitled to relief under section 25(3) for its foreign businesses, as the foreign business was not charged under the 1918 Act. The assessee was also not entitled to relief under section 25(3) for rental income from house properties, as such income falls under a separate head of charge. However, the amounts recovered under the Malayan Debtor and Creditor Ordinance were not assessable in the year 1952-53, following the precedent set in M.L.M. Muthiah Chettiar's case.
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1960 (12) TMI 93
Issues:
- Interpretation of the term "worker" under Sec. 2(1) of the Factories Act, 1948
- Determination of whether respondents are workers or independent contractors
- Application of Sec. 79 of the Factories Act regarding entitlement to leave
Analysis:
The case involved an appeal concerning industrial matters where the appellant, a factory manager, did not pay wages to respondents 2 to 4 for a period of leave they took, leading them to approach the Payment of Wages Authority. The main contention was whether respondents qualified as "workers" under Sec. 2(1) of the Factories Act. The appellant argued that they were not workers, citing previous court decisions. The High Court upheld the Authority's decision, determining respondents as workers and dismissing the petition. The appellant then sought appeal to the Supreme Court, which was granted.
The Supreme Court analyzed the definition of a "worker" under Sec. 2(1) of the Factories Act, emphasizing the need for a relationship of master and servant or employer and employee. The court referred to previous cases to establish the criteria for determining worker status, including the right of the employer to control the work. In this case, the court examined the specific working conditions of respondents 2 to 4 at the factory, noting their obligations, supervision, and payment method based on piece-rates. The court differentiated this case from previous cases involving independent contractors, highlighting the level of control and supervision by the factory management over the respondents' work.
The court concluded that respondents 2 to 4 could not be considered independent contractors based on the level of supervision and control exercised by the factory management. Despite some freedom in work hours and attendance, the court found that the respondents were workers under the Factories Act. Additionally, the court addressed the application of Sec. 79 of the Factories Act regarding entitlement to leave, emphasizing that the right to leave accrues based on the minimum working days completed. The court dismissed the appeal, affirming the respondents' status as workers and their entitlement to leave under the Act.
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1960 (12) TMI 92
Issues Involved:
1. Substantial Question of Law
2. Valuation of Subject-Matter
3. Right to Appeal to the Supreme Court
4. Adoption and Contesting of Valuation
5. Application of Res Judicata and Estoppel
6. Principle of Approbat and Reprobat
Detailed Analysis:
1. Substantial Question of Law
The court identified that the appeal involves the determination of a substantial question of law. This was a prerequisite for granting leave to appeal to the Supreme Court under Article 133 of the Constitution. The substantial question of law was deemed satisfied, thereby affirming the right to appeal.
2. Valuation of Subject-Matter
The suit was initially valued at Rs. 9650 by the respondents (plaintiffs), and this valuation was adopted by the petitioners (defendants) for the purpose of paying the necessary court-fee for the appeals. However, the petitioners later contended that the real value of the properties was more than Rs. 20,000. The court examined whether the petitioners could go behind the initial valuation and show the real value.
3. Right to Appeal to the Supreme Court
Article 133 of the Constitution and Section 110 of the Civil Procedure Code (C.P.C.) were considered to determine the right of a party to appeal to the Supreme Court. The court emphasized that the right of appeal is a constitutional right and cannot be impaired by an erroneous statement as to the value of the subject-matter by a party. The real value of the subject-matter must be ascertained to decide the right to appeal.
4. Adoption and Contesting of Valuation
The court discussed the circumstances under which a party could contest the valuation adopted at an earlier stage. It was noted that the rules of procedure and evidence, such as res judicata and estoppel, would apply when determining the real value of the subject-matter. The court held that a party is not absolutely precluded from showing the real value, even if they adopted a different valuation earlier.
5. Application of Res Judicata and Estoppel
The principle of res judicata was discussed in relation to whether a party could be estopped from contesting the valuation. The court concluded that an erroneous valuation without more cannot amount to a representation that would estop a party from showing the real value. The court also clarified that the principle of constructive res judicata cannot apply where there was no duty on the defendant to contest the value given by the plaintiff.
6. Principle of Approbat and Reprobat
The court examined the rule that a party cannot both approbate and reprobate, which is a species of estoppel. This rule prevents a party from taking inconsistent positions to gain advantage. The court held that this rule would apply only if the party had a choice between two alternative courses and derived an advantage from the chosen course. In the instant case, no advantage accrued to the defendant by adopting the lower valuation, as the appeal would lie to the High Court regardless of the valuation.
