Input:
vil Appeal No. 1934 of 1972.
From the Judgment and Order dated 9.12.
1971 of the Punjab and Haryana High Court in regular Second Appeal No. 1286 of 1969.
V.C. Mahajan, K.R. Nagaraja (NP) and R.S. Hegde for the Appellant.
419 Uma Dutta, E.C. Agarwala, Ms. Sheil Sethi and Susheel Kumar for the Respondents.
The Judgment of the Court was delivered by K.N. SAIKIA, J.
This first defendant 's appeal by special leave is from the Judgment and Decree of the High Court of Punjab and Haryana in R.S.A. No. 1286 of 1969 dated 9.12.
Respondents 4 to 6 Balwant Singh, Jagir Singh and Teja Singh, sons of Kehar Singh sold land measuring 38 Kanals 3 Marlas, being 3/5th share of 63 Kanals 11 Marlas of ances tral land situated at village Maherna Kalan, Tehsil and District Ludhiana, as per sale deed dated June 4, 1964 in favour of the appellant (first defendant) for Rs. 14,000 as the vendors left their village Maherna Kalan and had not been cultivating the same and it was not yielding any prof it.
The sale deed contained a recital that the vendors sold the land with a view to purchase land in another village.
On November 6, 1965 the vendors actually purchased 80 Kanals of Nehri land for Rs. 11,000.
The parties are admittedly Jat Sikhs governed by Punjab Customs.
Respondents 1 to 3 filed a declaratory suit on August 3, 1966 in the Court of Sub Judge, Ludhiana seeking a declara tion that the sale of the suit land would not affect their reversionary rights after the death of respondents 4 to 6 as they were governed by the custom in the matter of alienation inasmuch as the suit land was ancestral in the hands of the alienors qua the plaintiffs (respondents 1 to 3) and that the sale was effected without consideration and without legal necessity; and respondents 4 to 6 (defendants 2 to 4) were restrained from alienating under the custom.
The appellant averred, inter alia, that the sale was for consideration and legal necessity as it was an act of good management on the part of the alienors; that respondents 4 to 6 who were not sonless and were men of good character and sober habits; that migrating from their village they had settled elsewhere as they were neither cultivating the suit land nor were in a position to manage and cultivate the same; and that the alienors had actually purchased 80 Kanals of better quality Nehri land which showed that the sale was an act of good management on the part of the vendors.
It was also contended that the land in suit was not ancestral qua the plaintiffs nor was it governed by customs and that the plaintiffs had no locus standi.
420 The respondents 4 to 6 being defendants 2 to 4 admitted the claims of the plaintiffs.
The respondent No. 5 who was the brother of respondent No. 2, was impleaded as proforma defendant having the same interest as the plaintiffs.
The Trial Court, inter alia held that the parties in respect of the sale of the suit land were governed by custom whereunder ancestral land could not be alienated except for legal necessity or as an act of good management; that the suit land was ancestral qua the plaintiffs (respondents 1 to 3) and defendants 2 to 4 (respondents 4 to 6); that the sale was effected for consideration of Rs. 14,000 as stipulated in the sale deed; and that the sale was an act of prudent management on the part of the vendors and as such unimpeach able.
The suit having been dismissed and the first appeal therefrom having failed, the respondents 1 to 3 preferred R.S.A. No. 1286 of 1969 in the High Court of Punjab and Haryana wherein they sought to adduce additional and further evidence of a sale deed dated June 3, 1969 alleged to have been executed by respondents 4 to 6 in respect of the suit land.
The High Court allowed the R.S.A. and set aside the sale holding that it was neither for any legal necessity nor could it be justified as an act of good management.
The suit was accordingly decreed.
The certificate to file Letters Patent Appeal having been refused, the appellant obtained special leave.
Mr. V.C. Mahajan, the learned counsel for the appellant, submits that whether the sale was or was not an act of good management having been a question of fact, the Trial Court and the first appellate court having arrived at a concurrent finding that it was an act of good management and as such unimpeachable, this concurrent finding could not have been set aside by the High Court in second appeal; that the sale deed dated June 3, 1969 which was never accepted and proved according to law was irrelevant for impeaching the sale and the High Court erred in law in taking it into consideration while determining whether the sale was an act of good man agement.
Mr. Uma Dutta, learned counsel for the respondents, submits, inter alia, that the sale of the suit land measur ing 38 Kanals 3 Marlas being on June 4, 1964 and the subse quent purchase of 80 Kanals for Rs. 11,000 being on November 8, 1965 and that land also having subsequently been sold on June 3, 1969 for Rs.35,000 and there being no evidence to show that the suit land was less fertile or that the vendors 421 had settled at village Pather, the High Court was correct in holding that the impugned sale was not an act of good man agement.
The only question to be decided in this appeal, there fore, is whether the High Court was correct in setting aside the concurrent finding that the impugned sale was an act of good management and not restricted by custom.
It is common ground that the parties are governed by the local custom which restricts alienation.
About the custom W.H. Rattigan in his 'A Digest of Customary Law in the Punjab ' (14th Ed.) in Chapter IV at page 283 said: "Thus, while the unhampered exclusive use of property in a man 's possession, whether ancestral or acquired, for his lifetime, with a free disposal of the income, is not denied, freedom of alienation, whether by gift or bequest, is in regard to ancestral immovable property, subject in most cases to certain restrictions." A 'late Senior Judge of the Chief Court ' in a leading case (Nos.
107 P.R. 1887, page 247) expressed generally that: respect of ancestral immovable properly in the hands of any individual.
there exists some sort of residuary interest in all the descendants of the first owner.
or body of owners, however, remote and contingent may be the proba bility of some among such descendants ever having the enjoy ment of the property.
In short, the owner in possession is not regarded as having the whole and sole interest in the property, and power to dispose of it, so as to defeat the expectations of those who are deemed to have a residuary interest and who would take the property if the owner died without disposing of it.
The limitations within which per sons having or claiming to have such a residuary interest may prevent an owner in possession from defeating their expectations will be found to vary according to local cir cumstances, which may either weaken or rebut the presumption that the owner has not an unrestricted power of disposition.
" 422 Sir Meredyth Plowden in Gujar vs Sham Das, 107P.R. 1887 also said: "In respect of ancestral immovable property in the hands of any individual, there exists some sort of residuary interest in all the descendants of the first owner or body of owners, however remote and contingent may be the probability of some among such descendants ever having the enjoyment of the property.
The owner in possession is not regarded as having the whole and sole interest in the property, and power to dispose of it, so as to defeat the expectations of those who are deemed to have a residuary interest, and who would take the property if the owner died without disposing of it.
" In the critical words of Chief Justice Sir Shadi Lal in Gujar vs Sham Das (supra) the issues before the Court were whether in a case, where the power of a sonless Jat proprie tor to alienate ancestral land without necessity was in dispute, it was the duty of the alienee to prove a custom authorizing a transfer of the ancestral land in favour of stranger, and on whom lay the onus of proving that a sonless proprietor has powers to dispose of ancestral land without necessity; and the rest were mere deductions.
In para 59 at page 291 of the Digest Rattigan states the restrictions on alienation of ancestral immovable property thus: "Ancestral immovable property is ordinarily inalienable (especially amongst 'Jats ' residing in the central districts of the Punjab), except for necessity or with the consent of male descendants, or, in the case of a sonless proprietor, of his male collaterals.
"Provided" that a proprietor can alienate ancestral immovable property at pleasure if there is at the date of such alienation neither a male descendant nor a male collateral in existence (No. 36 P.R. 1895; No. 55 P.R. 1903, F.B.)" In other words, the custom is that the ancestral immova ble property is ordinarily inalienable especially amongst Jats residing in the Central Districts of Punjab, except for necessity and the other permis 423 sible reasons.
An alientation as a bona fide act of good management has been treated as one of necessity and hence, valid.
At page 388 of the Digest we find the gloss: "In the case of a male proprietor, in the management of agricultural affairs a very strict economy and a very excel lent management must not be insisted upon.
Ordinary bona fide management is all that can be demanded (No. 70 P.R. 1894; No. 20 P.W.R. 1911; No. 40 P.W.R. 1911, and No. 25 P.R. 1911); 1922, 69 Ind. Case 521 (exchange of land).
Where although no immediate necessity for a sale is established, if the sale has been held to be an act of good management, it is binding on the reversioners.
" The above statement has been commented upon as being a bit wide, and the suggested statement is that 'such a sale must be upheld '.
In Mohammad Chiragh and Ors.
vs Fatta & Ors.
, A.I.R. 1934 Lahore 452 where although no immediate necessity for sale was established, but there was a recital in the sale deed that the vendors intended to purchase other land with the proceeds of the sale, and a representation of that kind was made to the vendees which might have been believed by them in good faith, the High Court did not see any good grounds for interference with the findings of the learned District Judge that the sale was an act of good management which, it was observed; "was essentially a find ing of fact.
