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• 1953 (5) TMI 35
  
  1. ISSUES PRESENTED and CONSIDERED

  The primary issues considered in this judgment were:

  • Whether the resolution passed by the U.P. Legislative Assembly on 30th March 1953, which resulted in the suspension of the petitioner, was void due to inconsistency with Part III of the Constitution, specifically Article 20(2).
  • Whether the Speaker of the Assembly acted within his authority in referring the conduct of the petitioner to the Committee of Privileges and whether this constituted the creation of a new privilege or an extension of existing privileges.
  • Whether the petitioner was subjected to double punishment for the same offense, violating Article 20(2) of the Constitution.
  • Whether the actions of the Speaker and the Legislative Assembly were subject to judicial scrutiny under Article 226 of the Constitution.

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue 1: Validity of the Resolution under Article 20(2)

  • Relevant legal framework and precedents: Article 20(2) of the Constitution prohibits double jeopardy, meaning no person shall be prosecuted and punished for the same offense more than once. The Court examined whether the legislative resolution amounted to a second punishment for the same offense.
  • Court's interpretation and reasoning: The Court found that the action of the Speaker in ordering the petitioner to withdraw from the House was not a punishment under Article 20(2) but a measure to maintain order. The subsequent suspension by the House was considered a separate action.
  • Key evidence and findings: The Court noted the procedural history and the fact that the Speaker's order for withdrawal was immediate and not punitive in the sense of judicial punishment.
  • Application of law to facts: The Court concluded that Article 20(2) did not apply as the actions taken were not judicial punishments but measures within the legislative process.
  • Treatment of competing arguments: The Court rejected the argument that the legislative resolution constituted a second punishment, emphasizing the distinct roles of the Speaker's immediate order and the House's resolution.
  • Conclusions: The resolution was not void under Article 20(2) as it did not constitute a second punishment for the same offense.

  Issue 2: Authority of the Speaker and Creation of New Privileges

  • Relevant legal framework and precedents: Article 194(3) of the Constitution provides that the powers, privileges, and immunities of a House of the Legislature and its members shall be the same as those of the House of Commons of the United Kingdom until defined by law.
  • Court's interpretation and reasoning: The Court held that the Speaker acted within his authority under the rules of procedure of the Assembly to refer the matter to the Committee of Privileges.
  • Key evidence and findings: The Court examined the rules of procedure and the Speaker's actions, finding that they were consistent with the powers granted to maintain order and discipline.
  • Application of law to facts: The Court found no creation of new privileges, as the actions were within the established rules and practices.
  • Treatment of competing arguments: The Court dismissed the contention that the referral to the Committee of Privileges was an overreach or creation of new privileges.
  • Conclusions: The Speaker's actions were within the scope of his authority, and no new privileges were created.

  Issue 3: Judicial Scrutiny of Legislative Actions

  • Relevant legal framework and precedents: Article 212 of the Constitution states that the validity of any proceedings in the Legislature of a State shall not be called into question on the ground of any alleged irregularity of procedure.
  • Court's interpretation and reasoning: The Court emphasized the separation of powers and the autonomy of legislative procedures, indicating that the judiciary should not interfere with legislative processes.
  • Key evidence and findings: The Court reviewed the legislative proceedings and found them to be within the legislative domain, thus not subject to judicial review.
  • Application of law to facts: The Court applied Article 212 to uphold the legislative autonomy and dismissed the petitioner's challenge to the legislative process.
  • Treatment of competing arguments: The Court rejected the argument that judicial intervention was warranted, citing constitutional provisions that protect legislative procedures from judicial scrutiny.
  • Conclusions: The legislative actions were not subject to judicial review, and the petition was dismissed.

  3. SIGNIFICANT HOLDINGS

  Preserve verbatim quotes of crucial legal reasoning:

  • "The validity of any proceedings in the Legislature of a State shall not be called in question on the ground of any alleged irregularity of procedure." (Article 212)
  • "No person shall be prosecuted and punished for the same offence more than once." (Article 20(2))

  Core principles established:

  • The autonomy of legislative procedures is protected from judicial scrutiny under Article 212.
  • Article 20(2) does not apply to legislative measures taken to maintain order and discipline within the House.
  • The Speaker's authority to maintain order and refer matters to the Committee of Privileges is within the established rules and practices.

  Final determinations on each issue:

  • The resolution of the U.P. Legislative Assembly was not void under Article 20(2).
  • The Speaker acted within his authority, and no new privileges were created.
  • The legislative actions were not subject to judicial review, and the petition was dismissed.

  ---

• 1953 (5) TMI 34
  
  Issues Involved:
  
  1. Conviction under Section 302 read with Section 149 of the Indian Penal Code (IPC).
  2. Credibility of eyewitness testimony.
  3. Enhancement of the sentence from transportation for life to the death penalty.
  
  Issue-wise Detailed Analysis:
  
  1. Conviction under Section 302 read with Section 149 of the Indian Penal Code (IPC):
  
  The appellants were convicted by the Sessions Judge under Section 302 read with Section 149 IPC for the double murder of Rattan Singh and Bawa Singh. The High Court sustained the convictions of the four appellants and enhanced their sentences to death. The prosecution's case was that all seven accused belonged to the same village and faction, and the murders were motivated by past enmity and suspicions of police informancy. The eyewitnesses, Mst. Punnan (P.W. 2) and Mst. Charni (P.W. 11), testified that all seven accused assaulted the victims. The medical evidence corroborated the presence of multiple injuries on the victims, inflicted by both blunt and sharp-edged weapons. However, the High Court's finding that "the other three accused may or may not have taken part in the affair" created uncertainty about the presence of at least five persons, which is a prerequisite for invoking Section 149 IPC. The Supreme Court noted that the conviction under Section 149 IPC requires certainty about the presence of five persons sharing the common object, which was not established beyond doubt in this case.
  
  2. Credibility of Eyewitness Testimony:
  
  The Sessions Judge believed the two eyewitnesses and convicted all seven accused. The High Court, however, required corroboration for the eyewitnesses' testimony due to their close relationship with the deceased and the fact that the fate of seven men depended on their testimony. The Supreme Court disagreed with this requirement, stating that there is no general rule of prudence that requires corroboration of testimony solely because the witnesses are women or closely related to the deceased. The Court emphasized that each case must be judged on its own facts and that the testimony of close relatives can often be a guarantee of truth. The Supreme Court found the eyewitnesses' testimony credible, noting their consistency and the promptness of the first information report (FIR) made by Mst. Punnan. The blood-stained clothes found on the appellants provided strong corroboration of their involvement.
  