Conclusion:
The court concluded that it would be open to any party, be he the plaintiff or defendant, to go behind the valuation adopted in the plaint or in the memorandum of appeal and show the real value of the subject-matter in dispute. This is subject to two exceptions: (1) where there has been a judicial adjudication of the correctness of the original valuation attracting the principle of res judicata, and (2) where the party making the original valuation or adopting it had an option and gained an advantage or caused detriment to the opposite party by exercising that option.
Final Order:
The court accepted the valuation of the subject-matter as above Rs. 20,000 and granted the petitioners a certificate under Article 133(1)(a) of the Constitution, acknowledging that the appeal involves a substantial question of law.
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1960 (12) TMI 91
Issues Involved:
1. Whether the loan due to the Jhalawar State Bank could be recovered as a public demand.
2. Whether the dues of the Jhalawar State Bank were transferred to the Bank of Rajasthan Ltd.
3. Whether the moneys claimed from the appellants were payable under a written instrument or agreement.
4. Whether the certificate under the Act was defective.
5. Whether the Act offends Article 14 of the Constitution by enabling moneys due to the Government in respect of its trading activities to be recovered by way of public demand.
Detailed Analysis:
Issue 1: Recovery of Loan as Public Demand
The appellants were served a notice under Section 6 of the Rajasthan Public Demands Recovery Act, 1952, for the recovery of Rs. 2,24,607/6/6 due to loans taken from the Jhalawar State Bank. The appellants contended that the amount was not a public demand. The court examined whether money due to the Jhalawar State Bank was money payable to the Government of Rajasthan. The Jhalawar State Bank, started in 1932, was deemed a state undertaking with assets derived solely from the funds of the Jhalawar State. Upon the integration of Jhalawar into the United State of Rajasthan, these assets vested in the State of Rajasthan. The court concluded that the Jhalawar State Bank's dues were indeed public demands as they were assets of the State of Rajasthan.
Issue 2: Transfer of Dues to Bank of Rajasthan Ltd.
The appellants argued that the dues of the Jhalawar State Bank were transferred to the Bank of Rajasthan Ltd. via certain notifications. The first notification dated February 15, 1951, indicated that the Bank of Rajasthan Ltd. was authorized "on behalf of the State" to recover amounts due to the Jhalawar State Bank. The second notification dated April 16, 1952, reiterated the merger of the Jhalawar State Bank into the Bank of Rajasthan Ltd. The court found that these notifications did not transfer the debts to the Bank of Rajasthan Ltd. as its own property but rather authorized it to recover the debts on behalf of the Government of Rajasthan. Therefore, the debts remained dues of the Government of Rajasthan.
Issue 3: Moneys Payable Under Written Instrument or Agreement
The appellants contended that the moneys claimed were not payable under a written instrument or agreement. The court noted that the loans were granted based on written applications and receipts signed by the appellants and the bank officers. These documents constituted written agreements, satisfying the requirement of the Act. The court dismissed the argument that the Act required a single instrument, stating that a singular includes the plural in statutory interpretation.
Issue 4: Defect in the Certificate Under the Act
The appellants argued that the certificate under the Act was defective as it did not specify the period for which the demand was due. The court clarified that in the case of loans, there is no question of a period for which the demand is due. The requirement to specify the period applies to claims for revenue or rent, not loans. Therefore, the certificate was not defective.
Issue 5: Constitutionality Under Article 14
The appellants contended that the Act violated Article 14 of the Constitution by giving the Government special facilities for recovering moneys due from its trading activities. The court held that the Government, even as a banker, could be legitimately put in a separate class. The dues of the Government are the dues of the entire people of the State, and a law providing special recovery facilities for such dues does not offend Article 14.
Conclusion:
The court concluded that the amount claimed from the appellants was a public demand within the meaning of the Act and was legally recoverable through the impugned proceedings. The appeal was dismissed with costs.
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1960 (12) TMI 90
Issues Involved:
1. Constitutionality of Section 39 of the Calcutta Police Act, 1866.
2. Whether Section 39 imposes unreasonable restrictions on the fundamental right to carry on trade under Article 19(1)(g) of the Constitution.
3. Whether the discretion conferred on the Commissioner of Police under Section 39 is arbitrary and unguided.
4. Whether the absence of a provision for a hearing and for giving reasons for refusal makes Section 39 unconstitutional.