" In Abdul Rafi Khan vs P. Lakshmi Chand & Ors., A.I.R. 1934 Lahore 998 where the members of the family, finding their position in the village precarious due to deteriorating relations between it and the tenants in the village sold their Land one by one as they found it diffi cult to manage them or recover rent and the vendors moved to another place where they purchased certain land, it was held that the sale of the land was an act of good management and the vendee was not expected to see to the application of the money by the vendors to the purposes mentioned in the sale deed.
Similarly in Dial Singh vs Surain Singh, A.I.R. 1937 Lahore 493, the question was whether a sale of ancestral land was for necessity.
On April 3, 1934 Bhagwan Singh sold ancestral land for Rs. 1,500 the entire consideration being paid to him before the Sub Registrar.
The object of the sale was the purchase of land in Bikaner and Gwalior States and actually since the sale Bhagwan Singh spent 424 about Rs. 160 in buying about 100 bighas of land in Gwalior.
The lower courts concurrently found that the sale was for.
necessity.
Before the District Judge it was urged that the money had not been actually spent on the purpose for which it was raised.
But the learned District Judge held that this was admitted to be correct, that all that the alienee had to do was to see that the money was required for a legitimate purpose.
The sole question, therefore, was whether the sale in order to buy land in Gwalior and Bikaner was an act of good management, which would be regarded as one of necessi ty.
The Division Bench held that no sufficient reason had been shown for dissenting from the concurrent finding of the courts below that the sale of land by Bhagwan Singh in the presence of his elder son was for necessary.
In Gajjan Singh & Ors.
vs Anna Singh, [1968] P.L.R. Vol.
70 195 it was held that no person could be tied down to the village where he had ancestral land unless it was shown that he was leaving the village or disposing of the land in the village on some false pretext.
Where relations of a proprie tor with his brother were strained and he sold the land to purchase land in some other village, the alienation was held to be an act of good management and that once a true repre sentation was made by the vendor, the vendees were not to see the application of the money and they need not prove that the money in fact was utilised for a necessary purpose.
It was further held that the land purchased with the sale proceeds of the ancestral land did not cease to be ancestral and it remained ancestral land.
In the instant case the vendee proved the ingredients of good management and the concurrent finding of the Trial Court and the first Appellate Court was that the impugned sale was an act of good management, and it was essentially a finding of fact.
Applying the law as enunciated in the above decisions we do not find any infirmity therein.
The submis sions of the learned counsel for the respondents that in view of the subsequent sale of the land would go to show that it was speculative sale would be wholly irrelevant.
There was evidence to show that even prior to the sale the vendors were not cultivating and as such not deriving any profit from the land.
The distance of time between the impugned sale on June 4, 1964 and the purchase of 80 Kanals of land in the other village on November 6, 1965 was not such as to disprove that the sale was an act of good manage ment and as such was for necessity.
The Trial Court clearly found that the vendors left for and settled at the new village where they purchased 30 Kanals of land.
The averment that the purchased land was subsequently sold on June 425 3, 1969 at Rs.35,000 besides having not been proved in accordance with law, was wholly irrelevant for the purpose of discharging the onus of the appellant vendee.
The High Court was, therefore, in error in setting aside the concur rent finding of fact in the facts and circumstances of the case, in Second Appeal.
In the result, this appeal is allowed, the impugned Order of the High Court is set aside and Decree of the lower courts in the suit restored.
The parties being near rela tions, we leave them to bear their ' own costs.
Y. Lal Appeal allowed.

Output:
Respondent Nos. 4 to 6 sold their 3/5th share of the ancestral land to the appellant for Rs.14,000, as the ven dors left their village and wanted to settle elsewhere where they purchased 80 kanals of Nehri land.
Respondents Nos. 1 to 3 filed a declaratory suit in the court of Sub Judge, Ludhiana seeking a declaration that the sale of the suit land would not affect their reversionary rights after the death of respondents 4 to 6.
They pleaded that the land was ancestral and according to the custom governing the parties, it could not be alienated; they also asserted that the land was sold without any consideration and legal necessity.
The appellant defendant No. 1, contended that the sale was an act of good management on the part of the alienors, and that the same was not without consideration/the vendors having decided to settle elsewhere.
The trial court held that the sale was an act of prudent management and was not without consideration.
As regards the custom it held that the parties were governed by custom, whereunder ancestral land could not be alienated except for legal necessity or as an act of good management.
The suit was accordingly dismissed and the first appeal preferred against that decision failed.
Respondents 1 to 3 thereafter preferred Regular Second Appeal before the High Court.
The High Court allowed the appeal, set aside the sale holding that it was neither for any legal necessity nor could it be justified as an act of good management.
The suit was accordingly decreed.
Hence this appeal by the appellant defendant No. 1 by special leave.
418 Before this Court the appellant contended that the sale was or was not an act of good management having been a question of fact, the trial court as also the first appel late court having arrived at a concurrent finding that it was an act of good management, the High Court should not have interfered with that finding.
On the other hand the respondents contended that the sale was not an act of good management.
Allowing the appeal, this Court, HELD: The custom is that the ancestral immovable proper ty is ordinarily inalienable specially amongst Jats residing in the Central Districts of Punjab, except for necessity and the other permissible reasons.
All alienation as a bona fide act of good management has been treated as one of necessity and hence valid.
[233B] In the instant case, the vendee proved the ingredients of good management and the concurrent finding of the Trial Court and the first appellate court was that the impugned sale was an act of good management, and it was essentially a finding of fact.
[234F] The High Court was, therefore, in error in setting aside the concurrent finding of fact in the facts and circum stances of the case in Second Appeal.
Gujar vs Sham Das, 107 P.R. 1887; Mohammad Chiragh and Ors.
vs Fatta & Ors., AIR 1934 Lahore 452; Abdul Rafi Khan vs
P. Lakshmi Chand and Ors., AIR 1934 Lahore 998; Dial Singh vs Surain Singh, AIR 1937 Lahore 493; Gujjan Singh and Ors.
vs Atma Singh, 1968 PLR Vol.
70 195.


Input:
Civil Appeal No. 982 (NT) of 1975.
From the Judgment and order dated 10.10.1974 of the Gujarat High Court in Gift Tax Reference No. 1 of 1973.
Dr. V. Gauri Shanker, K.C. Dua, C.V. Subha Rao and Miss A. Subhashini for the Appellant.
T.A. Ramachandran, Sonet P. Mehta.
D.N. Misra and Ms. Sunita Narhari for the Respondent.
The Judgment of the Court was delivered by VENKATACHALIAH, J.
This appeal, by certificate, by the Commissioner of Income Tax, Gujarat, directed against the order dated, 10.10.1974 of the Gujarat High Court in Gift Tax Ref.
No. 1 of 1973 raises a question touching the correct principles of valuation of certain shares constituting the subject matter of a gift, held in a company incorporated in the United Kingdom analogous to a private limited company in India.
Shri Ambalal Sarabhai, since deceased, held 480 shares in an English Company M/s. Bakubhai & Ambalal Ltd., London, the share capital of which consisted of 2000 shares of 10 each.
On 17.10.1964, under eight deeds of gift, the said Ambalal Sarabhai made gifts of the said 480 shares to certain members of his family.
In the proceedings of the assessment to gift tax respecting said gifts the question of the proper basis for determination of the value of the gifts having arisen, the assessee contended that, as the shares were not quoted in the stock exchange, their value be determined on the average of break up value indicated by the balance sheets of the Company as on 31.3.1964 and 31.3.1965.
The former figure was Rs.507 and the latter Rs.333 per share; the average of the two being Rs.420 per share.
The assessee also contended that in view of the decision of the General Body of the company, dated, 4.10.1961 to increase its share capital by issue of additional 2000 shares at 10 each, the value of the shares constituting the subject matter of the gifts which were transferred "ex right" would stand depreciated.
344 The Gift Tax Officer did not accept the contentions of the asses see.
He proceeded to value the shares at Rs.507 per share on the basis of the break up value yielded by and deducible from the balance sheet as on 31.3.1964.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
In the further appeal before the Income Tax Appellate late Tribunal, the Tribunal, placing reliance on what it considered to be the principles of valuation appropriate to such cases said to be contained in Lynal & Anr.
vs I.R. C. (H.L.), , valued the shares at Rs.450 each said to represent the break up value on the basis of the balance sheet of 31.3.1963.
The Tribunal held that it could not take into consideration any other document except the published in formation which, in this case, was the balance sheet as on 31.3.1963.
The Tribunal, at the instance of both the revenue and the assessee stated a case and referred three questions of law for the opinion of the High Court the first two at the instance of the revenue and the third at the instance of the assessee.
The assessee, it must be observed did not press the question referred at his instance and the High Court, accordingly, did not express any opinion on it.
The two questions referred for the opinion of the High Court at the instance of the Revenue were: "(1) Whether on the facts and in circumstances of the case.
the finding of the Tribunal based on the ratio of the case decided by the House of Lords in Lynall and Another vs Inland Revenue Commissioner, (83 l.
