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The appeal is therefore allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income tax. RPC |
The appellants will have their costs throughout. RPC |
HIDAYATULLAH, J. I have had the advantage of reading the judgment just delivered by my brother, Kapur, J. Ratio |
I regret very much my inability to agree that the appeal should be allowed and the order of the High Court set aside. Ratio |
In my opinion, the High Court had correctly answered the question referred to it. Ratio |
The facts of the case have been stated in detail in the judgment of my learned brother, and I need not repeat them but refer only to some of them briefly. Ratio |
On June 12, 1950, a sum of Rs. 5 lakhs was given by the Maharaja of Bhavnagar to the predecessor of the appellants, who was an ex Dewan of the State. FAC |
This was paid by Messrs. Premchand Roychand & Sons, Bombay, with whom the Maharaja had an account. Ratio |
There is no contemporaneous record to show why this payment was made; but it appears that when the accountant of the Maharaja enquired how the amount 755 was to be entered in the books of account, the Maharaja issued an order on December 27, 1950, to the following effect: "In consideration of Shri Annantrai P. Pattani ... |
After the assessment proceedings had commenced in this case, the original assessee produced a letter written by the Maharaja on March 10, 1953, as follows: "I confirm that in June, 1950, I gave you a sum of rupees five lacs (Rs. 5,00,000) which was a gift as a token of my affection and regard for you and your family.Th... |
The question in this case was whether section 7(1) of the Income tax Act read with Explanation 2 to that section as it stood prior to the amendment in 1955, applied to this payment. Ratio |
That section, so far as it is material, is as follows: "7(1).The tax shall be payable by an assessee under the head 'Salaries ' in respect of any salary or wages, any annuity, pension or gratuity and any fees, commissions, perquisites or profits in lieu of, or in addition to, any salary or wages, which are allowed to h... |
Explanation 2. A payment due to or received by an assessee from an employer or former employer or from a provident or other fund, is to the extent to which it does not consist of contributions by the assessee or interest on such contributions a profit received in lieu of salary for the purpose of this subsection, unles... |
To determine whether the second Explanation applies 756 to the facts in this case, it has to be found if this pay ment was received by the assessee from a former employer by way of remuneration for past services. Ratio |
The Tribunal did not accept the letter of the Maharaja, and observed as follows: "In support of the latter view Mr. Tricumdas strongly relied upon the letter dated 10 3 1953 addressed by the Maharaja to the assessee, vide para 2 above. Ratio |
We have already indicated the circumstances in which that letter came to be written and would merely observe that we find it difficult to bring ourselves to believe in (sic) the contents of that letter and would leave the matter at that. Ratio |
" This, in my opinion, is a finding upon the evidentiary value of the letter of the Maharaja, and though the order of the Tribunal is worded mellifluously, the Tribunal 's decision is quite clearly that it was not per suaded to accept it. Ratio |
Indeed, of the two documents, greater worth has to be attached to one which was issued before the controversy started and was written not to the assessee but to the Maharaja 's accountant who enquired how the account was to be adjusted. Ratio |
The use of the word 'contemporaneous ' to describe the order to the accountant meant no more than this that it was earlier in time and very soon after the amount was given. Ratio |
The Tribunal did not rely on any extra neous evidence in reaching its conclusion, but on something which had proceeded from the Maharaja himself. Ratio |
The motive of the Maharaja may be irrelevant, because what has to be seen is not why the payment was made but for what the assessee had received it. Ratio |
The Maharaja no doubt had been generous in fixing the pension at Rs. 2,000 per month. Ratio |
But the payment of such a large sum was not just bounty but to reward the past services, which judged from the scale of the pension had not adequately been paid for in the past. Ratio |
In this connection, the words of the Maharaja himself (and what better evidence can there be?) were that the amount was paid "in consideration of Shri Annantrai P. Pattani the Ex Dewan of our Bhavnagar State having rendered loyal and meritorious services Rs. 5,00,000 are given to him as gift". Ratio |
757 The word gift ' does not alter the nature of the payment. Ratio |
The Maharaja indeed made a gift, as he had stated over again; but this order quite clearly disclosees that it was by way of remuneration for past services. Ratio |
The case, therefore, falls within the ruling of the a Supreme Court reported in P. Krishna Menon vs The Commissioner of Income tax, Mysore, Travancore Cochin and Coorg, Bangalore (1), and is indistinguishable from it. Ratio |
In the earlier case of this Court, the person who gave the money did not even mention any past services; but this Court found that because the recipient had taught him Vedanta philosophy, the payment was really in the nature of remuneration for past services. Ratio |
The facts in P. Krishna Menon 's case (1) were that the assessee was teaching his disciples Vedanta philosophy without any motive or intention of making a profit out of such activity. PRE |
One J. H. Levy who used to go to Travancore from England at intervals attended his teachings. PRE |
Levy had an account with Lloyd 's Bank at Bombay, and on December 31, 1944, Levy transferred the entire amount of Rs. 2,41,103 11 3 to the credit of an account which Levy got the assessee to open in his ' own name. PRE |
Levy made further remittances and by August 19, 1951, had paid about Rs. 4,50,000. PRE |
It was held by this Court that the assessee was carrying on a vocation. PRE |