  3. Enhancement of the Sentence from Transportation for Life to the Death Penalty:
  
  The High Court enhanced the sentences of the four appellants from transportation for life to the death penalty without providing sufficient reasons. The Supreme Court held that the discretion to award the death penalty lies with the trial judge, and an appellate court should not interfere unless the discretion has been improperly exercised. The Supreme Court noted that the trial judge had reasons to award the lesser penalty, considering the uncertainty about who inflicted the fatal blows and the vicarious nature of the appellants' responsibility. The High Court's summary dismissal of the appeals and enhancement of the sentences without detailed reasoning was deemed improper. The Supreme Court reduced the sentences of the appellants to transportation for life, emphasizing that the power to enhance a sentence to death should be exercised only for the strongest possible reasons.
  
  Conclusion:
  
  The Supreme Court upheld the convictions of the four appellants under Section 302 read with Section 149 IPC but reduced their sentences from death to transportation for life. The Court emphasized the need for certainty in the application of Section 149 IPC, the credibility of eyewitness testimony, and the proper exercise of judicial discretion in sentencing. The appeal was dismissed except for the reduction in the sentence.

  ---

• 1953 (5) TMI 33
  
  Issues Involved:
  1. Premature execution and contravention of compromise decree terms.
  2. Validity and service of notice under Order 21, Rule 22, C.P.C.
  3. Legality and jurisdiction of the order amending the execution petition and the enforceability of the charge on immovable properties.
  
  Detailed Analysis:
  
  1. Premature Execution and Contravention of Compromise Decree Terms:
  The judgment-debtor objected that the execution was premature and violated the terms of the compromise decree. However, no evidence was provided to support this objection. The appellant's counsel conceded that there was no merit in this objection based on the materials on record.
  
  2. Validity and Service of Notice under Order 21, Rule 22, C.P.C.:
  The judgment-debtor argued that the notice under Order 21, Rule 22, C.P.C. was not duly served, thereby fraudulently denying him the opportunity to object to the execution in time. The court found that the notice was duly served, and no objections were raised by the judgment-debtor at the appropriate time. The appellant's counsel did not press this objection further, acknowledging the lack of supporting evidence.
  
  3. Legality and Jurisdiction of the Order Amending the Execution Petition and Enforceability of the Charge on Immovable Properties:
  The primary contention was that the order amending the execution petition to include the sale of charged immovable properties was illegal and beyond jurisdiction. The judgment-debtor argued that the compromise decree merely declared a charge and did not create an enforceable charge, necessitating a fresh suit for enforcement. Furthermore, it was contended that the immovable properties could not be sold without prior attachment.
  
  The court held that the executing court has inherent powers under Section 151 of the Code to allow amendments to execution petitions in appropriate cases. The court found no negligence on the part of the decree-holder, and circumstances had changed since the original execution petition, justifying the amendment. The court emphasized the broad discretion of the executing court in allowing amendments, especially when no limitation issues arise.
  
  The court also addressed the argument regarding the enforceability of the charge. It concluded that the compromise decree, particularly terms 5 and 6, created an enforceable charge on the judgment-debtor's immovable properties. The court noted that the language of the Solenama indicated the parties' intention to make the charged properties available for the realization of the decree-holder's dues in execution. Consequently, the court upheld the order for the sale of the immovable properties without prior attachment.
  
  The court cited various precedents supporting the enforceability of charges created by consent decrees in execution proceedings. It distinguished cases where the decree was not made on consent or where the decree explicitly required a fresh suit for enforcement.
  
  Conclusion:
  The court dismissed the appeal, affirming the order allowing the amendment of the execution petition and the sale of the charged immovable properties without prior attachment. The judgment emphasized the executing court's discretion in allowing amendments and the enforceability of charges created by consent decrees in execution proceedings. The appeal was dismissed without costs.

  ---

• 1953 (5) TMI 32
  
  Issues Involved:
  1. Whether the Petitioner was holding a civil post under the State of Assam.
  2. Whether the Petitioner was dismissed or removed from his position in violation of Article 311 of the Constitution.
  3. Whether the appointment of Respondent 5 as permanent 'Mouzadar' was made 'mala fide'.
  4. Whether the Deputy Commissioner's decision was subject to judicial review under Article 226 of the Constitution.
  
  Detailed Analysis:
  
  Issue 1: Whether the Petitioner was holding a civil post under the State of Assam
  The Petitioner argued that he was a public officer holding a civil post under the State of Assam, governed by the Assam Land Revenue Manual and a 'Kabuliyat'. He claimed that he was entitled to a legitimate expectation of not being removed without lawful grounds and a reasonable opportunity to show cause against any proposed action, as required by Article 311 of the Constitution. However, the court refrained from expressing an opinion on whether the Petitioner held a civil post, as it was deemed unnecessary for the resolution of the case.
  
  Issue 2: Whether the Petitioner was dismissed or removed from his position in violation of Article 311 of the Constitution
  The Petitioner contended that the appointment of Respondent 5 as permanent 'Mouzadar' amounted to his dismissal or removal without a reasonable opportunity to show cause, violating Article 311(2) of the Constitution. The court, however, concluded that it was not a case of dismissal or removal within the meaning of Article 311. The Petitioner was initially appointed to officiate as 'Mouzadar' on the security and responsibility of the permanent 'Mouzadar' and was allowed to continue temporarily until a permanent appointment was made. The court emphasized that the Petitioner was aware of the temporary nature of his appointment and had applied for the permanent position, indicating his understanding of the situation. The termination of his service upon the appointment of a permanent 'Mouzadar' was not considered a dismissal or removal but rather a natural conclusion of his temporary appointment.
  
  Issue 3: Whether the appointment of Respondent 5 as permanent 'Mouzadar' was made 'mala fide'
  The Petitioner alleged that the appointment of Respondent 5 was made 'mala fide' due to the influence of recommendations from prominent individuals. However, the court found no evidence to support this allegation. It was noted that the Petitioner himself had produced similar certificates to substantiate his qualifications. The court concluded that the certificates were merely evidence of the candidates' qualifications and did not prove 'mala fides'. The Deputy Commissioner's decision was based on the assessment of the candidates' qualifications and was within his discretion.
  
  Issue 4: Whether the Deputy Commissioner's decision was subject to judicial review under Article 226 of the Constitution
  The court held that the Deputy Commissioner's decision to appoint Respondent 5 was not subject to judicial review under Article 226. The appointment was made in accordance with executive instructions and within the Deputy Commissioner's jurisdiction. The court emphasized that it does not act as a court of appeal under Article 226, particularly when the law confers no right of appeal. The Deputy Commissioner's decision was final, and there was no infringement of any legal right warranting interference by the court.
  