T.R. 563) and basing the valuation of the shares of Bakubhai and Ambalal Ltd., London, on its balance sheet as at 31.3.63 instead of 31.3.64 is bad in law? (2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in accepting the valuation of the shares as returned by the assessee and deleting Rs.27,360 added by the Gift Tax officer under Section 15(3) of the Act?" The High Court by its order, now under appeal, answered the questions against the revenue.
It held: "The only information which was available as on October, 17, 1964 was in the form of the balance sheet as of March 31, 1963 and hence the Tribunal was right when it took into consideration for the purpose of arriving at the value of the 345 shares by the break up method, the balance sheet as at March 31, 1963 and not as the revenue was contending for the balance sheet as of March 31.
Dr. Gauri Shanker, Learned Senior Counsel urged in support of the appeal, that the entire exercise of valuation before the High Court rested on a case which had no application to the matter; that the case was governed squarely by the pronouncements of this Court in Commissioner of Wealth Tax, Assam vs Mahadeo Jalan & Ors., and, more particularly, in Commissioner of Gift tax, Bombay vs Smt.
Kusumben D. Mahadevia, ( and that the erroneous view of the High Court as to the principles of valuation should, therefore, not remain uncorrected.
Shri Ramchandran, learned senior counsel for the assessee, in the.
light of the aforesaid pronouncements to this court, found it difficult to support the principles on which the determination of the value of the shares proceeded before the authorities as well as before the Tribunal and the igh Court.
He, however, invited our attention to the following observations of the High Court: " .
As a matter of fact it may be pointed out that before the Tribunal it was common ground that the value of the shares should be ascertained by following the break up value method and the only difference was as to with reference to balance sheet of what date the total value of the assets has to be ascertained . and urged that in view of the consensus between the parties as to the basis of valuation it was not now open to the Revenue to turn around and urge the application of an altogether different principle.
We are afraid, the basis adopted by the High Court is clearly unsustainable in the light of the pronouncements of this court referred to earlier.
The reference to and reliance upon the Lynall principle was somewhat in apposite and misplaced.
That case principally dealt with the impermissibility of reliance on classified information considered confidential and privileged from disclosure.
Pointing out the inadequacy of the "break up value" method this court in Mahadeo Jalan 's case referred with approval to the following observations of Williams J in Mc.
Cathie vs Federal Commissioner 's of Taxation ; " . the real value of the shares . will depend 346 more on the profits which the company has been making and should be capable of making, having regard to the nature of its business than upon the amounts which the shares would be likely to realise upon liquidation . .
In Kusumben 's case referring to the principles of valuation relevant to the matter, this court said: ". .
But where the shares in a public limited company are not quoted on the stock exchange or the shares are in a private limited company the proper method of valuation to be adopted would be the profit earning method.
This method may he applied by taking the dividends as reflecting the profit earning capacity of the company on a reason able commercial basis but if it is found that the dividends do not correctly reflect the profit earning capacity because only a small proportion of the profits is distributed by way of dividends and a large amount of profits is systematically accumulated in the form of reserves, the dividend method of valuation may be rejected and the valuation may be made by reference to the profits.
The profit earning method takes into account the profits which the company has been making and should be capable of making and the valuation, according to this method is based on the average maintainable profits.
Of course, for the purpose of such valuation, the taxing authority is not bound by the figure of profits shown in the profit and loss account because it is possible that the amount of profits may have suffered diminution on account of unreasonable expenditure or the directors having chosen to take away a part of the profits in the form of remuneration rather than dividends.
The figure of profits in such a case would have to be adjusted in order to arrive at the real profit earning capacity of the company . ." The view of the High Court cannot, therefore, be said to reflect the position in law correctly.
The correct principle of valuation applicable to a given case Is a question of law.
The parties can agree upon a principle permissible under and recognised by law.
If two or more alternative principles ar equally valid and available, it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to 347 another.
In this case, the revenue cannot be said to be precluded from urging the correct legal position.
In the ultimate analysis, it requires to be held that the view of the High Court as to the principle of valuation in determining the value of the kind of shares concerned in this case cannot be held to be correct.
The first question of law referred for its opinion would otherwise, require to be answered in the affirmative and the second in the negative; both against the assessee.
As a logical consequence, the Tribunal would have to go through, over again, the exercise of determination of the value of the shares adopting the correct principle.
But the matter is already two and a half decades old.
The gift was in the year 1964.
The total Gift Tax as now assessed is Rs.5661.
Upon a fresh determination of the value of the shares adopting the somewhat intricate processes inherent in the 'profit method ' of valuation the difference in the quantum of the tax might, perhaps, not be substantial.
The magnitude of the mechanism for refixation of the value of the gifts and the difference in the quantum of the tax it might result in, do not bear a reasonable or sensible proportion.
Having regard to the pecuniary involvement in the case which is obviously small we think we should not expose the parties to a fresh round of litigation.
In this view of the matter, we think appellant should be content with the declaration of the law on the matter, without disturbing the valuation made by the Tribunal and approved by the High Court.
though the principle adopted is not supportable in law.
We therefore decline to interfere in the matter.
The valuation is therefore left undisturbed . 9.
The appeal is disposed of accordingly.
In the circumstances of the case, there will be no order as to costs.
N.P.V. Appeal disposed of.

Output:
% The assessee contended in the gift tax assessment proceedings that the 480 shares in the English Company acquired as gift were not quoted in the stock exchange, that their value be determined on the average break up value indicated by the balance sheets of the Company as on 31.3.1964 and 31.3.1965, and that in view of the decision of the General Body of the Company dated 4.10.1961 to increase its share capital by issue of additional shares the value of the shares constituting the subject matter of the gifts which were transferred "ex right" would stand depreciated.
The Gift Tax officer valued the shares on the basis of the breakup value yielded by and deducible from the balance sheet as on 31.3.1964.
The Appellate Assistant Commissioner dismissed the assessee 's appeal.
In the further appeal before the Income tax Appellate Tribunal, the Tribunal, relying on the ratio laid down in the English Case, Lynall and another, vs Inland Revenue Commissioner, valued the shares at Rs.450 each, said to represent the break up value on the basis of the balance sheet of 31.3.1963, holding that it could not take into consideration any other document except the published information, which was the aforesaid balance sheet.
The Tribunal stated a case and referred the matter to the High Court, for its opinion.
The High Court held that since the only information which was available on the date of the gifts was in the form of the balance sheet as of March 31, 1963, the Tribunal was right in taking the same into consideration, for the purpose of arriving at the value of the shares by the 'break up ' method.
342 In the appeal to this Court it was contended on behalf of the Revenue that the principle of valuation relied upon by the High Court was erroneous, and that the case was covered by the decisions of this Court in Commissioner of Wealth Tax, Assam vs Mahadeo Jalan & Ors., and Commissioner of Gift Tax, Bombay vs Smt.
Kusumben .
Mahadevia, On behalf of the assessee it was urged that in view of the consensus between the parties as to the basis of valuation, it was not now open to the Revenue to urge the application of an altogether different principle.
Disposing of the appeal, ^ HELD:1.
The correct principle of valuation applicable to a given case is a question of law.
The parties can agree upon a principle permissible and recognised by law.
If two or more alternative principles arc equally valid and available it might be permissible for the parties to agree upon one of the alternative modes of valuation in preference to another.
[346G H] In the instant case, the Revenue cannot be precluded from urging the correct legal position.
[347A] 2.
When the shares in a public limited company are not quoted on the stock exchange.
Or are in a private limited company the proper method of valuation to be adopted would be the profit earning method.[346B C] Commissioner of Gift Tax, Bombay vs Smt.
Kusumben D. Mahadevia, , relied upon.
Commissioner of Wealth Tax, Assam vs Mahadeo Jalan .
& Ors.
, and, Williams J in Mc.
Cathie vs Federal Commissioner of Taxation, ; , referred to.
In the instant case, the view of the High Court as to the principle of valuation in determining the value of the kinds of shares concerned cannot be held to be correct.
As a logical consequence, the Tribunal would have to go through, over again, the exercise of determination of the value of the shares adopting the correct principle.
But, having regard to the fact that the matter is already two and a half decades old, and that the magnitude of the mechanism for the re fixation of the value of the gifts by adopting the somewhat intricate process inherent in the 343 "profit method" of valuation, and the difference in the quantum of tax that might result in, do not bear a reasonable or senible proportion, the valuation is left undisturbed.[347A D]


Input:
Appeal No. 257 of 1964.
Appeal by special leave from the judgment and order dated February 19, 1963 of the Government of India, Ministry of Mines and Fuel, New Delhi on an application for review under rule 54 of the Mineral Concession Rules 1960.
section N. Andley, Rameshwar Nath, P. L. Vohra and Mahinder Narain, for the appellant.