5. Allegations of mala fides in the rejection of the petitioner's licence application.
Issue-wise Detailed Analysis:
1. Constitutionality of Section 39 of the Calcutta Police Act, 1866:
The petitioner challenged the constitutionality of Section 39 of the Calcutta Police Act, 1866, arguing that it conferred naked and uncanalised powers on the Commissioner of Police to grant or refuse a licence without any guiding criteria, thus amounting to an unreasonable restriction on the fundamental right to carry on trade under Article 19(1)(g) of the Constitution.
2. Whether Section 39 imposes unreasonable restrictions on the fundamental right to carry on trade under Article 19(1)(g) of the Constitution:
The Court examined whether Section 39 of the Act constitutes a reasonable restriction within the meaning of Article 19(6) on the fundamental right to practice any profession or to carry on any occupation, trade, or business under Article 19(1)(g). The Court noted that the Act was passed in 1866, long before the Constitution came into force, and thus, the language might not reflect the meticulousness expected in post-1950 statutes. The Court opined that the section must be read as a whole to determine if there is any guidance for the Commissioner in granting or refusing licences.
3. Whether the discretion conferred on the Commissioner of Police under Section 39 is arbitrary and unguided:
The Court concluded that Section 39 does not confer absolute and unguided discretion on the Commissioner. It provides that the Commissioner must satisfy himself on three points: (i) the applicant must be the keeper of an eating house, (ii) the applicant must be of good behavior, and (iii) the applicant must be able to prevent drunkenness and disorder among patrons. The Court held that these criteria guide the Commissioner's discretion, thereby making the restriction reasonable.
4. Whether the absence of a provision for a hearing and for giving reasons for refusal makes Section 39 unconstitutional:
The petitioner argued that the absence of a provision for a hearing and for giving reasons for refusal rendered Section 39 unconstitutional. The Court, however, held that procedural aspects must be examined in the context of the statute. It noted that the discretion is vested in a high police officer, and while the Commissioner is expected to act reasonably, there is no duty cast on him to act judicially. The Court stated that the absence of a provision for a hearing or for communicating reasons does not make Section 39 unconstitutional, as the petitioner has the remedy to apply to the High Court under Article 226 if the Commissioner acts unreasonably.
5. Allegations of mala fides in the rejection of the petitioner's licence application:
The petitioner alleged that the order rejecting his licence application was mala fide. The Court found no grounds to support this allegation, noting that the petitioner did not claim any personal animus or favoritism by the Commissioner. The Court dismissed the petition on this ground as well.
Separate Judgment by Subba Rao, J.:
Subba Rao, J., dissented, arguing that Section 39 imposed unreasonable restrictions on the fundamental right to carry on trade. He emphasized that the discretion conferred on the Commissioner was uncanalised and arbitrary, lacking procedural safeguards such as a hearing or an appeal mechanism. He concluded that Section 39 infringed the petitioner's fundamental right under Article 19(1)(g) and recommended issuing a writ of mandamus against the Commissioner.
Conclusion:
The majority opinion upheld the constitutionality of Section 39 of the Calcutta Police Act, 1866, dismissing the petition with costs. Subba Rao, J., dissented, finding the section unconstitutional and recommending a writ of mandamus.
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1960 (12) TMI 89
Issues Involved:
1. Competence of the appeal filed without a certified copy of the decree.
2. Application of Order 41, Rule 1 of the Code of Civil Procedure.
3. Exclusion of time under Section 12, sub-section (2) of the Limitation Act.
4. Judicial discretion in procedural defects.
Issue-wise Detailed Analysis:
1. Competence of the Appeal Filed Without a Certified Copy of the Decree:
The primary issue in this appeal is whether the appeal filed by the respondents in the High Court of Punjab was competent, given that it was filed without a certified copy of the decree. The appeal was filed with a certified copy of the judgment and the bill of costs but not the decree, as the decree had not been drawn up by the trial court.
2. Application of Order 41, Rule 1 of the Code of Civil Procedure:
Order 41, Rule 1 mandates that every appeal must be accompanied by a copy of the decree appealed from and the judgment on which it is founded. The rule is clear that while the appellate court may dispense with the filing of the judgment, it has no jurisdiction to dispense with the filing of the decree. The appeal is primarily against the decree, not the judgment, making the filing of the decree mandatory. Failure to file the decree renders the appeal incomplete, defective, and incompetent.