  Conclusion:
  The petitions were dismissed with costs, and the rules were discharged. The court found no violation of Article 311 or any 'mala fides' in the appointment of Respondent 5. The Deputy Commissioner's decision was final and not subject to judicial review under Article 226.

  ---

• 1953 (5) TMI 31
  
  Issues: Assessment of remuneration under the head 'salaries' vs. income, profits, and gains of business.
  
  Analysis:
  1. The case involved a reference under Section 66(1) of the Income Tax Act to determine whether the assessee's remuneration as the Managing Agent of a company should be assessed under the head 'salaries' or as income from business. The remuneration was fixed at 15% of net profits or a monthly pay of Rs. 1,000, based on the assessee's election at the year-end.
  
  2. The Income Tax Officer initially treated the remuneration as business profits, while the assessee contended it should be considered as salary since he was the servant of the company. The Appellate Assistant Commissioner and the Appellate Tribunal had conflicting views on the nature of the remuneration, leading to the reference to the High Court for a decision.
  
  3. The High Court emphasized that the classification of income as business or salary depends on the specific facts and circumstances of each case. The Commissioner of Income Tax argued that certain provisions in the Articles of Association indicated the assessee was not a whole-time employee and could not be considered a servant. However, the Tribunal's analysis highlighted that the duties assigned to the assessee did not conclusively establish whether he was a servant or conducting his own business.
  
  4. The Tribunal's examination revealed that despite being designated as a Managing Agent, the powers conferred upon the assessee resembled those given to a servant, subject to termination as per resolutions passed by the company's Board. The Tribunal also noted that the assessee was acknowledged as the Chief Manager of the company, raising questions about his actual role and status within the organization.
  
  5. Ultimately, the High Court upheld the Tribunal's decision that the remuneration received by the assessee should be classified as salary rather than income from business. The Court found that the Tribunal had sufficient grounds to reach this conclusion based on the facts and circumstances presented during the proceedings.
  
  6. As a result, the High Court ruled in favor of the assessee, determining that his remuneration should be treated as salary. The assessee was awarded costs amounting to Rs. 300.

  ---

• 1953 (5) TMI 30
  
  Issues Involved:
  
  1. Whether the directions issued by the University of Madras to affiliated colleges not to admit girl students without the Syndicate's permission are valid.
  2. Whether the directions are discriminatory under Article 15(1) of the Constitution.
  3. Whether the University of Madras qualifies as a "State" under Article 12 of the Constitution.
  4. Whether Article 29(2) governs the right of admission to educational institutions over Article 15(1).
  
  Issue-wise Detailed Analysis:
  
  1. Validity of Directions Issued by University of Madras:
  
  The University of Madras issued directions to affiliated colleges requiring prior permission from the Syndicate before admitting girl students. This policy was implemented due to the increasing number of female students seeking higher education, which existing women's colleges could not accommodate. The Syndicate's rules aimed to ensure that colleges admitting women provided necessary amenities like separate hostels and playgrounds. The University argued that these restrictions were not discriminatory but were intended to ensure a proper and healthy educational environment for women in co-educational settings.
  
  2. Discrimination under Article 15(1) of the Constitution:
  
  The petitioner argued that the University's directions violated Section 5(1) of the Madras University Act and Article 15(1) of the Constitution by discriminating based on sex. Section 5(1) states that no person shall be excluded from admission to any degree or course of study on the sole ground of sex, race, creed, class, or political views. However, the Court held that "admission to any degree or course of study" referred to specific courses like Law, Medicine, and Engineering, not to admission to colleges in general. The Court also concluded that the University's directions were not discriminatory as they were based on practical considerations and aimed at ensuring appropriate facilities for female students.
  
  3. University of Madras as a "State" under Article 12:
  
  Article 15(1) prohibits discrimination by the State. The Court examined whether the University of Madras could be considered a "State" under Article 12, which includes "the Government and Parliament of India, the Government and the Legislature of each of the States, and all local or other authorities within the territory of India or under the control of the Government of India." The Court concluded that the University of Madras, being a body corporate created by an Act and not charged with governmental functions, did not qualify as a "State." It was a state-aided institution, not state-maintained, and thus its regulations were not subject to Article 15(1).
  
  4. Article 29(2) Governing Admission Rights:
  
  The appellant contended that Article 29(2), which states that no citizen shall be denied admission into any educational institution maintained by the State or receiving aid out of State funds on grounds only of religion, race, caste, language, or any of them, governed the right of admission. This Article does not mention sex as a ground for non-discrimination. The Court agreed that Article 29(2) was the controlling provision for admission to educational institutions, not Article 15(1). The omission of "sex" in Article 29(2) was deliberate, allowing educational authorities to make rules suited to specific conditions without being compelled to admit women.
  
  Conclusion:
  
  The Court concluded that the University of Madras is not a "State" as defined in Article 12, and its regulations are not subject to Article 15(1). Admission to colleges is governed by Article 29(2), which does not prohibit sex-based restrictions. The University's regulations requiring colleges to provide specific facilities for women before admitting them were not discriminatory. Consequently, the appeal was allowed, and the writ petition was dismissed.

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• 1953 (5) TMI 29
  
  Issues:
  Violation of fundamental rights under Article 15(1) by conducting elections on communal lines, illegal exercise of powers in nomination, relief sought under Article 32, scope of remedy under Article 32, discrimination in election process, denial of equality in political rights, relief sought against elected and nominated members.
  
  Analysis:
  The judgment involves an application under Article 32 of the Constitution seeking protection of fundamental rights under Article 15(1) against alleged violations by the respondents. The petitioners, residents of Etah, complained about by-elections held on communal lines, depriving them of voting rights and candidacy opportunities. They sought writs of quo warranto, mandamus, and other directions against respondents 3, 4, 11, and 12, challenging the legality of their actions as members of the Municipal Board. The petition also requested writs against the District Magistrate and Civil Judge of Etah to prevent the holding of any illegal board meetings. The court acknowledged that laws providing for elections on separate electorates for different religious communities violate Article 15(1) of the Constitution, prohibiting discrimination based on religion, among other grounds.
  
  The judgment delves into the scope of the remedy under Article 32, emphasizing its limitation to enforcing fundamental rights conferred by Part III of the Constitution. The court highlighted that the petitioners' rights as rate-payers in the Municipality, ensuring the Board's legal constitution and the validity of members, fall outside Article 32's purview as they are not fundamental rights under Part III. The petitioners contended that the elections discriminated against them based on religion and delimitation on communal lines denied equality in political rights, violating Articles 15(1) and 14. However, the court found no ongoing discrimination against the petitioners and noted their failure to challenge the election process earlier when the opportunity existed.
  