C. K. Daphtary, Attorney General, R. Ganapathy lyer and B. R. G. K. Achar, for respondent No. 1.
R. N. Sachthey, for respondent No. 2.
The Judgment of the Court was delivered by Hidayatullah, J.
The appellant Messrs. Nandram Hunatram of Calcutta, a firm consisting of four partners including one Kishan Lal Aggarwal, held a mining lease for coal in respect of Handidhua Colliery for a period of 30 years commencing on April 6, 1959.
Under Part VII of the lease, which contained the covenants of the lessee, the firm had undertaken to commence mining operations within one year from the date of the execution of the lease and then to continue the work of searching and winning minerals without voluntary intermission in a skillful and workman like manner.
The firm had appointed one M. L. Goel as the Manager and Kishan Lal Aggarwal as the occupier of the colliery.
It appears (and in fact it is not denied) that the partners fell out among themselves and as none of them was willing to spend money on the colliery, work deteriorated and came to a standstill in May 1962.
Goel reported to the State Government that the wages of the labourers had not been paid for weeks, that work had stopped at the colliery and that even the essential services were not being maintained owing to non payment of wages.
He wrote to the firm and Government early in the first week of May, bringing to their notice that the colliery was in danger of being flooded if the essential services stopped working.
On May 9, 1962 the essential services stopped working as their wages had not been paid for several weeks.
The colliery began to get flooded when the pumps stopped and it was apprehended that within the next few hours the pumps would be drowned and the colliery lost.
Government, however, stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
On May 14, the Chief Inspector of Mines was informed by Kishan Lal Aggarwal that he was restrained by the other 106 Partners of the firm from making payment for running expenses of the colliery and that he was not in a position to perform his duties as an occupier.
He accordingly resigned his office.
Goel also resigned and on May 16, 1962 the Sub divisional Officer, Talchar informed Government that the situation had become very alarming and that some action was absolutely necessary.
Government thereupon gave a notice on May 19, 1962 asking the firm to remedy the defect within sixty days of the receipt of the notice failing which Government threatened to take over the colliery from the firm.
As the firm did nothing to remove the defects and did not request for extension of time, Government took over the colliery and terminated the lease.
The firm thereupon filed an application for revision before the Central Government under Rule 54 of the Mineral Concession Rules 1960.
The Central Government asked for the comments of the State Government on the application and invited the firm to make its own comments upon the reply of the State Government.
Taking the entire matter into consideration the Central Government by order, February 19, 1963, rejected the application for revision.
The present appeal is against the order of the Central Government by special leave of this Court.
It was admitted in the application for revision and it is not denied before us that the partners were quarrelling among themselves and the work at the colliery had therefore stopped.
It is admitted that the wages of the labourers were not paid for about five weeks before Government sent its notice on May 19, 1,962.
It is further admitted that the essential services had also stopped working and that but for the timely action of the Government, the colliery would have been flooded in a matter of hours and probably rendered unworkable till dewatered.
With this background in mind we have to consider the objections of the firm to the order of the Central Government in the first instance and of the State Government in the final analysis.
Clause (3) of Part VII of the lease is one of the covenants by the lessee and under it the lessee undertook to continue work, without voluntary intermission, in a skilful and workman like manner.
Under cls.
(i) to (x) of Rule 41 of the Mineral Concession Rules, 1949 and under Rule 27(5) of the Mineral Concession Rules, 1960 power is conferred on the State Government to require the lessee by notice to remove a breach within 60 days of the receipt of notice and in default to determine the lease and forfeit the whole or part of the security in deposit.
Under Rule 27(1)(f) the lessee is also required to conduct operations in a proper, skilful and workmanlike manner.
It is abvious that there was a breach by the lessee of the covenants and the Mineral Concession Rules when the firm stopped working the colliery.
Even if the firm did not order the stoppage of the work at the colliery it is clear from the complaints 107 of Goel and Kishan Lal Aggarwal that no payment was being made to the labourers and they stopped work.
On record there are many telegrams and letters sent by the Workers ' Association to Government complaining of the failure of the firm to pay their wages for weeks.
It is thus clear that action was absolutely necessary to save the colliery from being ruined.
It is contended, however, that the wages were paid in full on the 17th of July but that obviously cannot do away with voluntary intermission which had already taken place for a few weeks.
The firm in its representation to the Central Government said that it had plans to raise as much as 240,000 tons of coal per year but their performance shows that in April, 1962 they had raised less than 2,000 tons and nothing in May, June and July.
In these circumstances, there is no merit whatever in the submission of the firm that the action by the State Government was arbitrary and high handed.
It is plain that the firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
It is, however, argued before us that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the application for revision.
Reliance is placed upon two recent decisions of this Court which, following the earlier decision reported in Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala(1) have laid down that Government should give reasons when it performs quasi judicial functions such as hearin appeals and revisions.
The two cases are Madhya Pradesh Industries Ltd. vs Union of India and Ors.(2) and Aluminium Corporation of India Ltd. vs Union of India and Ors(3) In Harinagar Sugar Mills(1) the order was reversed on the ground that reasons for the decision should have appeared.
In the Aluminium case there was dispute as to how much scrap was remelted and Government gave its decision on a report received behind the back of the aggrieved party again without stating why a part of the assessee 's case was rejected.
In the Madhya Pradesh Industries case it was pointed out that an order affirming an earlier decision need not fail because it does not repeat the same reasons over again.
The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
The facts in the case were quite clear and spoke (1) ; , (2) ; (3) C.A. No.635 of 1964 decided on September 23,1965.
108 for themselves.
The belated attempt to pay the back wages of the workmen did not undo the voluntary intermission for a significantly long period and did not wipe off the dereliction on the part of the firm by which the existence of the colliery was gravely endangered.
The documents on the record quite clearly establish that the colliery was being flooded as the essential services had stopped functioning and but for the timely intervention of the State Government the colliery would have been lost.
In these circumstances, it is quite clear that the action of the State Government was not only right but proper and this is hardly a case in which any action other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving of the action taken in the case by the State Government, which stood completely vindicated.
The order of the Central Government is clearly sustainable on the ma terial and it is not said that anything has been withheld from us.
The action of the State Government far from being arbitrary or capricious was perhaps the only one to take and all that the Central Government has done is to approve of it.
The appeal fails and is dismissed with costs.
Appeal dismissed.

Output:
The appellant firm held mining lease of a colliery on the condition to continue the work, without voluntary intermission, in a skillful and workman like manner.
The partners fell out amongst, themselves, the work of the colliery stopped, wages of the labourers were not paid, the essential services stopped working, and the colliery began to get flooded.
The State Government stepped in and made a promise to the essential workmen that their wages would be paid and this saved the colliery.
The State Government gave a notice asking the firm to remedy the defect within sixty days failing which it would take over the colliery.
As the firm did nothing to remove the defects and did not request for extension of time, the State Government took over the colliery and terminated the lease.
The firm filed a revision before the Central Government.
The Central Govern ment asked for the comments of the State Government and invited the firm to make its own comment upon the reply of the State Government.
Taking the entire matter into consideration, the Central Government rejected the revision.
In appeal to this Court, the firm contended that the action by the State Government was arbitrary and highhanded and that the Central Government did not give a hearing to the firm and also did not give any reasons in its order dismissing the revision.
HELD:The action of the State Government far from being arbi trary or capricious was not only right but proper.
This$ was hardly a case in which any act ion other than rejecting the application for revision was called for and a detailed order was really not required because after all the Central Government was merely approving the action taken in the case by the State Government, which stood completely vindicated.
[108 B C] The Mineral Concession Rules make it incumbent on the Central Government to obtain the comments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the comments of the State Government.
This procedure was correctly followed and the Central Government thus had a detailed discussion of the pros and cons of the case before it.
[107 G].
Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala, [ ; , Madhya Pradesh Industries Ltd. vs Union of India.
[1966] J.S.C.R. 466 and Aluminium Corporation of India Ltd. vs Union of India and Ors., C.A. No. 635/64, dated 22 1965] referred to.
105 The firm did not fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the colliery and of endangering it by neglect.
This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules.
[107 C D].


Input:
ivil Appeal No. 13 of 1958.
Appeal by special leave from the judgment and order dated June 29, 1954, of the former Nagpur High Court in Misc.
Civil Case No. 219 of 1952.
R. Ganapathy Iyer and D. Gupta, for the appellant.
M. C. Setalvad, Attorney General for India, K. G. Chondke, J. B. Dadachanji and K. K. Raizada, for the respondents.
I. N. Shroff, for the Intervener (State of Madhya Pradesh).
April 21.
The Judgment of the Court was delivered by DAS, C. J.
This is an appeal by special leave, against the order of the High Court of Judicature at Nagpur dated June 29, 1954, answering against the 704 appellant certain questions referred to it by the Board of Revenue under section 23(1) of the Central Provinces & Berar Sales Tax Act, 1947 (hereinafter referred to as "the Act").
