9911796707
TMI Blog2023 (5) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... e of goods also, the possession of the carrier would not convert it into the owner of the goods. Can a thief become the owner? It would be straining the law beyond justification if the Court were to recognise a thief as the owner of the property within the meaning of Section 69A. Recognising a thief as the owner of the property would also mean that the owner of the property would cease to be recognised as the owner, which would indeed be the most startling result. Ambit of the word owner in section 69A When it came to the Podar Cement Pvt. Ltd.[ 1997 (5) TMI 2 - SUPREME COURT] , this Court took into consideration the ground reality in the context of Section 22 of the Act and approved of taxing the income of a person who is entitled to receive income from the property in his own right under Section 22. We have elaborately referred to the judgment of the Patna High Court in the Sahay Properties case [ 1982 (12) TMI 27 - PATNA HIGH COURT] . The full rights of an owner as set out therein may again be reiterated as: - (1) The power of enjoyment which includes the power to destroy. (2) The right to possession which includes the right to exclude others. (3) The power to alienate inter viv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was the owner and on the said basis made the addition. The intention of the law-giver in introducing Section 69A was to get at income which has not been reflected in the books of account but found to belong to the assessee. Not only it must belong to the assessee, but it must be other valuable articles. Bitumen may be found in small quantities or large quantities. If the article is to be found valuable , then in small quantity it must not just have some value but it must be worth a good price {See Black s Law Dictionary (supra)} or worth a great deal of money {See Concise Oxford Dictionary (supra)} and not that it has value . Section 69A would then stand attracted. But if to treat it as valuable article , it requires ownership in large quantity, in the sense that by multiplying the value in large quantity, a good price or great deal of money is arrived at then it would not be valuable article. Thus, this Court would conclude that bitumen as such cannot be treated as a valuable article . For purpose of Section 69A of Income Tax Act, it is therefore declared that- an article shall be considered valuable if the concerned article is a high-priced article commanding a premium price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .................................................. 42 K. R. B. JODHA MAL DISTINGUISHED BY HIGH COURT ...................................................................... 43 L. "OTHER VALUABLE ARTICLE" ........................................................................................................ 75 M. PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR A SOCIIS ............................................................ 81 N. WHETHER BITUMEN IS 'OTHER VALUABLE ARTICLE' .................................................................... 85 1. Delay condoned. 2. Leave granted. A. THE FACTS 3. The appellant-assessee carried on business as carriage contractor for bitumen loaded from oil companies namely HPCL, IOCL and BPCL from Haldia. The goods were to be delivered to various divisions of the Road Construction Department of the Government of Bihar. According to the appellant, it has been in the business for roughly three decades. 4. By the impugned Order dated 05.03.2009 in M.A. 214 of 2002, the High Court has dismissed the Appeal filed by the appellant under Section 260A of the Income-Tax Act, 1961 (hereinafter referred to as, 'the Act', for short). The assessment year invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered. Accordingly, it was found that 2094.52 metric tonnes had not been delivered. On the said basis and again invoking Section 69A of the Act, a sum of Rs.10471720.30 was added as income of the appellant. 8. As against the Order dated 27.03.1998 for the Assessment Year 1995-1996, in Appeal, by Order dated 15.09.2000, the Commissioner Appeals found that all Junior Engineers, except two, had accepted delivery. After finding that the addition made by the Assessing Officer in respect of quantity, where Junior Engineers had accepted delivery, was untenable, the Appellate Authority ordered deletion of a sum of Rs.20114659/-. This amount represented the value of 4064.28 metric tonnes. In regard to the disputed quantity, viz., the dispute raised by Shri Madan Prasad and Ahia Ansari, Junior Engineers, the matter was remanded back for affording an opportunity for cross-examination. This Order related to the Assessment Year 1995-1996. 9. Next in chronological order, is the Order dated 18.12.2000 passed by the Appellate Authority in Appeal carried by the appellant against the Order dated 31.03.1999, relating to the Assessment Year 1996-1997. The Appellate Authority referred to the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Jr. Engineers and after making further enquiries to establish the genuineness or otherwise of their signatures on the challans, I deem it proper to set aside this addition of Rs.2,01,14,659/- in respect of 4064.98 MT of Bitumen also to the file of the A.O. with the direction that he shall issue summons to the concerned Jr. Engineers who have received 4064.98 MT of Bitumen as per challans furnished by the appellant, record their statements, allow the appellant an opportunity to cross examine them and, if necessary, refer their signatures to the hand writing experts to establish the genuineness of otherwise of such signatures. In view of these directions, in order the substitution of last para on page -7 extending up to 1st as page 8 of CIT(A) is or which has already been reproduced above by the following para: I have carefully considered the above submissions in the course of