  The judgment concluded that the petitioners' failure to assert their rights during the elections under the old system of separate electorates, coupled with their delayed complaint after recent developments, weakened their claim of fundamental rights infringement. The court rejected the argument that the elected members were void and upheld that relief sought against them did not align with enforcing fundamental rights under Articles 15(1) and 14. Ultimately, the court dismissed the petitioners' application under Article 32, stating that they misconceived their remedy. The petition was dismissed with costs, emphasizing the need for appropriate legal proceedings to address the alleged grievances effectively.

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• 1953 (5) TMI 28
  
  Issues Involved:
  1. Whether the assessee was entitled to set off the business loss of Rs. 3,21,929 brought forward from the preceding year against this year's income from interest on securities.
  2. Whether the assessee was entitled under Section 8 to deduct any part of its administrative expenses out of the income from interest on securities.
  3. Whether the assessee was entitled under the first proviso to Section 8 of the Income-tax Act to deduct any interest on money borrowed and utilized for investment in tax-free securities.
  
  Issue-Wise Detailed Analysis:
  
  1. Set-off of Business Loss Against Interest on Securities:
  The primary question was whether the assessee could set off the business loss of Rs. 3,21,929 from the previous year against the current year's income from interest on securities. The assessee argued that the interest on securities should be considered part of the business income and computed under Section 10, not separately under Section 8. The court noted that the heads of income under Section 6 of the Income-tax Act are mutually exclusive and must be assessed separately. The court concluded that interest on securities must be computed and assessed under Section 8 alone, regardless of whether the securities are held as part of the business assets. Therefore, the assessee was not entitled to set off the business loss against the interest on securities. The answer to this question was "No."
  
  2. Deduction of Administrative Expenses from Interest on Securities:
  The second question pertained to whether the assessee could deduct administrative expenses from the income from interest on securities under Section 8. The court clarified that the first proviso to Section 8 allows for the deduction of commission by a banker realizing the interest on behalf of the assessee, but it does not permit the assessee to deduct administrative expenses incurred for collecting the interest themselves. The proviso requires actual deduction by a banker, which was not the case here. The court found no substance in the assessee's contention. The answer to this question was "No."
  
  3. Deduction of Interest on Borrowings Invested in Tax-Free Securities:
  The third question involved whether the assessee could deduct interest on money borrowed and invested in tax-free securities under the first proviso to Section 8. The court explained that the first proviso to Section 8 allows for the deduction of interest on borrowings invested in taxable securities because such interest is expenditure incurred to earn taxable interest income. However, for tax-free securities, the third proviso to Section 8 exempts the interest received from tax liability, and thus, there is no basis for claiming a deduction for the expenditure incurred to earn that income. The court found the assessee's contention untenable. The answer to this question was "No."
  
  Conclusion:
  The court's judgment addressed the three questions referred by the Income-tax Appellate Tribunal, concluding that the assessee was not entitled to set off the business loss against the interest on securities, nor to deduct administrative expenses or interest on borrowings invested in tax-free securities from the income from interest on securities. The answers to all three questions were "No."

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• 1953 (5) TMI 27
  
  Issues Involved:
  1. Whether the receipts of the applicant from Laxmi Ratan Cotton Mills Ltd. could be held to be profits from business within the meaning of Section 2(5) of the Excess Profits Tax Act.
  
  Issue-Wise Detailed Analysis:
  
  1. Nature of Receipts from Laxmi Ratan Cotton Mills Ltd.
  The primary issue is whether the sum of Rs. 1,27,147 received by the assessee from Laxmi Ratan Cotton Mills Ltd. should be classified as "profits from business" or "salary" under the Excess Profits Tax Act. The assessee, who acted as a broker for the Mills, claimed this amount as "salary" while the Excess Profits Tax Officer assessed it as "income from business."
  
  Facts and Circumstances:
  - The assessee secured orders for the Mills and advised them on marketable cloth types, receiving 4 annas per cent on sales initially.
  - In 1941-42, the remuneration was increased to Re. 1 per cent, with 4 annas paid in cash and 12 annas credited for bad debts.
  - Up to 1944-45, the income was shown as "income from business."
  - In 1945-46, the assessee claimed the income as "salary," but the Income-tax Officer assessed it under "business."
  - The Tribunal found that the assessee was an adviser of a commercial nature, finding markets for goods and dealing independently of the company.
  
  Tribunal's Inferences:
  - The assessee was a commercial adviser and guarantee broker, remunerated on a commission basis.
  - The relationship between the assessee and the Mills was not that of a servant and master but of two independent contracting parties.
  
  Legal Tests and Principles:
  - The distinction between "business" and "employment" is often thin, and the relationship between the parties is crucial.
  - Various tests include whether the assessee is doing his own work or working for others, the extent of control, entitlement to profits and liability for losses, and whether the work is done for multiple entities or just one.
  - Relevant cases cited include Robbins v. Commissioners of Inland Revenue and Marsh v. Commissioners of Inland Revenue, which helped delineate the boundaries between independent business and employment.
  
  Tribunal's Conclusion:
  - The Tribunal concluded that the assessee's work was partly as a commercial adviser and partly as a guarantee broker, thus qualifying as "receipts from business."
  
  Court's Analysis:
  - The court examined the definition of "business" under Section 2(5) of the Excess Profits Tax Act, noting its broad scope, including trade, commerce, manufacture, profession, or vocation.
  - The court considered whether the remuneration could be split into 4 annas per cent and 12 annas per cent. It found that the 12 annas per cent for guaranteeing bad debts could not be considered salary as it involved significant risk and potential loss, characteristic of a business venture.
  - Even if the commission was treated as a single payment, the nature of the work-advising, securing orders, and bearing risks-indicated it was a business venture.
  
  Final Judgment:
  - The court affirmed the Tribunal's decision, concluding that the receipts were indeed "profits from business" within the meaning of Section 2(5) of the Excess Profits Tax Act.
  - The answer to the question referred was in the affirmative, supporting the Excess Profits Tax Officer's assessment.

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• 1953 (5) TMI 26
  
  Issues:
  1. Whether income earned by a co-operative bank from activities outside its usual business is exempt from tax under a specific government notification.
  
  Analysis:
  The judgment in question involved a reference made by the Income-tax Appellate Tribunal regarding the tax exemption status of income earned by a co-operative bank from certain activities. The specific question referred to the Court was whether income derived from dealing in sugar and standard cloth, with special permission from authorities, was exempt from tax under a particular government notification. The assessee, a co-operative bank, had been authorized by the Government to engage in these activities, which were not part of its typical banking operations. The Tribunal found that the profits earned from these activities were not considered profits of the co-operative society's business but were categorized as income from "other sources" under the Income-tax Act. The key issue was whether these profits qualified for exemption under the relevant government notification.
  
