Input:
le 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 percent, the value of that asset for the purposes of Rule 2A shall be taken to be its market value.
[49 B] In the instant case, the Wealth tax Officer was of the view that the book values of specific house properties as indicated in the returns filed by the appellant No. 2 were far below their market values.
He was therefore justified in making a reference to the Valuation Officers under section 16A and the notices issued by the Valuation Officers were valid.
[49 E] & CIVIL APPELLATE JURISDICTION: Civil Appeal No. 816 of 1978.
From the Judgment and Order dated the 4th October, 1977 of the High Court of Judicature at Allahabad in Writ Petition No. 88 (Tax) of 1975.
38 V.S. Desai, Ravindra Narain, Harish Salve, Miss Rainu Walia and P.K. Ram, for the Appellants.
B.B. Ahuja for the Respondents.
The Judgment of the Court was delivered by TULZAPURKAR, J.
This appeal by certificate is directed against the judgment and order dated 4th October, 1977.
of the Allahabad High Court whereby the High Court upheld the reference made by the Wealth Tax Officer (Respondent No. 1) to the Valuation Officers (Respondents Nos. 2 and 3) for valuing certain buildings belonging to the appellant No. 1 firm as well as the notices issued by the Valuation Officers to appellant No.2 in furtherance of the Reference.
The appellants had by means of a writ petition challenged the reference as well as the notices on certain grounds and had prayed for a mandamus restraining respondents Nos. 2 and 3 from valuing the buildings.
The writ petition having been dismissed, the appellants have come up in appeal to this Court.
Most of the material facts giving rise to this appeal are not in dispute and may briefly be stated as follows: Appellant No. 1 (M/s. Juggi Lal Kamlapat, Bankers) is a partnership firm.
Appellant No. 2 (Padampat Singhania) was one of the partners in the firm in his capacity as a 'Karta ' of a Hindu Undivided Family upto 15 3 1972.
He was being assessed to wealth tax in the status of H.U.F. and the assets so assessed for wealth tax included the interest of the family in appellant No. 1 firm.
For the assessment years 1967 68 to 1972 73 wealth tax returns were submitted by appellant No. 2 in the status of H.U.F. and therein the family 's interest in appellant No. 1 firm was included.
Since appellant No. 1 firm owned a number of buildings in Kanpur in the returns so submitted the book value of those buildings had been adopted by appellant No.2 for valuing the interest of the family in appellant No. 1 firm.
Respondent No. 1 felt that the market value of those buildings was much more than such book value.
He, therefore, referred the question of valuation of those buildings to respondents Nos. 2 and 3 (the concerned Valuation Officers) under s.16A of the Wealth Tax Act 1957 (hereinafter referred to as 'the Act ').
Respondents Nos. 2 and 3 issued notices under section 38A (1) (b) of the Act to appellant No. 2 intimating that they would inspect the buildings for determining the fair market value thereof and requested him to afford necessary facilities for such inspection and to produce certain records connected with those build 39 ings.
On receiving the notices appellant No. 2 realised that respondent No.1 had referred the question of valuation of the concerned buildings to respondents Nos. 2 and 3 under section 16A of the Act and that the notices issued by respondents Nos. 2 and 3 were in furtherance of such reference.
On 9th of September, 1974 appellant No.2 addressed a letter to respondent No. 1 contending that none of the properties referred to the Valuation Officers belonged to him and that the reference to them was unauthorised and the same should be with drawn.
He also addressed letters to respondents Nos. 2 and 3 in which he contended that reference made to them by respondent No.1 was invalid and requested each one of them to return the reference back to the Wealth Tax Officer.
Since these contentions were not accepted by the respondents, the appellants filed a writ petition in the High Court challenging the reference made by respondent No.1 as well as the notices issued by respondents Nos. 2 and 3.
On behalf of the appellants the following contentions were urged in support of the writ petition: (1) For the assessment of appellant No. 2, respondent No. 1 could not refer to respondents nos.