independent enquiries made by the A.O. by issue summons only 2 Jr. Engineers namely, l. Mr. Madan Prasad, 2. Mr. Ahiya Ansari have been examined in respect of reported short supply of Bitumen of 4443.01 MT. Sri Madan Prasad and Mr. Ahiya Ansari have denied receipt of Bitumen to the extent of 204.45 MT and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion, as he did not address himself to the explanation offered by the Junior Engineers. It was found that all Executive Engineers of the Consignee Divisions presented a case of non-delivery before the Assessing Officer. Thus, on the same day, i.e., on 11.01.2002, the ITAT allowed the Appeal filed by the Revenue and sustained the Order of the Assessing Officer relating to addition on account of short supply of bitumen for the Assessment Year 1996-1997, whereas, for the Assessment Year 1995-1996, taking note of the Order of the Commissioner Appeals, passed under Section 154 of the Act, by which, the matter stood remitted back, the Appeal of the Revenue and the Appeal of the appellant, challenging the Rectification Order, came to be dismissed. 13. This, in turn, triggered the Appeal, i.e., M.A. 214 of 2002 before the High Court by the appellant under Section 260A of the Act. The High Court, inter alia, refers to the appellant filing Return for the Assessment Year 1996-1997, disclosing total income of Rs.576133/-. 14. Reference is made to the addition of Rs.1,04,72,720.30 on the basis of short supply of bitumen. After referring to the submissions, the court focussed on the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in separate appeals filed for assessment year 1995-96 and 1996-97 on the same set of facts, the ITAT had allowed the appeal of the Revenue for the year 1996-97, but for the assessment year 1995-96, the matter was remanded back. This argument was rejected by the High court in the review on the following reasoning: "However, the question would be whether the fact that the appellate tribunal had passed another order correctly or incorrectly, the same may have any effect rendering the judgment of the tribunal passed in present matter to be erroneous despite the same having been upheld in appeal by this Court? Answer has to be in negative. For the assessment year 1995-96, the matter has attained finality as the Division Bench has already accepted the view of the appellate tribunal to be correct in M.A. No.214 of 2002. The view of the same Tribunal or the same Bench of the Tribunal was correct or incorrect for a different assessment year was not the subject matter of the appeal. If one of the views of the appellate tribunal is in favour of the assessee that does not mean that the said view would be correct and the view taken in the present case was incorrect. The view formed by the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant against the Assessment Year 1995-1996. Even when the conflicting views taken by the Tribunal was pointed out in the Review Petition, despite noticing the argument, the High Court has rejected the same without just cause. In the Order, it is pointed out that the Court observed that the matter for the year 1995-1996 had travelled to the Court in M.A. 214 of 2012, when it actually related to 1996-1997. More importantly, the learned Senior Counsel would contend that bitumen cannot be treated as other valuable article within the meaning of Section 69A of the Act. The very company of words, in which the words 'other valuable article' is found, viz., money, bullion and gold, should have persuaded the Court to find the addition illegal. It was also canvassed before us that the appellant cannot be treated as the owner, as appellant was a carrier. It fulfilled its obligations by lifting the goods in question and delivered the same. In fact, it is the contention of the appellant that the goods had been delivered and there was no misappropriation. There was no complaint by the oil companies from whom, the bitumen had been lifted, about there being short delivery. There was even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in the opinion of the 4 Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 25. Section 69B provides for power with the Assessing Officer to deal with investments made by an assessee in bullion, jewellery and other valuable article, when such assets are found to be owned by the assessee and he finds a mismatch between the amount spent for acquiring them or investing in them and the amount recorded in the Books of Accounts for any source of income and no explanation is offered or the explanation offered is not found satisfactory, the excess amount can be brought to tax. Section 69C, inserted w.e.f. 01.04.1976, deals with unexplained expenditure, being deemed to be the income of the assessee. 26. Section 69 and Section 69A, apart from being close neighbours, do bear resemblance with one another. Section 69 deals with unexplained investment. Section 69A deals with unexplained money, bullion, jewellery or other valuable articles. Section 69A was inserted by Amending Act 5 of 1964 and it came into effect w.e.f. 01.04.1964. Both Sections require that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is indisputable that the appellant was engaged as a carrier to deliver the bitumen, after having lifted the same from the Oil Companies to the various Divisions of the Road Construction Department of the Government of Bihar. Before the Court proceeds to deal with this aspect, we may bear in mind, what this Court held in the decision reported in Chuharmal S/O Takarmal Mohnani v. Commissioner of Income Tax, M.P., Bhopal (1988) 3 SCC 588. In the said case, the Court was dealing with wrist watches being seized from the assessee during a search conducted by the Customs Authorities from the bedroom of the assessee. The question fell for consideration, as to whether the principles underlying Section 110 of the Evidence Act, 1872, would assist the Revenue to conclude that a