The reference arose out of an order of assessment made on the respondent for ' payment of sales tax for the period June 1, 1947, to November 12, 1947, on a taxable turnover of Rs. 30,067 9 0.
The facts leading up to the present appeal may shortly be stated as follows.
The respondent deals in matchwood called " sawar " (Bombay Malabaricum).
His place of business is situate at Chanda in the erstwhile Central Provinces.
In January 1948 the respondent entered into an agreement with the Western India Match Co. Ltd., which is popularly known and will hereinafter be referred to as " WIMCO " for the supply of a minimum quantity of 2,500 tons of sawar logs during the season 1947 48.
This agreement is evidenced by WIMCO 's letter dated January 7, 1948, accepting and confirming it.
Unfortunately that letter, although a part of the record, has not been printed in the Paper Book.
It is common ground, however, that the agreement of sale was subject to the conditions appearing in a formal contract in writing dated March 2, 1945, which is said to have been renewed from year to year.
It appears that prior to the execution of the last mentioned contract there was another contract between the respondent and WIMCO which was dated October 18, 1940.
Evidently that contract was superseded by the later one of March 2, 1945, the terms and conditions whereof were renewed year after year.
It is, therefore, not easily intelligible why both the contracts were filed before the Sales Tax authorities and actually mentioned in the first question that was referred to the Hight Court.
Both the contracts have been printed in the Paper Book and reference has been made to some of the terms of both of them in the course of the arguments before us.
The reason for referring to the terms of the ,earlier contract is presumably to emphasise the variation in the language used in the corresponding provisions of the later contract as indicative of a definite change in the intention of the parties.
It is, therefore, 705 as well that the relevant clauses of both the contracts should be set out here for properly following the arguments advanced on both sides.
Reference may first be made to the earlier contract dated October 18, 1940.
Clause I sets out the specifications, that is to say, the dimensions and quality of the logs to be delivered under the contract which need not be reproduced here.
The other material clauses, omitting the unnecessary portions thereof, may now be set out: " 2.
The Contractor agrees that any logs supplied by him which do not conform with the specification herein shall not be accepted or paid for by the company and he the contractor undertakes to remove all logs so rejected at his own expense from the Company 's premises within fifteen days after date of notice to him or his representative from the Company so to remove such logs.
Should the Contractor fail to i.e. move such logs from the Company 's premises within the period stipulated it is hereby mutually agreed that such failure shall be construed as being the Contractor 's consent to relinquish all claims whatsoever to such rejected logs, and the Contractor agrees to such logs thereupon becoming the property of the company and that the contractor shall have no claim whatsoever upon the company for payment either in respect of the supply by him of such rejected logs or arising out of the disposal by the Company of such logs." " 3.
The said goods shall be delivered at Ambernath in the quantities and at the times hereinafter mentioned, i.e., " 4.
The goods to be supplied under this Contract shall be despatched by the Contractor from Railway Stations on the B.N.R. and G.I.P.R. Sections between the following Stations : " 5.
Measurements: The goods under this contract shall be measured under the supervision of the 89 706 Company 's Factory Manager at Ambernath on arrival of the goods at the Factory in accordance with the following stipulations: The Contractor agrees to. accept the decision of the Company 's Factory Manager at Ambernath as final and binding.
" The prices of the logs to be supplied are set out in cl. 6 of the contract as "F.O.R. Ambernath ".
We now pass on to the later contract of March 2, 1945.
Clause 1 sets out the specifications of the logs to be supplied under the contract in exactly the same language as in el.
I of the earlier contract.
The other material clauses, again omitting the unnecessary portions, are as follows: " 2.
The contractor agrees that any logs supplied by him which, on arrival at Ambernath, are found in the opinion of the Company 's Factory Manager not to conform with the specifications herein shall not be accepted or paid for by the Company, notwithstanding the fact that such logs may have been accepted by the Company 's representatives before being railed to Ambernath.
" It may be mentioned here that Ambernath is a place situate in the erstwhile province of Bombay and outside the Central Provinces.
The goods to be supplied under this contract shall be despatched by the Contractor from railway stations on the B. N. Railway, N. section Railway and G. 1.
P. Railway sections between the following stations.
It is unnecessary to set out the names of the stations which, it may, however, be stated, are all in the erstwhile Central Provinces.
Clause 6 provides: "6.
Measurements: The goods under this contract shall be measured under the supervision of the Company 's representative in accordance with the following stipulations: 707 The contractor agrees to accept the decision of the Company 's Factory Manager at Ambernath as final and binding.
" The prices of the logs to be supplied under the contract are specified as " F.O.R. Ambernath " in cl. 7 which concludes with the following sentence: " The money so due and payable shall be paid by the Company to the Contractor when the measurements of the goods have been completed under the supervision of the Company 's representative." Pursuant to the agreement between the respondent and WIMCO, the former loaded diverse quantities of Sawar logs on railway wagons and despatched the same by railway from Chanda or other railway stations in the Central Provinces to Ambernath in the erstwhile province of Bombay and outside the Central Provinces.
It is not disputed that on many occasions the representative of WIMCO was present at the railway station when the logs were sorted out and loaded into the wagons.
The statement of the case submitted along with the reference under section 23(1) of the Act is silent on the point as to whether the railway receipts were made out with WIMCO as the consignee; but it is abundantly clear from the order of the Assistant Commissioner, Sales Tax, which is part of the record and it has not been disputed before us that " the railway receipt which is a document of title according to section 2(4) of the Indian is taken in the name of the consignee.
" The course of dealings between the parties also appears to be that, on arrival of the logs at Ambernath, the consignee buyer WIMCO, paid the railway freight and the logs were inspected and measured by WIMCO 's Factory Manager and the prices, calculated at the agreed rates, were paid to the respondent 's agent at Bombay.
There is no doubt that the price of the logs supplied by the respondent to WIMCO under the agreement and accepted by the latter during the period in question amounted to Rs. 30,067 9 0.
The question for our 708 decision is whether the respondent is liable to pay any sales tax under the Act.
It will be convenient at this stage to refer to the relevant provisions of law applicable to the facts of this case.
Section 4 of that Act is the charging section.
According to this section safes tax is payable " on all sales effected after the commencement of the Act." " Sale " is defined by section 2(g) of the Act.
At the relevant period, that section, omitting Explanation 1, which is not material for our purpose, ran as follows: " 'Sale ' with all its grammatical variations and cognate expressions means any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods made in course of the execution of a contract, but does not include a mortgage, hypothecation, charge or pledge.
. . . . . . . . . . Explanation II: Notwithstanding anything to the contrary in the Indian , the sale of any goods which are actually in the Central Provinces and Berar at the time when the contract of sale as defined in that Act in respect thereof is made, shall, wherever the said contract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar.
" The Act being a piece of legislation enacted by the legislature of the erstwhile Province of Central Provinces and Berar, its operation is limited to the territories of that province.
Therefore, the question arises: Does the sum of Rs. 30,067 9 0 represent the prices of logs sold by the respondent within the Central Provinces ? Sale being the transfer of property in the goods agreed to be sold, we have to enquire if the property in the goods which fetched the sale proceeds on which the sales tax is sought to be levied was transferred in the Central Provinces as contemplated in the main definition or if those goods were actually in the Central Provinces at the time when the contract for sale as defined in the in respect thereof was made as required by Explanation II set 709 out above.
This takes us to the .
Section 4 of the is expressed in the words following: "4.
Sale and agreement to sell: (I) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
There may be a contract of sale between one part owner and another.
(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
" There can be no doubt that the agreement pursuant to which the logs were supplied by the respondent to WIMCO was an agreement to sell within the meaning of the above section.
There is also no controversy between the parties that at the date when this agreement was entered into, the logs were unascertained goods.
The question is: When did that agreement to sell unascertained goods become a sale and where did such sale take place ? In other words, when and where did the property in those goods pass from the respondent to WIMCO ? The transfer of property in the goods as between the seller and buyer is dealt with in Ch.
III of the .
Section 18 of the runs thus : " 18.
Goods must be ascertained: Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.
" Passing over sections 19 to 22 which (except as to sub section
(3) of section 19) apparently apply to contracts for the sale of 710 specific or ascertained goods, we come to section 23 which provides : " 23.
Sale of unascertained goods and appropriation : (I) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer.
Such assent may be expressed or implied, and may be given either before or after the appropriation is made.
(2) Delivery to carrier: Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.
" Reference may next be made to section 33 and section 39(1).
Section 33 says: " 33.
Delivery : Delivery of goods sold may be made by doing anything which the parties agreed shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf" Section 39(1) runs as follows: " 39.
Delivery to carrier or wharfinger: (1) Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger, for safe custody, is prima facie deemed to be delivery of the goods to the buyer.
" Keeping the provisions of the above quoted sections of the two Acts in view, we have to decide when and where the property in the logs passed from the respondent to WIMCO.