3. Exclusion of Time Under Section 12, Sub-section (2) of the Limitation Act:
The respondents applied for a certified copy of the judgment and decree on March 24, 1954, but were only given the judgment and bill of costs as no decree had been drawn up. The High Court allowed time for the respondents to obtain the decree, which they did on December 23, 1959. The period for filing the appeal is 90 days from the date of the decree, and Section 12, sub-section (2) of the Limitation Act allows for the exclusion of the time requisite for obtaining a copy of the decree. In this case, the time taken for drawing up the decree is included in the period requisite for obtaining the copy, making the appeal filed on December 23, 1959, within the limitation period.
4. Judicial Discretion in Procedural Defects:
The High Court, recognizing the procedural defect, allowed the respondents time to obtain the decree. The Supreme Court noted that the failure to draw up the decree was a result of negligence by the trial court's office and the High Court's office. The High Court's decision to permit the respondents to rectify the defect was deemed fair and just. The Supreme Court emphasized that procedural rules should not penalize litigants for the court's or its officers' negligence. The appeal, having been properly filed on December 23, 1959, was in time and should be heard on its merits.
Conclusion:
The Supreme Court upheld the High Court's order, dismissing the appellant's contention that the appeal should have been dismissed as incompetent. The appeal was deemed to have been filed in time, and the High Court was directed to proceed with the hearing on the merits. The judgment highlights the importance of judicial discretion in procedural matters and the need to ensure that litigants are not unfairly penalized for procedural lapses beyond their control. The appeal was dismissed with no order as to costs.
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1960 (12) TMI 88
Issues Involved:
1. Conviction under Section 304 read with Section 149 and Section 148 of the Indian Penal Code.
2. The principle of "compelling reasons" in appeals against acquittals.
3. Evaluation of evidence and credibility of witnesses.
4. Role of appellate courts in reviewing acquittals.
5. Application of Article 136 of the Constitution for interference by the Supreme Court.
Issue-wise Detailed Analysis:
1. Conviction under Section 304 read with Section 149 and Section 148 of the Indian Penal Code:
The case involves an appeal against the conviction and sentence of nine appellants by the High Court of Rajasthan under Section 304 read with Section 149 and Section 148 of the Indian Penal Code. The prosecution's case was that two factions in the village Harnawa had a dispute, leading to a violent confrontation at a temple. The Rajputs, feeling insulted by the cultivators occupying their usual place, armed themselves and attacked, resulting in injuries and deaths. The Sessions Judge acquitted all accused, but the High Court found the nine appellants guilty of culpable homicide not amounting to murder and rioting with deadly weapons.
2. The principle of "compelling reasons" in appeals against acquittals:
The judgment discusses the principle of "compelling reasons" in appeals against acquittals. The Supreme Court clarified that the words "compelling reasons" are not meant to curtail the appellate court's power but to emphasize that the appellate court must provide clear reasons for reversing an acquittal. The court referenced several precedents, including Sheo Swarup v. King-Emperor and Surajpal Singh v. The State, to elucidate that the appellate court has full power to review evidence and reach its own conclusions but must do so with proper consideration of the trial court's findings.
3. Evaluation of evidence and credibility of witnesses:
The Sessions Judge rejected the evidence of key witnesses on unsubstantial grounds and did not provide a definite finding on the prosecution's version. The High Court, however, found the evidence of witnesses like Goga, Chandra, and Doongar Singh credible and consistent. The High Court pointed out that the Sessions Judge ignored voluminous corroborative evidence without valid reasons. The High Court's approach was to evaluate the entire evidence comprehensively and give due weight to the credibility of witnesses who had suffered injuries during the incident.
4. Role of appellate courts in reviewing acquittals:
The judgment emphasizes that the appellate court has the same power to review evidence in appeals against acquittals as it does in appeals against convictions. The difference lies in the approach and perspective, ensuring that the appellate court considers all relevant matters and provides clear reasons for its conclusions. The High Court, in this case, followed the correct principles by thoroughly reviewing the evidence and providing detailed reasons for overturning the acquittal of the nine appellants.
5. Application of Article 136 of the Constitution for interference by the Supreme Court:
Article 136 of the Constitution grants the Supreme Court discretionary power to entertain appeals in cases where substantial and grave injustice has been done. The Supreme Court noted that it would not interfere with factual findings unless the conclusions were such that they shocked the conscience of the court. In this case, the High Court's findings were based on a thorough evaluation of evidence and adherence to legal principles, and no substantial or grave injustice was found. Therefore, the Supreme Court dismissed the appeal, affirming the High Court's judgment.