2 and 3 the valuation of building which did not belong to him but belonged to appellant No. 1 firm: (2) the interest of a H.U.F. in a partnership firm was not exigible to wealth tax; (3) the interest of appellant No. 2 in appellant No. 1 firm had to be valued in accordance with Rule 2 of Wealth Tax Rules 1957 and hence section 16A of the Act had no application; (4) the valuation of the concerned buildings forming part of the assets of the business of appellant No. 1 firm had to be determined in accordance with the commercial principles under s.7 (2) (a) and not under s.7 (1) of the Act and (5) the respondents nos.
2 and 3 could not issue the notices to appellant No.2 as he was neither the owner of the buildings nor was in occupation thereof.
In regard to the first contention the High Court took the view that though it was true that a partner of a firm could not claim ownership in specific properties belonging to the partnership firm either during the continuance of the partnership or even on its dissolution but was entitled to get a share in the profits during its continuance and was further entitled, upon its dissolution or his retirement there from, to the value of his share in the surplus of the partnership assets left after a deduction of liabilities and prior charges on the date of dissolution or retirement, it was clear that having regard to section 29 of the Partnership Act (which enables a partner to transfer his interest in the partnership firm) and s.2 (e) and 4 (1) (b) of the Act the interest of a partner in the partnership firm will have to be regarded as a part 40 of his net wealth under the Act.
As regards the second contention which was elaborated to the effect that even if the interest of an individual in a partnership firm could be regarded as an asset within the meaning of s.2(e) of the Act, the interest of a H.U.F. in the partnership firm could not be regarded as such asset and was not, therefore, exigible to wealth tax (for which reliance was placed on the circumstances that under s.4 (1) (b) of the Act provision has been made for determining the value of an individual 's interest in a partnership firm but no corresponding provision obtains in the Act for inclusion of the interest of H.U.F. in a partnership firm for purposes of assessment), the High Court took the view that from the said circumstances relied upon it did not follow that the interest of a H.U.F. in a partnership firm could not be regarded as a part of net wealth of such family or was not liable to wealth tax, especially when the charging provision namely, s.3 of the Act expressly levied wealth tax on the net wealth of every Hindu undivided family and there was no reason why its interest in a partnership firm, which was property, could not be regarded as a part of its assets liable to the charge under the section.
With regard to the third and fourth contentions the High Court held that Rule 2, sec. 7 and sec.
16A (1) (4) (ii) had to be read harmoniously and Rule 2 did not exclude the application of secs.
7 and 16A for valuing an asset of a partner in a partnership firm and that notwithstanding the non obstante clause contained in sec.
7 (2) it was an enabling provision giving a discretion to the Wealth Tax Officer either to value the assets of a business as a whole or valuing each asset thereof separately and in that behalf the Wealth Tax Officer had the power to refer such valuation to the Valuation Officer under sec.
As regards the last contention the High Court negatived the same by observing that appellant No. 2 as a partner could be regarded as an agent of appellant No. 1 firm and the Valuation Officers could issue Notices to him requiring him to afford facilities for inspection of the concerned buildings and to produce books, documents and records relevant for the valuation of those buildings.
In this view of the matter the High Court dismissed the writ petition but its decision is challenged in this appeal.
Counsel for the appellants raised substantially two contentions in support of the appeal.
In the first place counsel has contended that there is no provision for the inclusion of a Karta 's interest in a partnership firm in the H.U.F. 's net wealth for wealth tax purposes under the Act and this would be clear from sec.
4 of the Act.
Elaborating this contention counsel has pointed out that sec.
4 (1) is applicable to the computation of the net wealth of an individual and 41 that the said provision is a deeming provision whereunder certain tassets though held in reality by some others are to be treated as belonging to that individual and included in his net wealth for purposes of his wealth tax assessment and one such deeming provision is to be found in cl.
(b) thereof which provides that where the assessee is a partner in a firm the value of his interest in a firm determined in the prescribed manner shall be included in computing the net wealth of such individual and what is urged is that there is no provision to be found in the Act which provides for the inclusion of Karta 's interest in a firm in the H.U.F. 'section net wealth.
Counsel strenuously urged that but for the deeming provision which is to be found in cl.
(b) even the interest of partner (in his individual capacity) would not have become includible in his net wealth.