person, in possession, could be treated as the owner. This Court held, inter alia, as follows: "6. … In other words, it follows from well settled principle of law that normally, unless contrary is established, title always follows possession. In the facts of this case, indubitably, possession of the wrist-watches was found with the petitioner. The petitioner did not adduce any evidence, far less discharged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of an unclaimed consignment under sub-section (1), the common carrier may, (a) if such consignment is perishable in nature, have the right to sell the consignment; or (b) if such consignment is not perishable in nature, cause a notice to be served upon the consignee or upon the consignor if the consignee is not available, requiring him to remove the goods within a period of fifteen days from the date of receipt of the notice and in case of failure to comply with the notice, the common carrier shall have the right to sell such consignment without any further notice to the consignee or the consignor, as the case may be. (3) The common carrier shall, out of the sale proceeds received under sub-section (2), retain a sum equal to the freight, storage and other charges due including expenses incurred for the sale, and the surplus, if any, from such sale proceeds shall be returned to the consignee or the consignor, as the case may be. (4) Unless otherwise agreed upon between the common carrier and consignor, the common carrier shall be entitled to detain or dispose off the consignment in part or full to recover his dues in the event of the consignee failing to make payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Corporation of Sikkim. The assessee also claimed that the Chogyal of Sikkim was the owner and, under his verbal instruction conveyed through his A.D.C., he arranged for despatch thereof by signing the papers. In fact, the Chogyal also claimed ownership of the said packages on the basis of the letter by the Under Secretary of the Chogyal of Sikkim addressed to the Assistant Collector of Customs dated May 30, 1973. The Chogyal was the head of an independent State at the relevant time and it was necessary, if the claim for ownership of the Chogyal is to be disputed, to have the said letter verified by obtaining the original from the customs authorities. Merely because the packages were presented before the customs authority, it does not ipso facto prove the ownership of the assessee of the goods. 7. In our view, it has not been established or found that the assessee is the owner of the said idol and pedestal. On the contrary, the said letter dated May 30, 1973, addressed to the Assistant Collector of Customs shows that the Chogyal is the owner of the said articles. Under such circumstances, there is no reason to hold the assessee liable and to add Rs. 80,000 being the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence on which the liability was founded. If a person was negligent and did not take as much care as he would have taken of his own goods, he would be liable in damages. These principles of the English common law rule were also applied in this country as indicated in the decision of the Privy Council in Irrawaddy Flotilla Co. Ltd. v. Bugwandass in which, it was, inter alia, observed as under: "For the present purpose it is not material to inquire how it was that the common law of England came to govern the duties and liabilities of common carriers throughout India. The fact itself is beyond dispute. It is recognised by the Indian Legislature in the Carriers Act, 1865, an Act framed on the lines of the English Carriers Act of 1830." "15. In the meantime, Parliament intervened and the Carriers Act, 1865 was enacted with the result that the liability of a common carrier came to be considered in the light of the provisions contained in that Act. It is true that Section 158 of the Indian Contract Act speaks of bailment of the goods for being carried on behalf of that bailor, but it is also to be noticed that the bailment spoken of in that section is gratuitous as it is specifically p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of goods also, the possession of the carrier would not convert it into the owner of the goods. E. THE CARRIAGE BY ROAD ACT, 2007 40. Under Section 15 of the Carriage by Road Act, 2007, the carrier can, after issuing notice as provided, when there is a failure by the consignee to take delivery, sell the goods in the case of a sale which is so authorised by a statute. The buyer from the carrier would acquire a good title even as against the consignee. It may be true that as far as the sale proceeds received by the common carrier from the sale, he would be accountable to the consignee as provided in Section 15 of the Act. Likewise, in a case covered under Section 15 (4), the common carrier would have the power to dispose of the consignment for recovery of dues from the consignee. In such cases if the other ingredients of Section 69A are satisfied, there may be no fallacy involved if an assessee is found to be the owner of the goods which he disposes of under the authority of law. F. CRIMINAL BREACH OF TRUST 41. Section 405 of the Indian Penal Code, 1860 reads as follows: "405. Criminal Breach of Trust Whoever, being in any manner entrusted with property, or with any dominio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted and it can convey good title to the buyer. H. IS A THIEF AN OWNER? OWNERSHIP BEING ILLEGAL. 44. Can a thief be treated as the owner of the goods? In this regard, this Court notices the following discussion in the commentary on Sampath Iyengar's, Law of Income Tax. "12. Sine qua non is "ownership".