  The Court examined the meaning of "profits" of a co-operative society in the context of tax exemption. The assessee argued that since the Government had permitted the business activities, the profits should be considered as profits of the co-operative society. Conversely, the Revenue contended that the term "profits" referred to earnings derived from activities closely aligned with the society's core business. The Court referred to relevant sections of the Income-tax Act, particularly Section 10 dealing with business profits, to analyze the nature of income eligible for taxation. Previous case law, including decisions from the Madras and Rangoon High Courts, was cited to establish principles regarding the taxation of profits derived by co-operative societies.
  
  The Court emphasized that the exemption under the government notification applied to profits made by a co-operative bank from its core business activities as a co-operative society. Income generated from activities outside the scope of the society's primary objectives did not qualify for tax exemption under the notification. The judgment highlighted the distinction between profits arising from the society's intended business operations and those from unrelated ventures, even if permitted by the Government. The Court's decision was based on the intent of the exemption notification to encourage cooperative business activities specifically aligned with the objectives of co-operative societies.
  
  In conclusion, the Court answered the referred question in the negative, indicating that income earned by the co-operative bank from activities not in line with its core business as a co-operative society was not exempt from tax under the relevant government notification. Both judges, Falshaw and Kapur, concurred with this decision, affirming that profits derived from business activities unrelated to the co-operative society's core functions were not eligible for tax exemption under the specified notification.

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• 1953 (5) TMI 24
  
  Issues:
  1. Allowability of hotel charges as expenditure under Section 10(2)(xv) of the Income-tax Act.
  2. Taxability of excess interest received from partners in the hands of the firm.
  
  Analysis:
  Issue 1:
  The judgment involves a reference under Section 66(1) of the Indian Income-tax Act, where the assessee, a registered firm, claimed deductions for hotel charges incurred by partners during business tours. The Income-tax Officer disallowed these charges, which were later partially allowed by the Appellate Assistant Commissioner and the Appellate Tribunal. The court held that the hotel charges for business tours are not allowable expenditure under Section 10(2)(xv) of the Income-tax Act, citing a previous decision.
  
  Issue 2:
  Regarding the taxability of excess interest received from partners, the firm had paid interest to partners for money borrowed from them, and partners had also paid interest for money borrowed from the firm. The Income-tax Officer added back the total interest paid by the firm to partners without deducting the interest received from partners. The Appellate Assistant Commissioner and the Tribunal adjusted the amounts and disallowed interest paid by the firm to partners as per Sections 10(2)(iii) and 10(4)(b) of the Income-tax Act. The court affirmed this treatment, emphasizing that partners borrowing from the firm diverts capital for personal use, and interest paid by partners should be treated as profits made by the partnership.
  
  The court referred to relevant provisions of the Income-tax Act and the Indian Partnership Act to support its decision. It highlighted that partners' financial transactions with the partnership should not result in deductions for interest paid by the firm to partners. The court commended the fair treatment by the Appellate Assistant Commissioner and the Tribunal in handling the partner's financial transactions. The court answered the second question affirmatively and directed the assessee to pay the costs of the reference.

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• 1953 (5) TMI 23
  
  Issues:
  Petition under Article 32 seeking relief against infringement of fundamental rights, validity of sections 6 and 7 of Ajmer Government Wards Regulation, 1888, and section 112 of Ajmer Tenancy and Land Records Act, 1950, abridgement of fundamental rights under Article 19(1)(f) of the Constitution, determination of habitual infringement of tenant rights, reasonableness of restrictions under Article 19(5), validity of section 112 under Article 31-A.
  
  Analysis:
  The petitioner, owning an "istimrari estate" in Ajmer, challenged the Deputy Commissioner's assumption of possession under sections 6 and 7 of the Ajmer Government Wards Regulation, 1888, and section 112 of the Ajmer Tenancy and Land Records Act, 1950. The impugned order was deemed void as it allegedly contravened the petitioner's rights under Article 19(1)(f) of the Constitution. Section 112 penalized landlords habitually infringing tenant rights, allowing the Court of Wards to assume superintendence, abridging the petitioner's rights.
  
  The Court examined the provisions of section 112 and Regulation I of 1888, noting the discretionary power of the Court of Wards to assume superintendence based on subjective determinations. The Court highlighted the absence of a mechanism to challenge the determination of habitual infringement, emphasizing the subjective nature of the process, which could not be questioned in civil courts. The Court found the abridgment of the petitioner's rights under Article 19(1)(f) and declared the impugned provisions void.
  
  The Attorney-General argued for the validity of section 112 on grounds of the determination process not solely relying on the Court of Wards' opinion and being a reasonable restriction in the public interest. However, the Court rejected these arguments, stating that penal provisions punishing landlords did not constitute reasonable restrictions and deprived the petitioner of property rights without recourse, violating fundamental rights.
  
  Lastly, the Attorney-General invoked Article 31-A to validate section 112, but the Court found it inapplicable as the law did not involve acquisition by the State or modification of rights. The Court concluded that section 112 infringed the petitioner's fundamental rights under Article 19(1)(f), directing the Court of Wards to restore possession of the estate to the petitioner and awarding costs. The petition was allowed, emphasizing the protection of fundamental rights.

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• 1953 (5) TMI 22
  
  Issues Involved:
  1. Whether there was material upon which the Tribunal found that the assessee attempted to extract more rosin by contravening the terms of the lease.
  2. Whether the sum of Rs. 5,000/- paid by the assessee as a fine under the penalty clause of the terms of the lease was a proper deduction within the meaning of Section 10(2)(xv) of the Indian Income-tax Act, 1922.
  
  Issue-Wise Detailed Analysis:
  
  Issue 1: Material Supporting Tribunal's Finding of Lease Contravention
  The Tribunal found that the assessee attempted to extract more rosin by contravening the terms of the lease. The relevant facts are as follows:
  
  - An agreement (Ex 'H') was entered into between the Tehri Garhwal State and the assessee on 24-11-1937, effective from 1-12-1937. Clause 11 of the agreement required the assessee to extract rosin according to specified standards and to pay compensation for any failure to observe these terms.
  - On 31-10-1944, the Home Secretary of Tehri Garhwal State accused the assessee of making channels deeper, broader, and longer than permitted and tapping small saplings, which violated the rules. Consequently, a fine of Rs. 5,000/- was imposed.
  - The assessee accepted this liability and paid the fine without objection.
  
  The Tribunal concluded that these facts provided sufficient material to support the finding that the assessee attempted to extract more rosin by contravening the lease terms. The court affirmed this conclusion, answering the first question in the affirmative.
  