In deciding the question whether the amounts were assessable to tax, this Court observed as follows: ". it seems to us that the present case is too plain to require any authority. PRE |
The only point is, whether the moneys were received by the appellant by virtue of his vocation. PRE |
Mr. Sastri contended that the facts showed that the payments were purely personal gifts. PRE |
He drew our attention to the affidavit of Levy where it is stated 'all sums of money paid into his account by me have been gifts to mark my esteem and affection for him and for no other reason '. PRE |
But Levy also there said, 'I have had the benefit of his teachings on Vedanta '. PRE |
It is important to remember however that the point is not what the donor (1) [1959] Supp.1 S.C.R. 133.96 758 thought he was doing but why the donee received it". PRE |
Sarkar, J., then referred to the dictum of Collins, M. R., in Herbert vs Mc Quade (1), which may be quoted here: "Now that judgment, whether or not the particular facts justified it, is certainly an affirmation of a principle of law that a payment may be liable to income tax although it is voluntary on the part of the ... |
That seems to me to be the test; and if we once get to this that the money has come to or accrued to, a person by virtue of his office it seems to me that the liability to income tax is not negatived merely by reason of the fact that there was no legal obligation on the part of the persons who contributed the money to ... |
Such reasons no doubt played their part in obtaining and increasing the amount of the offerings, but I cannot doubt that they were given to the vicar as vicar and that they formed part of the profits accruing by reason of his office.", and concluded as follows: "We have no doubt in this case that the imparting (1) (3) ... |
759 of the teaching was the causa causans of the making of the gift; it was not merely a causa sine qua non. PRE |
The payments were repeated and came with the same regularity as Levy 's visits to the appellant for receiving instructions in Vedanta. PRE |
We do not feel impressed by Mr. Sastri 's contention that the first payment of Rs. 2,41,103 11 3 was too large a sum to be paid as consideration. PRE |
In any case, we are not concerned in this case with that payment. PRE |
We are concerned with payments which are of much smaller amounts and as to which it has not been said that they were too large to be a consideration for the teaching. PRE |
And one must not forget that these are cases of voluntary payments and the question of the appraisement of the value of the teaching received in terms of money is not very material. PRE |
If the first payment was too big to have been paid for the teaching received, it was too big to have been given purely by way of gift. PRE |
" In my opinion, the case of this Court concludes the matter, and the Tribunal was within its rights in accepting one piece of evidence in preference to another, and the finding on the evidentiary value of the letter of the Maharaja was a matter essentially for the Tribunal to decide finally. Ratio |
I thus agree with the High Court in the answer which it gave, in agreement on facts with the Tribunal, and the reasons for which the answer was given. Ratio |
I would, therefore, dismiss the appeal with costs. RPC |
BY COURT: In view of the majority judgment of the Court, the appeal is allowed with costs throughout. RPC |
Appeal allowed. RPC |
Appeals Nos. 37 & 38 of 1957. FAC |
Appeals from the judgment and order dated August 30, 1955, of the former Bombay High Court in Appeals Nos. FAC |
55 and 56 of 1955, arising out of the judgment and order dated June 23, 1955, of the said High Court in Misc. FAC |
Application No. 80 of 1955. FAC |
C. K. Daphtary, Solicitor General of India, B. Ganapathy Iyer and R. H. Dhebar, for the appellant (in C. A. No. 37 of 57) and respondent No. 6 (in C. A. No. 38/57). FAC |
section D. Vimadalal and I. N. Shroff, for the appellant (in C. A. No. 38/57) and respondent No. 6 (in C. A. No. 37/57.) Rajni Patel, section N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for respondents Nos.1 and 3 to 5 (in both the appeals). FAC |
section B. Naik and K. R. Chaudhuri, for respondent No. 2 (in both the appeals). FAC |
August 18. FAC |
The Judgment of the Court was delivered by GAJENDRAGADKAR J. FAC |
These two appeals arise from an industrial dispute between the Firestone Tyre and Rubber Co. of India Ltd., (hereafter called the company) and its workmen (hereafter called the respondents), and they raise a short and interesting question about the construction of section 12(5) of the 14 of 1947 (hereafter called the A... |
It appears that the respondents addressed four demands to the company; they were in respect of gratuity, holidays, classification of certain employees and for the payment of an unconditional bonus for the financial year ended October 31, 1953. FAC |
The respondents ' union also addressed the Assistant Commissioner of Labour, Bombay, forwarding to him a 229 copy of the said demands, and intimating to him that since the company had not recognised the respondents ' union there was no hope of any direct negotiations between the union and the company. FAC |
The Assistant Commissioner of Labour, who is also the conciliation officer, was therefore requested to commence the conciliation proceedings at an early date. FAC |
Soon thereafter the company declared a bonus equivalent to 1/4 of the basic earnings for the year 195253. FAC |
The respondents then informed the company that they were entitled to a much higher bonus having regard to the profits made by the company during the relevant year and that they had decided to accept the bonus offered by the company without prejudice to the demand already submitted by them in that behalf. FAC |
After holding a preliminary discussion with the parties the conciliation officer examined the four demands made by the respondents and admitted into conciliation only two of them ; they were in respect of the classification of certain employees and the bonus for the year 1952 53; the two remaining demands were not admi... |