- The words "is found to be the owner" appearing in this section clearly show that the mere fact that, on a search, certain articles are found in the possession of a person cannot be said to attract the provisions of this section unless it is established that the person in whose possession articles were found is the owner thereof. An assessee is to be the owner before anything in his possession can be deemed to be his income. It cannot be said in the case of stolen property that the thief is the owner thereof. Section 69A was enacted to treat the value of certain items as income by a deeming provision but facts must be found to bring a case within that deeming provision. In the case of a deeming provision the court has to assume an unreal state of things to be real." 45. In Commissioner of Income Tax v. K.I. Pavunny (1998) 232 ITR 837, a Division Bench was dealing with the case wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which is illegal, can be found to be the owner under Section 69A. The question would arise pointedly, as to, when a common carrier refuses to deliver the consignment and continues to possess it contrary to contract and law and converts it into his use and presumably sells the same, as to whether he could be found to be the owner of the goods. Would he be any different from a person who commits theft and sells it claiming to be the owner. Can a thief become the owner? It would be straining the law beyond justification if the Court were to recognise a thief as the owner of the property within the meaning of Section 69A. Recognising a thief as the owner of the property would also mean that the owner of the property would cease to be recognised as the owner, which would indeed be the most startling result. While possession of a person may in appropriate cases, when there is no explanation forthcoming about the source and quality of his possession, justify an assessing officer finding him to be the owner, when the facts are known that the carrier is not the owner and somebody else is the owner, then to describe him as the owner may produce results which are most illegal apart from bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e….. we shall bring them on the tax rolls. But big assesses as are contemplated in this provision cannot be allowed to escape." J. THE DEPARTMENTAL INSTRUCTIONS DATED 11.05.1994 49. This Court notices Departmental Instruction No. 1916 dated 11th May, 1994. "2. Departmental instructions. - Instruction read as under: "Seizure of Jewellery and Ornaments in Course of Search Operations- Guidelines for.- Instances of seizure of jewellery of small quantity in course of operations under section 132 have come to the notice to the Board. The question of a common approach to situations where search parties come across items of jewellery, has been examined by the Board and following guidelines are issued for strict compliance:- (i) In the case of a wealth-tax assessee, gold jewellery and ornaments found in excess of the gross weight declared in the wealth-tax return only need be seized. (ii) In the case of a person not assessed to wealth-tax, gold jewellery and ornaments to the extent of 500 gms. Per married lady, 250 gms. Per unmarried lady and 100 gms. Per male member of the family, need not be seized. (iii) The authorised officer may, having regard to the status of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the practical point of view. If the thousands of evacuees who left practically all their properties as well as businesses in Pakistan had been considered as the owners of those properties and businesses as long as the "Ordinance" was in force then those unfortunate persons would have had to pay income tax on the basis of the annual letting value of their properties and on the income, gains and profits of the businesses left by them in Pakistan though they did not get a paisa out of those properties and businesses. Fortunately no one in the past interpreted the law in the manner Mr Mahajan wants us to interpret. It is true that equitable considerations are irrelevant in interpreting tax laws. But those laws, like all other laws have to be interpreted reasonably and in consonance with justice. 14. For determining the person liable to pay tax, the test laid down by the court was to find out the person entitled to that income. An attempt was made by Mr Mahajan to distinguish this case on the ground that under the corresponding English statute the liability to tax in respect of income from property is not laid on the owner of the property. It is true that Section 82 of the English I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Commissioner of Wealth Tax, Hyderabad 1986 (supp.) SCC 700; the matter arose under the Wealth Tax Act, 1957. Section 2(m) of the said Act defined net wealth as being predicated with reference to assets "belonging to" the assessee. The assessee in the said case had sold out the property without executing the sale deed. The possession was handed over to the buyer after receiving full consideration. The Court notices the following statement: "11. The material expression with which we are concerned in this appeal is 'belonging to the assessee on the valuation date'. Did the assets in the circumstances mentioned hereinbefore namely, the properties in respect of which registered sale deeds had not been executed but consideration for sale of which had been received and possession in respect of which had been handed over to the purchasers belonged to the assessee for the purpose of inclusion in his net wealth? Section 53-A of the Transfer of Property Act gives the party in possession in those circumstances the right to retain possession. Where a contract has been executed in terms mentioned hereinbefore and full consideration has been paid by the purchasers to the vendor and where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue as to whether the assets belonged to the assessee anymore. It was found that "mere possession or joint possession unaccompanied by the right of possession or ownership of property would not bring the property within the definition of net wealth for it would not be an asset belonging to "the assessee". The