  Issue 2: Deductibility of Rs. 5,000/- Fine under Section 10(2)(xv)
  The next issue was whether the Rs. 5,000/- fine paid by the assessee under the penalty clause of the lease terms was a proper deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922.
  
  - Section 10(2)(xv) allows for the deduction of any expenditure laid out or expended wholly and exclusively for the purpose of the business, provided it is not in the nature of capital expenditure or personal expenses.
  - The court referenced several English cases to interpret the phrase "for the purpose of business." In 'Strong and Co. Ltd. v. Woodifield,' it was held that expenses necessary for earning profits could be deducted, but not those incurred after profits were earned unless expressly authorized by the Act.
  - In 'Commrs. of Inland Revenue v. Warnes and Co. Ltd.,' a penalty paid for a breach of law was not considered a deductible business expense.
  - Similarly, in 'Mask and Co., Panruti v. Commr. of Income-tax, Madras,' the Madras High Court held that damages paid for a breach of contract due to dishonest actions were not deductible as business expenses.
  
  Applying these principles, the court found that the Rs. 5,000/- fine was imposed for a breach of the lease terms and was not an expenditure made for the purpose of earning profits. It was deemed a penalty for violating the rules, not a commercial loss connected with the trade.
  
  Therefore, the court concluded that the Rs. 5,000/- fine was not deductible under Section 10(2)(xv) and answered the second question in the negative.
  
  Conclusion
  The court answered the first question in the affirmative, confirming that there was material to support the Tribunal's finding of lease contravention. The second question was answered in the negative, ruling that the Rs. 5,000/- fine was not a deductible business expense under Section 10(2)(xv). The Commissioner of Income-tax was entitled to costs, with a counsel fee of Rs. 250/-.

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• 1953 (5) TMI 21
  
  Issues:
  Interpretation of Section 12 of the Indian Income-tax Act regarding deduction of expenses for a public limited company not yet operational.
  
  Analysis:
  The judgment involves a reference under Section 66(1) of the Indian Income-tax Act regarding the permissibility of a deduction of Rs. 6,000 under Section 12. The Commissioner of Income-tax raised concerns about the principles followed by the Tribunal in allowing the deduction, rather than the specific amount. The assessee, a spinning and weaving company in its second year of existence, had not yet commenced business but had derived income from interest and investments. The Tribunal estimated allowable expenditure at Rs. 6,000 against the interest income assessed under Section 12.
  
  The Tribunal's reasoning for allowing the deduction was based on the necessity of maintaining an establishment to keep the company alive, despite being at a development stage without business income. However, the judgment criticized this approach as erroneous, emphasizing that deductions under Section 12 should be solely for expenses incurred in earning the income. The judgment highlighted that claims for office and establishment expenses unrelated to income generation were impermissible under Section 12.
  
  The judgment referenced a decision by the Madras High Court, emphasizing that only actual expenses incurred in earning the income could be deducted. It rejected the idea of allowing deductions for expenses necessary to keep the company alive when no business income was present. The judgment clarified that deductions under Section 12 should align with the specific allowances provided in the section and not extend to personal or non-income-related expenses.
  
  Ultimately, the judgment maintained the Rs. 6,000 deduction but clarified that it should be based on the estimated expenditure for earning the interest income, not on the Tribunal's broader principles. The judgment concluded that the deduction was permissible only on the basis of actual expenses incurred for income generation, as required by Section 12. No costs were awarded due to the preservation of the deduction amount.
  
  In a concurring opinion, Lahiri, J., agreed with the analysis and decision of the Chief Justice regarding the interpretation and application of Section 12 in the context of the case.

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• 1953 (5) TMI 20
  
  Issues Involved:
  1. Whether the appellants' actions amounted to contempt of court by "scandalising the court."
  2. Whether the appellants exceeded the limits of fair and legitimate criticism.
  3. Whether the representation made by the appellants was calculated to interfere with the due administration of justice.
  
  Issue-wise Detailed Analysis:
  
  1. Whether the appellants' actions amounted to contempt of court by "scandalising the court":
  
  The judgment examines whether the allegations made against the judicial officers fall within the category of contempt committed by "scandalising the court." The court referenced the pronouncement of Lord Russell in Reg. v. Gray, which established that judges and courts are open to criticism, and reasonable argument or expostulation against any judicial act as contrary to law or the public good does not constitute contempt of court. The High Court held that the complaint by the appellants exceeded fair and legitimate criticism, thus constituting contempt. However, the Supreme Court emphasized that the summary jurisdiction for contempt exists to prevent interference with the course of justice and maintain the authority of law, not to protect judges personally from imputations.
  
  2. Whether the appellants exceeded the limits of fair and legitimate criticism:
  
  The court analyzed whether the appellants' criticism of the judicial officers exceeded fair and legitimate boundaries. The resolutions included general allegations against the officers, such as incompetence in law and discourteous behavior. The court acknowledged that while some complaints were not serious, others, like the allegation of hearing two cases simultaneously, were grave and warranted administrative attention. The Supreme Court concluded that the appellants acted bona fide without intending to interfere with the administration of justice, although they might have been under a misapprehension regarding the legal position.
  
  3. Whether the representation made by the appellants was calculated to interfere with the due administration of justice:
  
  The court examined if the appellants' representation was likely to interfere with the administration of justice or undermine public confidence in the judiciary. The Supreme Court noted that the appellants made efforts to keep the matter confidential, limiting the representation to four specified persons who were the official superiors of the officers. The court found that the representation did not aim to expose the officers' alleged shortcomings to the public but to address genuine grievances through appropriate channels. The court held that the circumstances under which the representation was made did not indicate an intention to interfere with the administration of justice, and any contempt was of a technical character.
  
  Conclusion:
  
  The Supreme Court allowed the appeal, setting aside the judgment of the High Court. It concluded that the appellants' actions did not amount to contempt of court, as the representation was made bona fide and was not calculated to interfere with the due administration of justice. The court emphasized that the contempt, if any, was only technical, and the proceedings against the appellants should have been dropped after they filed affidavits expressing regret. The court did not order costs for either party.

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• 1953 (5) TMI 19
  
  Issues Involved:
  1. Constitutionality of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949.
  2. Jurisdiction of the Special Court constituted under the Act.
  3. Validity of the trial procedure followed after the commencement of the Constitution.
  4. Imposition of fine under the Act in light of Article 20 of the Constitution.
  