Conclusion:
The Supreme Court dismissed the appeal, affirming the High Court's conviction of the nine appellants under Section 304 read with Section 149 and Section 148 of the Indian Penal Code. The court clarified the principles governing appellate review of acquittals, emphasizing the need for clear reasons and proper evaluation of evidence. The High Court's judgment was found to be in line with established legal principles, and no case for interference under Article 136 of the Constitution was made out.
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1960 (12) TMI 87
Issues Involved:
1. Whether entertainments duty is exigible under the Central Provinces and Berar Entertainments Duty Act, 1936.
2. Whether the display by mannequins constitutes an "entertainment" under the Act.
3. Whether the token price of Rs. 2/- for admission to the Dome constitutes "payment for admission to entertainment."
Issue-wise Detailed Analysis:
1. Exigibility of Entertainments Duty:
The primary question in this petition under Article 226 of the Constitution of India is whether entertainments duty is exigible from the petitioners under the Central Provinces and Berar Entertainments Duty Act, 1936. The petitioners, engaged in the manufacture and sale of textiles, set up a "Calicloth Dome" for displaying and selling their goods. Admission to the Dome was free in the morning but restricted in the evening, requiring a Rs. 2/- token, which could be adjusted against purchases. The District Excise Officer directed the petitioners to affix duty stamps on the tokens, considering them as admission fees. The petitioners contested this, arguing that their display was not an "entertainment" under Section 2(b) of the Act and that the token was not a payment for admission to entertainment.
2. Definition and Scope of "Entertainment":
The liability of the petitioners for the payment of entertainments duty hinges on the construction of the Act, particularly Section 3(1). The definitions provided in Section 2 of the Act for "entertainment," "payment for admission," and "admission to an entertainment" are inclusive and not exhaustive. The term "entertainment" naturally connotes amusement or gratification. The Act, intended to levy duty on admissions to theaters, cinemas, and public entertainments, implies that an "entertainment" must afford amusement or gratification to those who see or hear it.
In this case, the display by mannequins was argued by the respondents to be an attraction and an organized show during evening hours. However, the court found that the primary object of the Dome was to advertise and promote sales of the fabrics, not to provide organized entertainment. The mannequins' display was for enabling buyers to make selections, not for amusement. The court concluded that the Dome was not a place of entertainment as defined by the Act.
3. Payment for Admission to Entertainment:
The petitioners argued that the Rs. 2/- token was an advance payment towards the purchase of cloth, not an admission fee. The court examined whether the token constituted "payment for admission" to entertainment. It found that the token was not a charge for admission but a method to regulate trade and restrict entry to bona fide purchasers. The court noted that a visitor paying for cloth in a shop is not considered to be paying for admission to the shop. Similarly, the token was deemed an advance payment for purchases, not an admission fee.
The court referred to English case law, particularly Lyons and Co. v. Fox, which held that payments for meals in a restaurant providing entertainment were not "payments for admission" to entertainment. Applying this principle, the court concluded that the token obtained by visitors to the Dome was not a payment for admission to entertainment.
Conclusion:
The court concluded that the Calico Dome was not a place of entertainment under the Act, and no entertainments duty was payable by the petitioners. The petition was allowed, quashing the order of the District Excise Officer and restraining the enforcement of the Act against the petitioners. The petitioners were entitled to a refund of the duty already collected, and costs were awarded.
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1960 (12) TMI 86
Computation of salary, fees, wages, perquisites or profits - Taxation on cost of that perquisite - sum paid by employers for a suit bought by them as a present to him and supplied to him included in salary computation -assessment made under Schedule E of the Income Tax Act, 1952
as contended for the Crown that the taxpayer received in the year 1955-56, in addition to the cash emoluments of his employment, an advantage by virtue of that employment which was money's worth, namely, a suit of clothes; that, on the evidence, that advantage of money's worth fell to be measured by the price paid by Anglo-Oriental to the tailors for the suit, that was the sum of £ 14 15s.; that that sum was, correctly included in computing the amount of the salary, fees, wages, perquisites or profits of the taxpayer from his employment within the meaning of rule 1, Schedule 9, to the Income Tax Act, 1952; and that the assessment for the year 1955-56 ought to be confirmed - as contented by taxpayer suit was not an advantage received by him by virtue of his employment which was capable of being turned into money, because his employers would have been displeased if he had sold it; alternatively that, if the value of the suit was an advantage received by him by virtue of his employment which was capable of being turned into money, the value was not the price paid by Anglo-Oriental to the tailors, namely, £ 14 15s., but the sum which he could have raised by the sale of the suit in November, 1955, and that that sum was very small.