The Assistant Commissioner of Sales Tax assessed the respondent to a tax of Rs. 939 10 0 and imposed on the respondent a penalty of Rs. 100 under section 25 of 711 the Act for not having submitted its return in contravention of r. 19 of the Central Provinces and Berar Sales Tax Rules.
The Assistant Commissioner took the view that the loading of the logs into the wagons at railway stations within the Central Provinces and the taking out of the railway receipts in the name of the consignee, WIMCO, and the delivery of the same to WIMCO, had the effect of putting the latter in pos session of the goods as laid down in section 39(1) of the Indian and he accordingly held that the sale of the goods took place at Chanda and other railway stations in the Central Provinces and that the assessee was, consequently, liable to pay the sales tax under the Act.
The respondent preferred an appeal to the Sales Tax Commissioner who upheld the Assistant Commissioner 's order of assessment as well as of the penalty.
He laid greater emphasis on Explanation II to section 2(g) of the Act as over riding the provisions of the Indian in respect of the transfer of property in the logs and held that as the ' logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under that Explanation.
He also agreed with the Assistant Commissioner that the delivery of the logs to the railway company and the sending of the documents of title to WIMCO had, under section 39(1) of the , the effect of putting WIMCO in possession of the logs.
The respondent preferred what in form appeared to be a second appeal to the Board of Revenue.
As, however, there could be no second appeal under section 22(4) of the Act, the Board treated the memorandum of appeal as an application for revision under sub section
5 of section 22 of the Act read with r. 57.
Both the members of the, Board of Revenue came to the same conclusion, namely, that the sales were liable to assessment under the Act, but the reasonings adopted by them were somewhat different.
Shri Shrivastava, a member of the Board of Revenue, took the view that as soon as logs answering the description agreed upon were brought to the railhead at Chanda and sorted out and 712 loaded in the wagons in the presence of WIMCO 's re presentatives, there was an implied contract of sale of specific and ascertained goods, as evidenced by the conduct of parties and the property in each consignment passed immediately from the respondent to WIMCO at the railway station in the Central Provinces where such implied contracts were made.
The Chairman of the Board of Revenue, however, took the view that the contract of sale was made outside the Central Provinces, namely, in Bombay and that, under the , the property in the logs passed to WIMCO in Ambernath outside the province but that as the logs were in the Central Provinces, either in the form of logs or in the form immediately preceding, namely, trees standing on the land which had been impliedly agreed to be severed from the land before actual sale, Explanation II to section 2(g) of the Act applied and the sale must, accordingly, be deemed to have taken place within the Central Provinces and, must, therefore, be liable to sales tax under the Act.
The Board rejected the application but remitted the penalty.
On the application of the respondent under section 23(1) of the Act, the Board of Revenue submitted to the High Court a statement of case raising the following questions: " (1) Did the agreements of the kind on record the one dated 18 10 40 and the other dated 2 3 45constitute contracts of sale either express or implied in respect of sawar wood supplied by the assessee to WIMCO? (2) If the answer to question No. I be in the affirmative, did the contracts relate to specific or ascertained goods or to unascertained or future goods? (3) Did the property in the goods pass to WIMCO by consignment simpliciter at different railway stations within this province, or did it pass at Ambernath when the goods were approved as provided in the contract ? (4) Was reliance on the definition of I goods ' contained in section 2(7) of the in order in applying Explanation II to section 2(g) of the Sales Tax 713 Act in cases, where the goods sold were in the form of trees standing on the land in this province at the time of the contract of sale?" In its judgment dated June 29, 1954, the High Court took the view that the sales in question did not take place in the Central Provinces and Berar and consequently were not " sales " within the meaning of the Act and, therefore, not liable to tax.
It gave the following answers to the above questions: " Our answers to the questions referred for decision are : (1) The agreement in question was an express agreement to sell sawar logs to WIMCO.
There was neither an express nor an implied contract each time goods were railed.
(2) The contract was not for delivery of specific goods but of unascertained or future goods by description.
(3) The property in the goods did not pass to the buyer by the delivery to the railway for carriage.
It passed at Ambernath where the goods were appropriated by the buyer to the contract with the assent of the seller.
(4) The word ' goods ' in the definition of I sale in the Sales Tax Act must be interpreted according to its definition in section 2(d) of the Act and not according to the definition in section 2(7) of the .
The standing sawar trees are not goods within the meaning of the former Act.
" The effect of the answers being to nullify the assessment order, the Commissioner of Sales Tax has come up on appeal before us after obtaining special leave of this Court.
The answers to the first two questions have not been questioned before us.
The main arguments have centred round the answers to questions 3 and 4.
The answer to question 3 turned on the construction placed by the High Court on section 23 of the .
After quoting section 23, the High Court observed as follows: " After sorting the logs with the assent of the buyer 's representative, the applicant appropriated the 90 714 logs to the contract by railing them to the buyer 's destination at Ambernath.
The statement of the case is silent on the point whether the railway receipts were made out with the Company as the consignee.
The assent of the representative was provisional and was not binding on the Company.
Under the agreement it did not agree to unconditionally appropriate the logs to the contract as soon as they were delivered to the railway with the assent of its representative for carriage to Ambernath.
It had expressly reserved its right to reject the goods on examination at Ambernath.
The agreement therefore was that the buyer should, with the assent of the seller, appropriate the goods to the contract at Ambernath.
The appropriation under section 23 was not complete till the goods reached Ambernath and were appropriated by the Company to the contract.
The appropriation of the goods by the applicant at the railheads was conditional on their acceptance by the buyer at Ambernath.
There is nothing in the statement of the case to show that the logs were not so appropriated.
Therefore, the property in the logs passed to the buyer at Amber nath." The learned counsel for the department appearing in support of this appeal contends that property in the logs passed from the respondents to WIMCO under section 23 when sawar logs were brought to the railway station and loaded in the wagon and the railway receipts taken in the name of WIMCO were forwarded to the latter.
There was an unconditional appropriation of the goods to the contract by the respondent.
There was, according to learned counsel, assent on the part of WIMCO to this appropriation in two ways, namely, (a) expressly given by its representative who was present at the railway station, and (b) impliedly given by WIMCO by having agreed in advance that the goods should be despatched by rail from the stations mentioned in cl. 4 of the agreement, all of which were situate in the Central Provinces.
There is no doubt and indeed it has been categorically conceded by learned counsel for the department that the contract was for sale of unascertained goods and consequently the property in them could 715 not, under section 18, pass unless and until the goods were ascertained.
His contention is that logs of the contract quality and description having been unconditionally appropriated by the respondent to the contract without reserving to itself any right of disposal and WIMCO having expressly through its representative or impliedly by the very terms of the contract assented to such appropriation, property in them passed under section 23 from the respondent to WIMCO at the railway stations within the Central Provinces as soon as the sawar logs were loaded on the wagons and the railway receipts were taken out in the name of WIMCO.
It is said that so far as the respondent is concerned it unconditionally appropriated the logs to the contract.
Seeing that they were actually accepted by WIMCO on their arrival at Ambernath it is quite clear that the logs were of the contract quality and description.
The only question, according to learned counsel for the department therefore, is whether there was assent of WIMCO to such appropriation.
It has been found as a fact that WIMCO 's representative was not present on all occasions when sawar logs used to be loaded on the railway wagons.
There is no evidence that he was actually present when these particular sawar logs, with the sale proceeds of which we are concerned, were put into the wagons.
Nor is there an iota of evidence that the representative of WIMCO had any authority to.
bind WIMCO by any assent.
In view of these difficulties, learned counsel for the department did not press the case of express assent of the representative of WIMCO and concentrated on the case of implied assent.
It is quite clear from the language of section 23 itself, that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to representation may be express or implied and that it may be given after the appropriation or in advance before such appropriation.
Learned counsel for the department lays strong emphasis on the provision of cl. 4 in the contract that the sawar logs should be despatched by rail from certain stations within the Central Provinces and contends that delivery by the seller of sawar logs of the contract quality and 716 description to the railways in terms of the contract without the reservation of any right of disposal has the effect of passing the property therein to WIMCO at the railway stations in the Central Provinces under section 23 as well as of constituting delivery of them at the railway stations under sections 33 and 39(1).
The argument is prima facie sound unless there be some other provision in the contract to negative this conclusion, e. g., that the logs must be carried to Ambernath and delivered there (See The Badische Anilin and Soda Fabrik vs The Basle Chemical Works, Bindschedler (1)).
Learned counsel for the department does not urge that if the matter had to be decided on the terms of the earlier contract dated October 18, 1940, he could properly say that there was nothing in the contract negativing the idea of the passing of property in the logs within the Central Provinces.
The cumulative effect of the provisions of el. 2 that the property in the rejected logs would ' pass to WIMCO upon the failure of the respondent to remove the same after rejection, of el. 3 that the goods shall be delivered at Ambernath in the presence of WIMCO 's Factory Manager and of el. 6 providing that the prices will be " F.O.R. Ambernath " clearly militate against the theory of passing of property immediately on the goods being loaded into the wagons.