The conciliation proceedings initiated by the conciliator, however, proved infructuous with the result that on July 5, 1954, the conciliator made his failure report under section 12(4) of the Act. FAC |
In his report the conciliator has set out the arguments urged by both the parties before him in respect of both the items of dispute. FAC |
In regard to the respondents ' claim for bonus the conciliator made certain suggestions to the company but the company did not accept them, and so it became clear that there was no possibility of reaching a settlement on that issue. FAC |
Incidentally the conciliator observed that it appeared to him that there was considerable substance in the case made out by the respondents for payment of additional bonus. FAC |
The conciliator also dealt with the respondents ' demand for classification and expressed his opinion that having regard to the type and nature of the work which was done by the workmen in question it seemed clear that the said work was mainly of a clerical nature and the demand that the said workmen should be 230 take... |
The management, however, told the conciliator that the said employees had received very liberal increments and had reached the maximum of their scales and so the management saw no reason to accede to the demand for classification. FAC |
On receipt of this report the Government of Bombay (now the Government of Maharashtra) considered the matter and came to the conclusion that the dispute in question should not be referred to an industrial tribunal for its adjudication. FAC |
Accordingly, as required by section 12(5) on December 11, 1954, the Government communicated to the respondents the said decision and stated that it does not propose to refer the said dispute to the tribunal under section 12(5) " for the reason that the workmen resorted to go slow during the year 195253 ". FAC |
It is this decision of the Government refusing to refer the dispute for industrial adjudication that has given rise to the present proceedings. FAC |
On February 18, 1955, the respondents filed in the Bombay High Court a petition under article 226 of the Constitution praying for the issue of a writ of mandamus or a writ in the nature of mandamus or other writ, direction or order against the State of Maharashtra (hereafter called the appellant) calling upon it to ref... |
To this application the company was also impleaded as an opponent. FAC |
This petition was heard by Tendolkar J. FAC |
He held that section 12(5) in substance imposed an obligation on the appellant to refer the dispute provided it was satisfied that a case for reference had been made, and he came to the conclusion that the reason given by the appellant for refusing to make a reference was so extraneous that the respondents were entitle... |
Accordingly he directed that a mandamus shall issue against the appellant to reconsider the question of making or refusing to make a reference under section 12(5) ignoring the fact that there was a slow down and taking into account only such reasons as are germane to the 231 question of determining whether a reference ... |
Against this decision the appellant as well as the company preferred appeals. FAC |
Chagla, C. J., and Desai, J., who constituted the Court of Appeal, allowed the two appeals to be consolidated, heard them together and came to the conclusion that the view( taken by Tendolkar J. was right and that the writ of mandamus had been properly issued against the appellant. RLC |
The appellant and the company then applied for and obtained a certificate from the High Court and with that certificate they have come to this Court by their two appeals Nos. 37 and 38 of 1957. FAC |
These appeals have been ordered to be consolidated and have been heard together, and both of them raise the question about the construction of section 12(5) of the Act. Ratio |
Before dealing with the said question it would be convenient to state one more relevant fact. Ratio |
It is common ground that during a part of the relevant year the respondents had adopted go slow tactics. Ratio |
According to the company the period of go slow attitude was seven months whereas according to the respondents it was about five months. ARG |
It is admitted that under cl.23(c) of the standing orders of the company willful slowing down in performance of work, or abatement, or instigation thereof, amounts to misconduct, and it is not denied that as a result of the go slow tactics adopted by the respondents disciplinary action was taken against 58 workmen empl... |
The respon dents ' case is that despite the go slow strategy adopted by them for some months during the relevant year the total production for the said period compares very favorably with the production for previous years and that the profit made by the company during the relevant year fully justifies their claim for a... |
The appellant has taken the view that because the respondents adopted go slow strategy during the relevant year the industrial dispute raised by them in regard to bonus as well as classification was not to be referred for adjudication under section 12(5). Ratio |
It is in the light of these facts that we have to consider whether 232 the validity of the order passed by the appellant refusing to refer the dispute for adjudication under section 12(5) can be sustained. Ratio |
Let us first examine the scheme of the relevant provisions of the Act. Ratio |
Chapter III which consists of sections 10 and 10A deals with reference of dispute to Boards, Courts or Tribunals. STA |
Section 10(1) provides that where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time by order in writing refer the dispute to one or the other authority specified in cls.(a) to (d). STA |
This section is of basic importance in the scheme of the Act. Ratio |
It shows that the main object of the Act is to provide for cheap and expeditious machinery for the decision of all industrial disputes by referring them to adjudication, and thus avoid industrial conflict resulting from frequent lock outs and strikes. Ratio |
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