What is the money's worth which the taxpayer got, was it the payment which the employers made or was it the benefit which the taxpayer got from the payment? -
HELD THAT:- LORD EVERSHED M.R. The point involved in this appeal falls indeed within the narrowest compass; but it is, or appears to be, novel in the sense that no strictly comparable case seems to have come before the court before.
It seems that the taxpayer never acquired any rights against anybody. He received this letter; armed with it, he went to Messrs. Montague Burton's establishment, and Montague Burton expressed themselves as willing to supply him with the clothes he ordered. When the clothes were delivered, then (and then only) the taxpayer got something which was his own. He acquired at that point of time a suit, albeit he had no right against anyone to get the suit. Nor had he, as I conceive, any right against the company, though as a matter of ordinary decency as between master and servant he could no doubt rely upon the company doing what they said they would do. But this was not a case in which he was entitled to call upon the company to pay some sum of money on his behalf, as that phrase is ordinarily understood.
As I think in this case, and in accordance with Mr. Heyworth Talbot's argument, what the taxpayer got-what the company intended to give him, what the letter to him and Montague Burton said would be done, and was done--was a present of a suit. Until he got it, he got nothing; and when he got it, the thing which came in (which was his income expressed in money's worth) was the value of the suit.
We are here concerned with the present of a suit; that is the subject-matter; and the value of the suit in money seems to me to be the amount for which the taxpayer is properly taxable. Therefore, dismiss the appeal.
HARMAN L.J. I agree. The only controversy was whether he was to pay tax on the cost of that perquisite to his employer, or the value of it to him, and it appears to me that this perquisite is a taxable subject-matter because it is money's worth. It is money's worth, because it can be turned into money, and when turned into money the taxable subject-matter is the value received. I cannot myself see how it is connected directly with the cost to the employer.
It is admitted that as a conventional matter the difference can be taken as that between £ 14 15s. and £ 5. Income-tax is a tax levied on income. The taxpayer has to pay on what he gets. Here he has got a suit. He can realise it only for £ 5. The advantage to him is, therefore, £ 5. The detriment to his employer has been considerably more, but that seems to me to be irrelevant, and I do not see that it makes any difference that no property in this suit ever passed to the employer.
I think, in Lord Watson's words in Tennant v. Smith [1892 (3) TMI 1 - HOUSE OF LORDS] that it is a benefit consisting in "something acquired which the acquirer becomes possessed of and can dispose of to his advantage--in other words, money, or that which can be turned to pecuniary account." This can be realised in cash, and it is that realisable quality which is the measure of the taxpayer's liability.I would therefore dismiss the appeal.
DONOVAN L.J. I agree, and I add a few words only because of the novelty of the point.
The case wears an aspect of triviality which is deceptive. Tax on £ 15 alone is involved, but the proposition on which the claim is based is of much wider significance, and it will look very different when applied to other cases which can easily be foreseen, and some of which were referred to during the argument.
The proposition was stated thus: Where an employer offers to spend money for an employee as a reward for service ; and that offer is accepted, the employee is liable to be taxed on the money so spent, and not on the thing which the money provides for him. A good many qualifications would need to be added to that proposition to make it true. It looks true in cases like Hartland v. Diggines and Nicoll v. Austin where money liabilities of the employed officers were discharged by the employer. But what the officers were really taxed upon was the money's worth of the immunity they were thus given from their own liabilities. No valuation of that money's worth was required, it was obviously of the same value as the liability which had been discharged.
In the present case the taxpayer never became liable to pay the £ 14 15s. to Messrs. Montague Burton. Between him and them there was no privity of contract at all; and when the employers paid this sum, they discharged their own liability, and nobody else's.
On what principle is this payment nevertheless to be treated as the taxpayer's income? To that question, I think, no satisfactory answer is or can be given. At first the Crown suggested that it was the principle underlying certain surtax cases where taxed income had been applied under a trust for the benefit of the beneficiaries; but the court in those cases explained that once the trustees so applied the income, that income itself became the beneficiaries'; In the end the Crown conceded (I think rightly) that no true analogy could be drawn between that class of case and the present.