While not contesting this, learned counsel for the department urges that there is no such contrary intention indicated in the later contract of March 2, 1945, which really governs the case.
We are unable to accept this distinction as of any substance.
It is true that in this later contract cl. 2 is differently worded and there is no express provision that the goods should be delivered at Ambernath.
There are, nevertheless, several other provisions in the later contract indicating that property in the logs loaded in the wagon will not pass to WIMCO until after the goods arrive at Ambernath and are inspected, measured and accepted by WIMCO 's Factory Manager.
Clause 2 of the later contract quite clearly reserves the right of WIMCO to examine the goods on arrival and to reject the same if they are found, in the opinion of its Factory Manager, not to (1) , 717 conform with the specifications.
This reservation, which is made notwithstanding the fact that the logs may have been accepted by its representative before they were railed to Ambernath, clearly indicates that the so called acceptance by the representative was not final but was entirely tentative and subject to approval of the logs by WIMCO 's Factory Manager at Ambernath after their arrival.
This circumstance certainly militates against the property in them having already 'passed to WIMCO at the railway stations in the Central Provinces.
The provisions of cl. 6 that the goods shall be measured under the supervision of WIMCO 's representative, the decision of its Factory Manager at Ambernath being binding on the respondent and of el. 7 that the prices shall be " F.O.R. Ambernath " and shall be payable after such measurement of the logs by WIMCO 's representative further reinforce the conclusion that the intention of the parties was that property in the goods shall not pass until the logs arrive at Ambernath and are there inspected, measured and accepted by WIMCO.
In our judgment the prima facie case of what might have been the appropriation of the logs by the respondent by loading on the wagons logs of the contract quality and description with the assent of WIMCO given in .advance by the terms of el. 4 is effectively displaced by the provisions of cls. 2, 6 and 7 of the later contract which clearly indicate a contrary intention.
On a proper construction of the contract as a whole the intention of the parties clearly was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where WIMCO 's Factory Manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.
In other words the respondent sent the logs and left it to WIMCO to appropriate to the contract such of them as they accepted as of contract quality and description.
The respondent, therefore, gave in advance its assent to WIMCO 's appropriation of the goods at Ambernath.
Therefore, the decision of the High Court cannot be assailed but must be accepted as well founded in fact and in law.
Learned counsel for the department then falls back 718 upon the Argument founded on Explanation II to section 2(g) and 'argues, somewhat halfheartedly, that notwithstanding the provisions of the regarding the passing of property in the goods the sale under consideration must be deemed, in the light of that Explanation, to have taken place within the Central Provinces.
The question of the constitutional validity of that Explanation was not raised in the High Court and indeed, in view of the decision of this Court in Poppatlal Shah vs State of Madras (1) and other ' cases, cannot now be raised and we must proceed on the footing that Explanation 11 did not transgress the legislative competency of the Legislature which enacted the same.
It will be noticed that Explanation II can apply only if the goods " in respect of " which the contract of sale is entered into are, at the date of such contract, actually in the Central Provinces.
Learned counsel for the department urges that the logs delivered must have been in existence in the Central Provinces either in the shape of ';logs or in the shape of standing timber.
There is no evidence that at the date when the agreement for sale was made, the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
Learned counsel says that, at any rate, they must have been in existence there in the shape of standing timber.
Apart from anything else,, the agreement here was riot " in respect of " any standing timber and there was no provision in the agreement as between the respondent and WIMCO for severance of the standing timber before sale under that agreement.
In order to attract Explanation II the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold.
There is not an iota of evidence on that point.
In our judgment, there is no force in this alternative argument.
The result, therefore, is that this appeal is dismissed with costs.
Appeal dismissed.

Output:
The respondent company was a dealer in matchwood called sawar " and his place of business was situate in Chanda in the erstwhile Central Provinces.
Pursuant to an agreement between the respondent and a match factory, the former loaded diverse quantities of " sawar " logs on railway wagons and despatched the same by rail from Chanda and other railway stations in the Central Provinces to Ambernath, a town in the erstwhile Province of Bombay.
Under cl. 4 Of the agreement the goods to be supplied under the contract shall be despatched by the contractor from certain railway stations within the Central Provinces, while cl. 2 reserved the right of the consignee to examine the goods on arrival at.
Ambernath and to reject the same if they, were found, in the opinion of the factory manager, not to conform with the specifications.
Clause 6 provided that the goods shall be measured under the supervision of the factory 's repre sentative, the decision of the factory manager at Ambernath being binding on the contractor, and by cl. 7 the prices of the goods shall be " F. O.R. Ambernath ".
The course of dealings between the parties was that on arrival of the logs at Ambernath the logs were inspected and measured by the factory manager and the prices, calculated at the agreed rates, were paid to the respondent 's agent at Bombay.
The question was as to when and where the property in the logs passed from the respondent to the consignee and whether the respondent was liable to pay sales tax under the provisions of the Central Provinces and Berar Sales Tax Act, 1947.
At the date when the agreement was entered into, the logs were unascertained goods.
There was also no evidence that at that date the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all.
The sales tax department levied the tax on the respondent on the grounds, inter alia, that (1) the property in the logs passed from the respondent to the factory consignee under section 23 Of the Indian , when the logs were loaded in the wagons at railway stations within the Central Provinces and the railway 703 receipts taken in the name of the factory were forwarded to the latter, and that (2) in any case, as the logs were in the Central Provinces at the date when the contract for sale was made, the transfer in them must be deemed to have taken place there under Explanation II to section 2(g) Of the Central Provinces and Berar Sales Tax Act, 1947.
Held : (1) that on a proper construction of the contract as a whole the intention of the parties was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where the factory manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon.
Conse quently, as the respondent sent the logs and left it to the factory to appropriate to the contract such of them as they accepted as of contract quality and description, the property in the logs did not pass to the buyer by the mere delivery to the railway for carriage but passed only at Ambernath when the logs were appropriated by the factory with the assent of the seller within the meaning of section 23 of the Indian .
(2) that Explanation II to section 2(g) of the Central Provinces because under the Explanation the goods, in respect of which the contract of sale is made, must, at the date of the contract be in existence in the Central Provinces, that is to say, that the goods must at the date of the contract be there in the form in which they are agreed to be sold and there was no evidence, in the present case, for this.


Input:
vil Appeals Nos.
4885 91 of 1989.
From the Judgment and Order dated 21.9.
1989 & 6.10.1989 of the Punjab & Haryana High Court in C.W.P. No. 11218/89 and 12519, 12520, 12521, 12593, 12868 & 12463 of 1989.
P.H. Parekh, Manoj Swarup and J.P. Pathak for the Appellant.
Krishan Kumar and Mehta Dave & Co. for the Respondents.
The Judgment of the Court was delivered by SAWANT, J.
These appeals are directed against two Orders of the Punjab & Haryana High Court by which the High Court has directed the appellant Institute to admit respondent students 1 to 8B to its B .E. course irrespective of their merits.
The relevant admitted facts are that on May 24 and 25, 1989, respondent No. 9 Punjab University held a Com bined Entrance Test (C.E.T.) for admission to B.E. course (Session 1989 90) conducted by 4 different institutes in cluding the appellant Institute.
On June 26, 1989, the University declared the merit list of students who appeared in C.E.T. June 30, 1989 was the last date fixed for submit ting applications by students to individual institutes.
The students were given choice of the institutions and they were required to state their choice in order of preference.
The representatives from the 4 institutes met together at Chand igarh from 24th to 27th July 1989 to finalise the admissions tO the 4 institutes.
The meeting of the representatives of the 4 institutes was necessary to ensure that the students were given the institutes of their choice in the order of merit, subject, of course, to the students applying to the particular institutes and that the student did not get admission at more than one institute at a time.
The Commit tee of representatives interviewed the students and awarded them the institutes of their choice in the order of their respective merits.
Accordingly, the appellant Institute drew up its merit list of candidates.
Interviews were held in the respective institutes including the appellant Institute for filling up the reserved seats other than those 397 reserved for Scheduled Castes and Scheduled Tribes and also for filling up seats in general category which fell vacant subsequentIy as a result of the students leaving the appel lant Institute.
On August 14, 1989, a second round of inter views was held in all the institutes including the appel lant Institute for filling seats which fell vacant as a result of the students leaving the appellant Institute subsequently.
Incidentally, this was also the last date of admission to B.E. course as was notified in the prospectus of the appellant Institute.
However, the last date was extended to 25th August, 1989 by an advertisement in the newspaper, namely, Tribune published on August 19, 1989 wherein it was clearly mentioned that the admission to the course will be closed on August 25, 1989.
The advertisement was repeated in another newspaper, namely, the Times of India on August 20, 1989.
The appellantInstitute closed the admissions at 5.00 p.m. on August 25, 1989.
On this day, the position of the appellant Institute was that the last stu dent who was admitted to the B .E.
Course was at serial number 1127 in the merit list prepared by the University as per the results of the C.E.T 3.