  Issue-wise Detailed Analysis:
  
  1. Constitutionality of the West Bengal Criminal Law Amendment (Special Courts) Act, 1949:
  The appellants challenged the constitutionality of the Act, arguing that it violated Article 14 of the Constitution by allowing the government to single out particular cases for trial by the Special Court, thereby denying the accused certain procedural advantages available under the ordinary law. The court examined the Act's provisions, including its title, preamble, and sections, to ascertain its underlying policy and purpose. The Act aimed to provide more speedy trials and effective punishment for certain offences, particularly those involving public servants and loss of government property. The court held that the classification of offences under the Act was based on an intelligible principle reasonably related to the legislative purpose and was not arbitrary. Therefore, the Act did not violate Article 14.
  
  2. Jurisdiction of the Special Court constituted under the Act:
  The appellants contended that the Special Court had no jurisdiction to try them as the offences under Section 5(2) of the Prevention of Corruption Act were triable exclusively by the Court of Session. The court noted that the Special Court was constituted under the Act, which provided for the trial of specific offences, including those under the Prevention of Corruption Act. The court found that the Special Court had jurisdiction to try the appellants as the case was duly allotted to it by the State Government under Section 4 of the Act.
  
  3. Validity of the trial procedure followed after the commencement of the Constitution:
  The appellants argued that the continuation of the trial by the Special Court after the commencement of the Constitution was invalid as it denied them the right to a jury trial, which would have been available under the ordinary procedure. The court referred to previous decisions, including Anwar Ali Sarkar's case and the Saurashtra case, to determine whether the procedure followed was discriminatory. The court held that the legislative policy underlying the Act provided a reasonable basis for the classification of offences and that the discretion vested in the government to allot cases to the Special Court was guided by the Act's policy and purpose. Therefore, the continuation of the trial by the Special Court was valid.
  
  4. Imposition of fine under the Act in light of Article 20 of the Constitution:
  The first appellant was fined Rs. 50,000, including Rs. 47,550 received by him through the offence. The appellants argued that this fine violated Article 20, which prohibits imposing a penalty greater than what was prescribed under the law at the time of the offence. The court agreed that the additional fine of Rs. 47,550, imposed under the Act which came into force after the commission of the offence, contravened Article 20. Consequently, the court set aside the fine to the extent of Rs. 47,550 but upheld the remaining fine and the sentences of imprisonment.
  
  Separate Judgment by Bose J.:
  Bose J. dissented, expressing regret but firmly holding that the Act was discriminatory and violated the Constitution. He argued that the Act allowed the government to arbitrarily select cases for trial by the Special Court, thereby discriminating between individuals within the same class of offences. He emphasized the importance of maintaining fundamental liberties and cautioned against opening doors to potential abuses of power. He concluded that the convictions could not be upheld and called for a retrial under the ordinary procedure.
  
  Final Decision:
  The appeals were dismissed, upholding the constitutionality of the Act and the jurisdiction of the Special Court, but the additional fine imposed under the Act was partially set aside due to its contravention of Article 20.

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• 1953 (5) TMI 18
  
  Issues Involved:
  1. Validity of assessment on the receiver in place of executors.
  2. Applicability of Section 41(1) of the Indian Income-tax Act.
  3. Estoppel against the statute.
  4. Effect of High Court's order on substitution.
  
  Issue-wise Detailed Analysis:
  
  1. Validity of assessment on the receiver in place of executors:
  The primary issue was whether the assessment for the year 1944-45 on the applicant, Asit Kumar Ghosh, who was substituted as a receiver in place of the executors, was sustainable in law. The court noted that the assessment was initially started against the executors of the estate of Akshoy Kumar Ghosh. The executors filed the return, but the assessment proceedings were delayed. During the proceedings, Asit Kumar Ghosh, appointed as the receiver by the High Court, requested the Income-tax Officer to continue the proceedings in his name. The Tribunal upheld the assessment on the receiver, stating that he was merely a machinery in lieu of the executors. The court concluded that the substitution of the receiver did not validate the assessment, as the Income-tax Act did not authorize such substitution.
  
  2. Applicability of Section 41(1) of the Indian Income-tax Act:
  The applicant suggested that the assessment should have been made under Section 41(1) of the Indian Income-tax Act. However, the court clarified that the assessment was made under Section 23(3) and not under Section 41(1). Therefore, the question of Section 41(1) did not arise from the order of the Appellate Tribunal.
  
  3. Estoppel against the statute:
  The Commissioner of Income-tax argued that the applicant, having requested the substitution, could not now repudiate his liability to assessment. The court rejected this contention, stating that estoppel could not override statutory provisions. Estoppel is a rule of evidence and not a cause of action. The court emphasized that there could be no estoppel against the statute, and the assessment could not be based on the ground that the applicant wanted to be assessed.
  
  4. Effect of High Court's order on substitution:
  The court examined the effect of the High Court's order, which authorized the receiver to take charge of all proceedings pending against the estate. The court noted that the order only gave the receiver liberty to apply for substitution in legal proceedings but did not mandate substitution irrespective of the relevant law. The Income-tax Act did not provide for the substitution of a receiver in place of executors for assessment purposes. Therefore, the High Court's order did not validate the substitution or the subsequent assessment on the receiver.
  
  Conclusion:
  The court concluded that the assessment on the applicant for the assessment year 1944-45 was not sustainable in law. The answer to the referred question was "No." The court also noted the unmeritorious conduct of the applicant and denied costs. The judgment was agreed upon by both judges, with Lahiri, J. concurring.

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• 1953 (5) TMI 17
  
  Issues Involved:
  1. Validity of re-assessment proceedings under Section 34 of the Indian Income-tax Act.
  2. Taxability of income derived from the sale of forest trees as agricultural income.
  
  Detailed Analysis:
  
  1. Validity of Re-assessment Proceedings under Section 34:
  
  The first issue pertains to whether the re-assessment proceedings initiated under Section 34 of the Indian Income-tax Act were valid. The assessee contended that the Income-tax Officer lacked "definite information" to proceed under Section 34. The High Court examined whether the information derived from the decision in the Kapurthala case constituted "definite information" as required by Section 34. The court noted that the Income-tax Officer had initially excluded forest income based on his belief that it was not taxable. However, upon learning from the Kapurthala case that income from the sale of forest trees of spontaneous growth was taxable, the Officer initiated re-assessment proceedings. The court held that information regarding the correct state of the law, derived from an authoritative external source, qualifies as "definite information" under Section 34. Therefore, the re-assessment proceedings were valid.
  
  2. Taxability of Income Derived from Forest Trees as Agricultural Income:
  
  The second issue concerns whether the income derived from the sale of forest trees qualifies as "agricultural income" and is thus exempt from tax under Section 4(viii) of the Indian Income-tax Act. The Tribunal had held that the operations carried out by the assessee, except for the sowing of seeds, were necessary for any forest of spontaneous growth and did not constitute agricultural operations. The High Court disagreed, stating that operations such as weeding, cutting channels for rainwater, and sowing seeds after digging the soil in denuded areas involve the culture of land and qualify as agricultural activities. The court emphasized that the term "agriculture" does not necessarily require tillage but does require some expenditure of human skill and labor on the land. Consequently, the income derived from the forest was deemed agricultural income and thus exempt from tax.
  