In otherwise, according to counsel, there is a lacuna in the Act as regards the inclusion of a Karta 's interest in the partnership firm in his H.U.F. 'section net wealth and, therefore, the Department 's attempt to include the interest of appellant No.2 (as a Karta) in appellant No.
I 's firm in the net wealth of his H.U.F. is not warranted by any of the provisions of the Act.
Secondly, counsel has urged that assuming that appellant No.2 's interest (as a Karta of his H.U.F.) in appellant No. 1 's firm is exigible to the wealth tax under the Act, the valuation of such interest being governed by sec.
7 (2) (a) of the Act read with Rule 2A of the wealth Tax Rules, 1957 it is not open to the Wealth Tax officer to refer the valuation of specific house properties belonging to the firm to the Valuation officers under section 16A of the Act; in fact; according to him, the valuation of the assets of the partnership business of appellant No.1 as a whole having regard to its balance sheets for the concerned years ought to have been undertaken by the Wealth Tax officer and as such the book values of the house properties as appearing in the Balance Sheets ought to have been accepted by him and, therefore, the reference made by the Wealth Tax officer to Valuation officers as well as the notices issued by the latter being incompetent and unjustified in law, are liable to be quashed.
For the reasons which we shall presently indicate neither of the contentions has any substance and both are liable to be rejected.
In order to deal with the first contention mentioned above it will be necessary to set out the material provisions of s.4 of the Act Clauses (a) (b) of sub section
(1) of sec.
4 run as follows: "Net wealth to include certain assets: 4.(1) In computing the net wealth of an individual, there shall be included, as belonging to that individual 42 (a) the value of assets which on the valuation date are held (i) by the spouse of such individual to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, or (ii) by a minor child, not being a married daughter, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, otherwise than for adequate consideration, or (iii) by a person or association of persons to whom such assets have been transferred by the individual directly or indirectly otherwise than for adequate consideration for the immediate or deferred benefit of the individual, his or her spouse or minor child (not being a married daughter) or both, or (iv) by a person or association of persons to whom such assets have been transferred by the individual otherwise than under an irrevocable transfer, or (v) by the son 's wife, or the son 's minor child, of such individual, to whom such assets have been transferred by the individual, directly or indirectly, on or after the 1st day of June, 1973, otherwise than for adequate consideration, whether the assets referred to in any of the sub clauses aforesaid are held in the form in which they were transferred or otherwise: Provided that where the transfer of such assets or any part thereof is either chargeable to gift tax under the Gift tax Act, 1958(18 of 1958), or is not chargeable under section 5 of that Act, for any assessment 43 year commencing after the 31st day of March, 1964 but before the 1st day of April, 1972, the value of such assets or part thereof, as the case may be, shall not be included in computing the net wealth of the individual; (b) where the assessee is a partner in a firm or a member of an association of persons not being a co operative housing society, the value of his interest in the firm or association determined in the prescribed manner".
It is true that sec.
4 (1) deals with the computation of the net wealth of an individual and it is also true that same enacts a deeming provision in the sense that certain assets which do not in fact or in reality belong to that individual (the assessee) but to some one else are to be treated as belonging to that individual and are to be included in his net wealth.
But, in our view, a careful reading and analysis of cls.
(a) and (b) thereof will make it clear that there is a great difference between the cases covered by sub cls.
(i) to (v) of cl.
(a) and the case covered by cl.
(a) refers to five situations in all of which the asset is held by some one other than the individual concerned (the assessee) (e.g. held by the spouse or minor child of such individual to whom such asset has been transferred by such individual directly or indirectly otherwise than for adequate consideration, etc.) and it is provided that such asset held by that some one else shall be treated as belonging to the assessee a deeming provision in the real sense of creating a legal fiction, while under cl.
(b) it is provided that where the individual assessee is a partner in a firm it is the value of his interest in the firm determined in the prescribed manner that is to be treated as belonging to him and is includible in his net wealth.
In other words cl.
(b) is not a deeming provision in the sense in which a deeming provision is made in cl.
It cannot be said that the interest of a partner in a firm does not belong to him; it in fact belongs to him and no legal fiction is required for treating it as belonging to him and the proper way to interpret cl.
(b) would be that the deeming part of it relates to the quantum of his interest in the firm determined in the prescribed manner which is to be treated as belonging to him and includible in his net wealth.