decisions under the Income Tax Act were distinguished. In regard to R.B. Jodha Mal (supra), this Court finds the following discussion: "17. This Court had occasion to discuss Section 9 of the Income Tax Act, 1922 and the meaning of the expression "owner" in the case of R.B. Jodha Mal Kuthiala v. CIT [(1971) 3 SCC 369 : AIR 1972 SC 126 : (1971) 82 ITR 570] . There it was held that for the purpose of Section 9 of the Indian Income Tax Act, 1922, the owner must be the person who can exercise the rights of the owner, not on behalf of the owner but in his own right. An assessee whose property remained vested in the Custodian of Evacuee Property was not the owner of the property. This again as observed dealt with the expression of Section 9 of the Indian Income Tax Act, 1922. At p. 575 (SCC p. 373, para 11) of the report certain observations were relied upon in order to stres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in Section 53(A)of the Transfer of Property Act. The Court distinguished Jodha Mal (supra). This Court further referred to in great detail the judgment of the Patna High Court in Additional Commissioner of Income Tax, Bihar v. M/s. Sahay Properties and Investment Co.(P) Ltd. 1983 (144) ITR 357. Since this Court has approved the reasoning adopted by the Patna High Court, it is deemed appropriate to refer to the same: "32. The learned Judges observed at page 361: "The emphasis, therefore, in this statutory provision is that the tax under the section is in respect of ownership. But this matter is not as simple as it looks. This leaves us to a more vexed question as to what is ownership. Should the assessment be made at the hands of the person who has the bare husk of the legal title or at the hands of the person who has the rights of an owner of a property in a practical sense? Enjoyment as an owner only in a practical sense can be attributed to the term 'owner' in the context of this section -- a person who can exercise the rights of the owner and is entitled to the income from the property for his own benefit. It is well settled, and learned counsel for either side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 175 (Supreme Court of New York)] . It would thus be seen that where the possession of a property is acquired, with a right to exercise such necessary control over the property acquired which it is capable of, it is the intention to exclude others which evinces an element of ownership. To the same effect and with a more vigorous impact is the subject dealt with by Dias on Jurisprudence, (4th Edn., at p. 400): 'The position, therefore, seems to be that the idea of ownership of land is essentially one of the 'better right' to be in possession and to obtain it, whereas with chattels the concept is a more absolute one. Actual possession implies a right to retain it until the contrary is proved, and to that extent a possessor is presumed to be owner.' "Again, at p. 404, the learned author says: 'Special attention should also be drawn to the distinction between "legal" ownership recognised at common law and "equitable" ownership recognised at equity. This occurs principally when there is a trust, which is purely the result of the peculiar historical development of English law. A trust implies the existence of two kinds of concurrent ownerships, that of the trustee at la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionary, 3rd Edn., Vol. 3, p. 2060) Thus the juristic principle from the viewpoint of each one is to determine the true connotation of the term 'owner' within the meaning of Section 22 of the Act in its practical sense, leaving the husk of the legal title beyond the domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately -- a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainder man, say, at the end or extinction of the period of occupation after, again say, a thousand years? The answer to this question in favour of the assessee would not merely be doing palpable injustice but would cause absurd inconvenience and would make the legislature to be dubbed as being a party to a nonsensical legislation. One cannot reasonably and logically visualise as to when a person in actual physical control of the property realising the entire income and usufructs of the property for his own use and not for the use of any other person, having the absolute power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allows the doctrine of part performance to be applied to the agreements which, though required to be registered, are not registered and to transfers not completed in the manner prescribed therefor by any law. The section is, therefore, applicable to cases where the transfer is not completed in a manner required by law unless such a non-compliance with the procedure results in the transfer being void. There is, however, a distinction between an agreement void as such and an agreement void in the absence of something which the vendor could do and had expressly or impliedly contracted to do, and where a vendor agrees to sell his share of property, including sir land, there is an implied term in the contract that he will apply for sanction to the revenue authorities necessary for such transfers and the court will direct him to do so. It cannot be said that such an agreement is void because no sanction has been obtained. In the instant case, having reference to clause 5 of the agreement it would be seen that the option was given to the assessee to demand at its pleasure a conveyance duly registered being executed in its favour by the Sahay family (the vendor) and to get its name mutate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious omission or clear up the doubts surrounding the word owner in Section 22 of the Act. The Court answered the reference in favour of the Revenue by holding that "in the context of Section 22 of the Act having regard to the ground realities and to the object of the Act, namely, to tax the income of the "owner as a person who is entitled to receive income from the property in his own right." 