  Conclusion:
  
  The High Court concluded that the re-assessment proceedings under Section 34 were valid as the information derived from the Kapurthala case constituted "definite information." Additionally, the court held that the income derived from the sale of forest trees was agricultural income and exempt from tax. The answers to the questions referred were:
  1. Yes.
  2. Yes.
  
  The assessee succeeded on the main question and was awarded the costs of the reference, although the court did not certify for two counsel.

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• 1953 (5) TMI 16
  
  Issues Involved:
  1. Legality of increasing the standard profit under the third proviso to Rule 5A of Schedule I of the Excess Profits Tax Act.
  2. Definition and applicability of "borrowed money" under the third proviso to Rule 5A of Schedule I.
  3. Consideration of interest on deferred shares as "borrowed money" for the purpose of increasing standard profits.
  
  Issue-wise Detailed Analysis:
  
  1. Legality of Increasing the Standard Profit under the Third Proviso to Rule 5A of Schedule I of the Excess Profits Tax Act:
  
  The primary question was whether the standard profit fixed by the Central Board of Revenue under Section 26(1) of the Excess Profits Tax Act should be increased under the third proviso to Rule 5A of Schedule I by the interest apportionable to the standard period on deferred share capital, later treated as borrowings, even if such interest had not been charged to the profit and loss account during the standard period. The Tribunal accepted the assessee's claim based on the specific provision under the Act, while the Excess Profits Tax Officer and the Appellate Assistant Commissioner had previously rejected it, arguing there was no charge or liability against the assessee company on account of this interest at the time of the application under Section 26(1).
  
  2. Definition and Applicability of "Borrowed Money" under the Third Proviso to Rule 5A of Schedule I:
  
  The court examined whether the money obtained from the issuance of deferred shares could be considered "borrowed money." The Commissioner argued that there was no "borrowed money" involved, as the money was obtained via share issuance, not a loan. The court noted that "borrowed money" requires a borrower-lender relationship and a positive act of lending and acceptance as a loan. The court referenced the Supreme Court's decision in Shree Ram Mills Ltd. v. Commissioner of Excess Profits Tax, Central, Bombay, which emphasized that borrowed money involves a clear act of lending and acceptance.
  
  3. Consideration of Interest on Deferred Shares as "Borrowed Money" for the Purpose of Increasing Standard Profits:
  
  The assessee contended that the interest on the deferred shares should be added to the standard profits as per the third proviso to Rule 5A. The court, however, found that the money obtained from the issuance of deferred shares was not "borrowed money" but rather "money had and received," as per the High Court's order. The court held that the interest liability attached to the amount received on the deferred shares did not convert it into borrowed money. The court concluded that the terms used in the rules should be interpreted based on their ordinary meaning and practical context, not through legal fictions or implied promises.
  
  Judgment:
  
  The court answered the question in the negative, stating that the amounts in question did not come under the description "borrowed money" as used in the third proviso to Rule 5A of Schedule I to the Excess Profits Tax Act. Consequently, the standard profit fixed by the Central Board of Revenue should not be increased by the interest apportionable to the standard period on deferred share capital. The Commissioner of Excess Profits Tax, Central, Calcutta, was awarded the costs of the reference.
  
  Separate Judgments:
  
  Both judges, Chakravartti C.J. and Lahiri J., delivered a unanimous judgment, agreeing on the interpretation and application of the relevant provisions.

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• 1953 (5) TMI 15
  
  Issues Involved:
  1. Whether the claim for the allowance of bad debts at Rs. 10,00,000 for the relevant chargeable accounting period was justified as against Rs. 6,10,052 allowed.
  
  Detailed Analysis:
  
  1. Background and Facts:
  The applicant company, which acted as managing agents for two other companies, Craig Jute Mills Limited and Waverly Jute Mills Limited, wrote off Rs. 5,00,000 from each debtor company and claimed this amount as a bad debt in its excess profits tax assessment. The Income-tax Appellate Tribunal concluded that the applicant company had been aware since the 1934-35 assessment year that the loans would not be fully realized. Consequently, the interest amounts on the loans were credited to an interest reserve account instead of being taken to the profit and loss account. These credits were treated as a suspense account and deducted from the total debts in the balance sheets.
  
  2. Tribunal's Findings:
  The Tribunal found that the sums of Rs. 1,88,579 and Rs. 2,01,368 were not the incomes of the years in which they were credited to the interest reserve account. The conduct of the applicant in crediting the interest to the interest reserve account and reducing the debt in the balance sheets indicated that the applicant did not treat this interest as income. The Tribunal held that these amounts were in the nature of credits to a suspense account created for meeting bad debts. The Tribunal further opined that Rs. 2,01,368 was wrongly assessed to income-tax in the years 1938-39 and 1939-40 and was of the same nature as Rs. 1,88,579.
  
  3. Legal Question:
  The legal question referred was: "Whether on the facts and in the circumstances of this case, the claim for the allowance of bad debts at Rs. 10,00,000 for the relevant chargeable accounting period was justified as against Rs. 6,10,052 allowed?"
  
  4. Arguments and Legal Provisions:
  The applicant argued that the sums of Rs. 1,88,579 and Rs. 2,01,368 were incomes for the years they were credited to the interest reserve account. The Tribunal, however, determined that these amounts were not incomes but credits to a suspense account. The relevant legal provision discussed was Section 10(2)(xi) of the Income-tax Act, which allows for the deduction of bad and doubtful debts, provided they are actually written off as irrecoverable in the books of the assessee.
  
  5. Judgment Analysis:
  The court held that Section 10(2)(xi) does not necessitate an amount to be actually written off in the books in a particular year for it to be considered irrecoverable. The Income-tax Officer is given discretion to allow such an amount as he estimates to be irrecoverable, not exceeding the amount written off. The Tribunal's decision was based on the applicant's treatment of the interest amounts and the reduction of debts in the balance sheets, which indicated that the amounts had become irrecoverable in the earlier years. The court found that the Tribunal's conclusion that the amount of Rs. 3,89,948 became irrecoverable during the earlier years was supported by the evidence.
  
  6. Conclusion:
  The court concluded that the claim for the allowance of bad debts at Rs. 10,00,000 was not justified. The Tribunal's decision to allow only Rs. 6,10,052 was upheld. The answer to the referred question was in the negative, and the Commissioner of Excess Profits Tax, West Bengal, was awarded the costs of the reference.

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