That being so, I can discover no test which yields the result that the payment by the employer to Messrs. Montague Burton in the circumstances of this case is the income of the employee.
In that situation one must get back to what has always, so far as I know, been accepted as the basis of liability under Schedule E, namely, that liability extends to the profits or gains arising or accruing to the holder of the office or employment as such, whether those profits take the form of money, or money's worth. No money arose or accrued to the tax- payer here from this transaction. Money's worth did, in the shape of the suit.
The suit (and the suit alone) answers the description of profit accruing to the employee from his employment. On that basis it should be assessed to income tax at its money value in the taxpayer's hands, that is to say, what he could get for it if he sold it as soon as he received it. It is agreed between the parties that this is the sum of £ 5; and I therefore also think that the special commissioners and Danckwerts J. came to the right conclusion in this case, and that the appeal should be dismissed.
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1960 (12) TMI 85
Issues Involved:
1. Jurisdiction under Section 15 of the Payment of Wages Act, 1936.
2. Applicability of Clause 5 of the Agreement to certain employees.
3. Res judicata in the context of previous applications by employees.
4. High Court's jurisdiction under Articles 226 and 227 of the Constitution.
Detailed Analysis:
1. Jurisdiction under Section 15 of the Payment of Wages Act, 1936:
The principal question in this appeal concerns the nature and extent of the jurisdiction conferred on the authority by Section 15 of the Payment of Wages Act, 1936. The appellant contended that the applications made by the respondents were incompetent under Section 15, arguing that the jurisdiction conferred on the authority is limited and should not be extended inferentially. The Act aims to provide a speedy and effective remedy for claims arising out of illegal deductions or unjustified delays in payment of wages. The Supreme Court held that the question of whether a particular employee falls under a specific category is so intimately connected with the problem of wages that it would be unreasonable to exclude such a question from the jurisdiction of the authority under Section 15. The Court concluded that the authority has the jurisdiction to determine the terms of the contract and whether an employee falls within a particular category, as this is incidental to deciding the main question of what the terms of the contract are.
2. Applicability of Clause 5 of the Agreement to Certain Employees:
The respondents claimed that they were semi-clerks and occupied a position lower than that of a full-fledged clerk and higher than that of an operative, thus falling under Clause 5 of the agreement. The appellant argued that unless an employee satisfied the requirements of Clause 2, Clause 5 would be inapplicable. The Supreme Court found that Clause 2 applies to clerks, while Clause 5 provides a separate scale for employees who are neither clerks nor operatives. The Court held that the error committed by the appellate authority was manifest and obvious, as it misread the two clauses by making Clause 5 subject to Clause 2. The High Court was justified in correcting this error by issuing a writ of certiorari.
3. Res Judicata in the Context of Previous Applications by Employees:
The appellant argued that the present applications were barred by res judicata. The authority and the appellate authority had found that the claims made by Punamchand and Vishnuprasad were barred by res judicata, while Shamaldas' application was dismissed on the ground that he could not claim the status of a semi-clerk. The High Court found the concurrent findings on res judicata to be manifestly erroneous. The Supreme Court did not find it necessary to delve deeply into this issue, as the main contention was regarding the jurisdiction and applicability of Clause 5.
4. High Court's Jurisdiction under Articles 226 and 227 of the Constitution:
The appellant contended that the High Court exceeded its jurisdiction under Articles 226 and 227 by interfering with the decision of the appellate authority. The Supreme Court reiterated that a writ of certiorari can be issued not only in cases of illegal exercise of jurisdiction but also to correct errors of law apparent on the face of the record. The Court found that the error committed by the appellate authority was manifest and obvious, justifying the High Court's intervention. The appellate authority had misread the clauses of the agreement, leading to a patently erroneous decision. The Supreme Court upheld the High Court's decision to issue the writ of certiorari, as the error was self-evident and did not require an elaborate examination of the record.
Conclusion:
The Supreme Court dismissed the appeal, upholding the High Court's decision to correct the manifest error committed by the appellate authority. The Court affirmed that the authority under Section 15 of the Payment of Wages Act has the jurisdiction to determine the terms of the contract and whether an employee falls within a particular category, as this is incidental to deciding the main question of what the terms of the contract are. The High Court's intervention was justified, and the appeal was dismissed with costs.
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