55. In Mysore Minerals Ltd. M.G. Road, Bangalore v. Commissioners of Income Tax, Karnataka, Bangalore (1999) 7 SCC 106 the assessee company though allotted houses by delivery of possession by the Housing Board, an actual deed of conveyance had not been executed in its favour. The houses so allotted were for the use of its staff. Assessee claimed depreciation under Section 32 of the Act. Section 32 of the Act also contemplates ownership of the asset as a condition for claiming the benefit of depreciation. The Court, inter alia, held as follows: "4. Section 32 of the Income Tax Act confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the "owner" or "proprietor" of a property is the person in whom (with his or her assent) it is for the time being beneficially vested, and who has the occupation, or control, or usufruct, of it; e.g., a lessee is, during the term, the owner of the property demised. Yet another definition that has been given by Stroud is: " 'owner' applies 'to every person in possession or receipt either of the whole, or of any part, of the rents or profits of any land or tenement; or in the occupation of such land or tenement, other than as a tenant from year to year or for any less term or as a tenant at will'." 19. It is well settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the legislature in enacting Section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. To take the case at hand it is the appellant assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation made under Section 32 of the Act was rejected on the basis that the assessee was not the owner of the vehicles. The Court found from the lease agreement that it was agreed that the assessee was to be the exclusive owner of the vehicle at all points of time. The argument of the Revenue that the name of the lessee was entered in the Certificate of Registration under Motor Vehicle Act, and therefore, it must be treated as the owner under Section 2(30) was rejected. It was further found that if the lessee was in fact the owner, he would have claimed depreciation, which was not done. It was also found that the entire lease rent was assessed as business income in the hands of the assessee. The Court went on to hold that in the facts it was the appellant-assessee which could be treated as the owner of the vehicles entitling it to claim the benefit of depreciation under Section 32. 57. This Court is called upon to decide the ambit of the word 'owner' in section 69A in the facts before us. This Court agrees with the High Court that the concept of 'owner' cannot be divorced from the context in which the expression is employed. In the case of Jodha Mal (supra), the property undoubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be in possession and actual possession in a given case may be harmonised with ownership. Being in possession with a right to be possession may lead to a presumption that the possessor is the owner, unless it be that there are indications to the contrary. The beneficial vesting may in the context clothe the person with title as the owner. Another concept which emerges is a person in receipt of money having actual control over the property with no person having a better right to defeat his claim of possession may open the doors to a finding that he is the owner within the meaning of Section 69A. A person in actual physical control of the property and realising the entire income for his own use may indicate the presence of ownership. The absence of the conveyance needed to complete the transfer may not detract from a person being found to be the owner. The soul of the reasoning appears to be the entitlement to receive the income from the property 'in his right'. 60. Let us apply these tests and ascertain whether the appellant can be treated as the owner in any sense of the expression. Appellant as a carrier was entrusted with the goods. The possession of the appellant began as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner. The possession of the carrier who deliberately refuses to act under the contract but contrary to it, is not only wrongful, but more importantly, makes it a case where the possession itself is without any right with the carrier to justify his possession. Recognising any right with the carrier in law would involve negation of the right of the actual owner which if the property in the goods under the contract has passed on to the consignee is the consignee and if not the consignor. This Court has already found that the appellant is bereft of any of the rights or powers associated with ownership of property. The only aspect was the alleged possession of the goods which is clearly wrongful when it continued with the appellant contrary to the terms of the contract and the law. 62. The Court is conscious of the fact that income derived from an illegal business can be legitimately brought to tax [See AIR 1980 SC 1271]. However, that is a far cry from justifying invocation of Section 69A of the Act as it is indispensable to invoke the said provision that the assessing officer must find that the articles in question was under the ownership of the assessee in the financial year. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the said basis made the addition. L. "OTHER VALUABLE ARTICLE" 64. It is a case of the appellant that applying the Principle of Ejusdem Generis, bitumen would stand out as a strange bed fellow in the company of its immediate predecessor words, viz., money, bullion and jewellery. In other words, it is the case of the appellant that bitumen is a clear misfit and it could not have been the legislative intention to treat bitumen as other valuable article. Our attention is drawn to the Circular No. 20D dated 07.07.1964 issued by Central Board of Direct Taxes, which has been adverted to. {see paragraph 48} 65. In Bhagwandas Narayandas v. Commissioner of Income Tax, Ahmedabad and others 1973 Vol. 98 ITR 194, the question, which, inter alia, fell for consideration before a learned Single Judge of High Court of Gujarat, was, whether fixed deposit receipts and title deeds of immovable property were 'valuable things or articles', which required a show-cause notice under Rule 112A of the Income-Tax Rules, 1962. Section 132 if the Act also employs the expression 'other valuable articles'. The Court, inter alia, held as follows: "18. On close consideration of the scheme of sub-section (5) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (5) of section 132 of the Act or rule 112A of the Rules." (Emphasis supplied) 66. Unlike a document of title or a fixed deposit receipt, which cannot, by itself, be disposed of or alienated, bitumen would be goods, which can be transferred. It would have a value in the market depending upon its quality. In Commissioner of Income Tax v. M.K. Gabrial Babu and others (1991) 188 ITR 464 Kerala, the High Court of Kerala was dealing with the question, as to whether immovable property would be covered within the expression 'other value article or thing' within the meaning of Section 132(1) of the Act. The Court held: "4. … A word in a statue is quite often judged by the company its keeps. The preceding words of Section 132(1), cannot be ignored or overlooked. Money, bullion, jewellery, which precede "other valuable article or thing" forge a genus and, consequently, the words "other valuable article or thing" assume a constricted meaning and interpretation in that context. The general principles of interpretation of a restricted meaning being given to certain words, whether it be by applying the principles of ejusdem generis or otherwise restricting it, had been followed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s currency; esp. domestic currency .2. Assets that can be easily converted to cash . 3. Capital that is invested or traded as a commodity . 4. Funds; sums of money . - Also spelled (in sense4) monies. See Medium of Exchange; Legal Tender." 71. The word 'article' has been defined in Black's Law Dictionary as "Generally, a particular item or thing . 72. The Word 'bullion' has been defined in the Concise Oxford Dictionary as 'gold or silver in bulk before coining, or valued by weight' M. PRINCIPLE OF EJUSDEM GENERIS; NOSCITUR A SOCIIS 73. Section 69A provides for unexplained 'money, bullion, jewellery'. It is thereafter followed by the words 'or other valuable articles'. Does this mean that the words 'other valuable articles' must be read ejusdem generis? The principle applies when the following conditions are present [Principles of Statutory Interpretation by Justice G P Singh, 14th Edition]: "(1) the statue contains an enumeration of specific words; (2) the subjects of enumeration constitutes a class or category; (3) that class or category is not exhausted by the enumeration; (4) the general terms follow the enumeration; and (5) there is no indication of a different legislati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in "Words and Phrases" (Vol. XIV, p. 207): "Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis". In fact the latter maxim "is only an illustration or specific application of the broader maxim noscitur a sociis". The argument is that certain essential features of attributes are invariably associated with the words "business and trade" as understood in the popular and conventional sense, and it is the colour of these attributes which is taken by the other words used in the definition though their normal import may be much wider. We are not impressed by this argument. It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogued in the statute. This Court has also referred to the definition of the words, money, bullion valuable and article. The Court approves the view taken by the High Court of Gujarat in Bhagwandas Narayandas (supra) that a document of title to immovable property or a fixed deposit receipt would not qualify as other valuable article. The reasons which have been given appear to us to be sound. A document of title or a fixed deposit receipt would not be 'articles' which can be bought and sold in a market. An article, would also not encompass an item of immovable property. This Court can safely conclude that an article must be movable property. One strong indication that the Principle of Ejusdem Generis may not apply is a decision of this Court in Chuharmal (supra), where the articles involved were watches. Watches by no stretch of imagination can be brought in on the basis of ejusdem generis. They do not belong to the so-called genus of money or bullion or jewellery. The hallmark of a watch in the context of the expression 'other valuable article' would be that it is marketable and it has value. When it comes to value, it is noticed that in the definition of the word 'valuable' in Bla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Officer has proceeded to take Rs. 4999.58 per metric ton as taken in the AG Report on bitumen scam. Thus, it is that the cost of bitumen for 2094.52 metric ton has been arrived at as Rs. 1,04,71,720.30. This would mean that for a kilogram of bitumen, the price would be only Rs.5 in 1995-1996 (F.Y). 