On August 30, 1989, respondents 1 to 4 filed a Writ Petition No. 112 18/89 before the Punjab & Haryana High Court for a direction to the appellant Institute to extend its last date of admission and to admit them to the B.E. course in the appellant Institute alleging that six seats were lying vacant in the Institute.
In the meanwhile, as usual, the first test of the B.E. course was held by the appellant Institute after six weeks of the commencement of the course.
On September 19, 1989, the appellant Institute filed its written statement to the writ petition objecting to the maintainability of the petition against the appellant Institute as it was not a State within the meaning of Article 12 of the Constitution of India.
It was also pointed out in the written statement that since the past experience showed that some students left the Institute as soon as they got admission in the other institutes, the appellant Institute had admitted 10 additional students to the B.E. course.
The total seats available in the B.E. course in the appellant Institute were 180 and students at numbers 181 190 were admitted to meet this contingency.
It was also pointed out in the written statement that the last date of admission to the course was fixed by the appellant Institute taking into account the said past experience as well as to put a seal of finality on the process of admission which would otherwise continue indefinitely.
On September 20, 1989, the appellant Institute also filed a short affidavit in the writ petition stating therein that the admissions to the B.E. course had closed on 25th August, 1989 and no student had been 398 admitted thereafter.
It was also pointed out that regular classes had begun, and the first terminal examination had been held from 4th September, 1989 to 9th September, 1989 which carried weightage of about 30% marks.
Hence, the students admitted at the belated stage would not be able to cover up lecture attendance and no seat in excess of the total seats could be filled up.
On September 21, 1989, the High Court allowed the writ petition by proceeding on the assumption that more than half a dozen seats were lying vacant with the appellant Institute.
The High Court held that belated admissions were something that the students seeking such admissions would worry about rather than the appellant Institute.
The appel lant Institute was also directed to grant admissions to respondents 1 to 4 in the B.E. course forthwith.
As pointed out by the appellant Institute, on that day the factual position with regard to seats in the course was that out of 190 students who were granted admission, 12 students had left leaving a total strength of 178 students.
Since the last date for admission was August 25, 1989, 178 students had continued in the course with regular instructions and tests one of which was already held as stated earlier be tween 4th and 9th September, 1989, six weeks after the commencement of the course.
A further batch of Writ Petitions, namely, Writ Petitions Nos.
125 19, 12520, 1252 1, 12593, 12868, 12463 all of 1989 filed by respondents 5 to 8B respectively were allowed by the High Court on October 6, 1989 directing the appellant Institute to admit the respective respondents to the said course.
It also further appears that three other similar writ petitions filed by other students seeking admission to the course in the appellant Institute are pending before the High Court for preliminary hearing.
The appellant Institute further points out that the second test of the said course was scheduled to be held from 23rd to 28th October, 1989.
It is not disputed before us that whereas the last student admitted on merit in the appellant Institute was at serial number 1127 in the merit list prepared by the Univer sity as per the Combined Entrance Test, the respondent students were at the serial numbers in the said merit list, as follows: respondent No. 1 (1145), No. 2 (1147), No. 3 (116 1), No. 4 (1277), No. 5 (1259), No. 6 (1112), No. 7 (1266), No. 8 (1218), No. 8A (1189) and No. 8B (1245).
Thus it will be seen that except for respondent No. 6 who had not earlier applied for being admitted to the appellant Insti tute and had opted for some other Institute, all the re spondents had secured lower numbers in the merit list.
399 What is further, the students who were at a higher serial number of merit list were still waiting for admission to the appellant Institute, when the High Court directed the appel lant Institute to admit the respondent students.
What is more, even in their writ petitions before the High Court the respondent students had claimed no further relief than that they should be directed to be admitted to the appellantIn stitute according to their merit.
The relief claimed in Writ Petition No. 112 18/89 may be reproduced here by way of illustration: "this Hon 'ble Court may please to issue a Writ of Mandamus directing the respondents to extend the date of admission and to admit the petitioners in the B.E. course as per their merits;".
(emphasis supplied) The High Court further not only ignored the fact which was specifically pointed out in the appellant Institute 's affi davit in reply before it, that there were no seats available in the appellant Institute whose capacity was only 180 seats but also the fact that there were more meritorious students than the respondents as per the C.E.T. who could not secure admission and who were waiting to be admitted to the appel lant Institute.
The respondent students could get admission to the appellant Institute only if their comparative merits ordained it and not otherwise.
They could claim no merit over other meritorious students merely because they had approached the Court for securing admission.
There was further nothing wrong in the appellant Institute admitting 10 more students in the circumstances pointed out above.
The Institute has a capacity of only 180 students.
To meet the contingency of the students leaving it soon after admission they had admitted, as they do every year, 10 more students.
As it turned out, 12 of the students left leaving 178 students on the roll, with only 2 vacan cies.
The High Court could have directed only two students to be admitted and that too on merit.
Admittedly, there were more meritorious students than the respondents, waiting in queue.
The High Court thus travelled beyond its jurisdiction and not only directed more students than the Institute could absorb but also students who were less meritorious, to be admitted.
No reasons whatsoever have been given by the High Court for exercising its extraordinary writ jurisdiction so peremptorily which has resulted in injustice both to the appellantInstitute as well as to the students who stood higher in merit than almost all the respondent students except respondent No. 6.
We refrain from making any further comments on the impugned order.
400 8.
Since the respondent students stand already admitted, and the more meritorious students cannot now avail of the seats given to the respondents due to lapse of time, we do not propose to interfere with their pursuit of the course.
It is for this reason that we are dismissing the appeals.
In the circumstances, the appeals stand dismissed, but with no order as to costs.
G.N. Appeals dismissed.

Output:
For admission to B.E. Course (1989 90 Session) in the appellant Institute and 3 other institutes, there was a Combined Entrance Test held by the Punjab University.
The results were declared, and students allotted to the respec tive institutes of their choice.
The appellantInstitute drew up merit list of candidates allotted to it and gave admis sions in that order.
To fill up the vacant seats as a result of some students leaving the Institute, the appellant Institute held inter views on 14.8.1989, which incidentally was the last date for admission to B.E. Course.
However, the last date was extend ed up to 25.5.1989.
When admission was closed on that day, the last student admitted was at section No. 1127 in the merit list prepared by the University.
Respondents 1 to 4 filed a writ petition before the High Court on 30.8.1989, alleging that six seats were vacant and the appellantInstitute be directed to admit them.
The High Court on 21.9.1989 allowed the writ petition on the assump tion that six seats were vacant, whereas only 2 seats were available, according to the appellantInstitute.
Respondents 5 to 8B also approached the High Court by way of writ petitions and the High Court directed the appel lant Institute to admit the six Respondents also in the B.E. Course.
Further, three other similar writ petitions were pending before the High Court.
395 Against the above said orders of the High Court, the appellantInstitute has preferred these appeals contending that the last candidate admitted was at section No. 1127 in the merit list and admittedly all the Respondents except Re spondent No. 6 were less meritorious, while candidates with higher merits were still waiting for admission.
It was contended that while there were only 2 vacant seats, the High Court has directed the appellant Institute to admit as many as ten candidates, that too long after the course started and the First Terminal Exams were over.
Dismissing the appeals, this Court, HELD: 1.1 The High Court not only ignored the fact which was specifically pointed out in the appellant Institute 's affidavit that there were no seats available in the appel lant Institute whose capacity was only 180 seats, but also the fact that there were more meritorious students than the Respondents as per the Combined Entrance Test, who could not secure admission and who were waiting to he admitted to the appellant Institute.
The Respondent students could get admission to the appellant Institute only if theft compara tive merits ordained it and not otherwise.
They could claim no merit over other meritorious students merely because they had approached the Court for securing admission.
In fact, in their writ petitions before the High Court, the respondent students had claimed no further relief than that they should be directed to be admitted according to their merit.
[399B E] 1.2 There was nothing wrong in the appellant Institute admitting 10 more students in B.E. Course.
The Institute has a capacity of only 180 students.
To meet the contingency of the students leaving it soon after admission the appellant Institute had admitted 10 more students as has been done every year.
As it turned out, 12 of the students left leav ing 178 students on the roll, with only 2 vacancies.
The High Court could have directed only two students to be admitted and that too on merit.
Admittedly, there were more meritorious students than the respondents, waiting in queue.
The High Court thus travelled beyond its jurisdiction and not only directed more students than the Institute could absorb but also students who were less meritorious to he admitted.
No reasons whatsoever have been given by the High Court for exercising its extraordinary writ jurisdiction so peremptorily which has resulted in injustice both to the appellant Institute as well as to the students who stood higher in merit than almost all the respondentstudents except Respondent No. 6.[399E H] 396 2.
Since, however, the respondent students stand already admitted, and the more meritorious students cannot now avail of the seats given to the respondents due to lapse of time, their pursuit of the course is not interfered with.
[400A]