79. Bitumen may be found in small quantities or large quantities. If the 'article' is to be found 'valuable', then in small quantity it must not just have some value but it must be 'worth a good price' {See Black's Law Dictionary (supra)} or 'worth a great deal of money' {See Concise Oxford Dictionary (supra)} and not that it has 'value'. Section 69A would then stand attracted. But if to treat it as 'valuable article', it requires ownership in large quantity, in the sense that by multiplying the value in large quantity, a 'good price' or 'great deal of money' is arrived at then it would not be valuable article. Thus, this Court would conclude that 'bitumen' as such cannot be treated as a 'valuable article'. In view of these findings, this Court need not pronounce on points III and IV. The appeals are allowed. The impugned judgment will stand set aside and though on different grounds, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is contesting the assessee's claim. In the present case, the assessee was certainly not the owner of the bitumen - but was the carrier who was supplying goods from the consignor- oil marketing companies to the consignee- Road Construction Department. Notably, due to short delivery of goods, the possession of the assessee was unlawful. The inevitable conclusion therefore is that the assessee is not the owner, for the purposes of Section 69A. 4. To address the second question on whether bitumen is a valuable article under Section 69A, we must understand what sort of article is bitumen. Commonly, bitumen is described as a sticky, black, highly viscous, liquid or a semi-solid form of petroleum and a crude oil by-product, which is also known as asphalt. When crude oil is subjected to refining- by fractional distillation, i.e. before it is converted into industrially viable finished petroleum products, midway, several useful articles are obtained. In the process of distillation of crude oil in the fractionating column- top distillates like liquified petroleum gas(LPG), middle distillates like- kerosene, diesel, jet fuel and paraffin are obtained and in the lower column, distillates like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and concluded that it may include any article of value. 6. At this juncture, it is also relevant to consider, the decision of the Chhattisgarh High Court in Dhanush vs. CIT Dhanush General Stores vs. Commissioner of Income Tax (2011) 339 ITR 651 under a related anti-avoidance provision, i.e. Section 69B of the Act. However, before adverting to the decision, it is pertinent to note that on the question of interpretation of the phrase 'other valuable article' in Section 69A, the findings, will also be applicable to Section 69B. Although Section 69A deals with unexplained ownership of valuable articles, and the provision in Section 69B covers cases of understatement of expenditure incurred on acquisition of valuable articles, both provisions deal with the ownership of valuable articles. Section 69B, inserted by virtue of the Finance Act, 1965 (10 of 1965), reads as follows: "69B. Amount of investments, etc., not fully disclosed in books of account. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be brought within the ambit of Section 69A. It is only the high priced precious items- that command a premium price and are often used by high wealth individuals to park their unaccounted income- by converting it into gold and bullion - that the Section 69A was inserted to address and to make such articles taxable under the Income Tax Act. Therefore, the intent of the legislature, through the Amendment - was to subject articles like gold, jewellery and other valuable items, to income tax, where such articles are typically owned with the intention of avoiding income tax. 10. Conversely, if all sundry articles of nominal value are bracketed in the category of valuable article, it will lead to an absurdity and will also be inconsistent with the legislative intent. Focusing on the high total value of an article, ignoring its lowly per unit price would mean including low-cost ordinary articles also in the valuable category, under Section 69A. This would defy the legislature's logic. In this context, when the principle of Ejusdem Generis is applied, the preceding words in Section 69A such as money, bullion, jewellery would suggest that the phrase 'other valuable article' which follows ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be strictly construed is, well settled. See CIT vs. Kasturi 237 ITR 24 (SC) The classical words of Justice Rowlatt in the 1920s case of Cape Brandy Syndicate Capy Brandy Syndicate vs. Inland Revenue (1921) 1 KB 64 would be of valuable assistance here. Justice Rowlatt while interpreting the phrase- 'pre-war trade years' in context of the British Finance Act,1915-16, observed as follows: "…….…in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used………" 14. The above opinion of Justice Rowlatt was approvingly cited by former Chief Justice Koka Subba Rao, writing for a three judge bench of this Court in the case of Banarsi Debi vs. ITO. Banarsi Debi vs. ITO (1964) 7 SCR 539- See paragraph 6. The principle that provisions and exemptions under taxation statutes are to be strictly interpreted in accordance with legislative intent was also upheld by one of us recently in 2022, in Augustan Textile Colours. Augustan Textile Colours Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace article like bitumen only on the basis of huge mass of bitumen. It would be an incorrect way to categorize bitumen as a 'valuable article', under Section 69A of the Income Tax, Act. 18. While doing the above analysis, the 1976 song "The First Hello, The Last Goodbye" written & sung by the British singer Roger Whittaker is buzzing in my mind. The singer here goes lyrical while crooning about things of great value and aptly sings "…gold would not be precious if we all had gold to spare…..". Taking a cue from the song's lyrics, it can be appropriately said that the legislature while introducing section 69A to the Income Tax, Act, 1961 by the Finance Act, 1964, was concerned only with such precious and aspirational articles like bullion and jewellery which are capable of being repositories of hidden earnings but were not really concerned about common place stuff like "bitumen", which would not attract a second glance, on any road surface of our country. 19. In conclusion, it is held that bitumen is not a valuable article in the context of Section 69A and the assessee here was not the owner of the concerned bitumen for the purpose of section 69A of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