It is impossible to accept the contention that but for cl.
(b) of s.4 (1) the interest of a partner (where he happens to be an individual assessee) in a firm would not have been exigible to wealth tax under the Act.
As we shall presently point out a partner 's interest in a firm either in his individual capacity or in his capacity as a Karta of H.U.F is otherwise exigible 44 to wealth tax under the other provisions of the Act and the deeming provision contained in s.4 (1) (b) properly understood must be held to be referable to the quantification of his interest in the firm determined in the prescribed manner that is made includible in his net wealth.
Section 3 of the Act read with the definitions of "net wealth" as given in sec.
2 (m) and "assets" given in sec.
2 (e) clearly brings out the exigibility of a partner 's interest in a firm either in his individual capacity or his capacity as a Karta of a H.U.F. to wealth tax under the Act.
Section 3 which is a charging provision runs thus: "Charge of wealth tax.
Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in Schedule I." Section 2 (m) defines "net wealth" thus: "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever, located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than (here follow three types of debts which are not to be reckoned with which we are not concerned).
" Section 2 (e) defines "assets" thus: "assets" includes property of every description, movable or immovable, but does not include (here follow certain specified properties with which we are not concerned.)" On reading the aforesaid provisions together it will appear clear that wealth tax has been levied on the net wealth of an individual 45 or a H.U.F. meaning thereby the aggregate value of all the assets belonging to such assessee minus all the debts owed by him.
Under the definition of 'assets" property of every description, movable or immovable is included, and since it cannot be disputed and was not disputed before us that a partner 's interest in a firm either in his individual capacity or in his capacity as a Karta of a H.U.F. is property.
the same would be includible in the expression "assets" which will have to be taken into account while computing the net wealth of such individual or H.U.F. and on such net wealth the charge of wealth tax has been imposed under sec.
It is thus clear that there is no lacuna in the Act as regards the making of a Karta 's interest (representing his H.U.F.) in the partnership firm exigible to wealth tax.
The first contention, therefore, must fail.
The second contention of counsel for the appellant has been that even if it be held that appellant No. 2 's interest (as a Karta of his H.U.F.) in the appellant No. 1 's firm is exigible to the tax under the Act the valuation of such interest would be governed by sec. 7 (2) (a) of the Act read with Rule 2A of the Wealth Tax Rules 1957 and since it is a case of valuing such interest in the partnership business of appellant No. 1 firm the Wealth Tax Officer while first valuing the assets of the business should have, having regard to the balance sheets of the said business as on the valuation dates, accepted the book values of the specific house properties as appearing in the balance sheets and could not refer the valuation thereof to the Valuation officers under sec.
16A of the Act which being inapplicable could not be resorted to; in this connection reference was also made by counsel to sub s (2) of sec.
4 whereunder it is provided that in making any rules with reference to the valuation of the interest referred to in cl.
(b) of sub section
(1) (being a partner 's interest in a firm) the Board shall have regard to the law for the time being in force relating to the manner in which accounts are to be settled between partners of a firm on the dissolution of a firm.
The substance of the argument, in brief, has been that sec.
7 (1) which enables the Wealth tax officer to determine the value of any asset, other than cash, at the market price thereof on the valuation date for the purposes of the Act is inapplicable to the instant case and, therefore, sec.
16A is not attracted and hence the valuation reference made by the Wealth tax officer to the Valuation officers regarding specific house properties is liable to be set aside.
As we shall demonstrate presently, the contention proceeds on an entire misconception of the relevant provisions of the Act and the Rules.
We have already indicated above that a partner 's interest in a 46 firm, either in his individual capacity or as a Karta of a H.U.F., is property or asset liable to be included in the net wealth of the concerned assessee and is exigible to wealth tax under the Act.
Once that position is accepted it is clear that such asset will have to be valued for the purposes of the Act and in this behalf Rule 2 (1) of the Wealth tax Rules, 1957 prescribes the manner of valuing such interest, It runs thus: "Valuation of interest in partnership or association of persons.
(1) The value of the interest of a person in a firm of which he is a partner or in an association of persons of which he is a member, shall be determined in the manner provided herein.
The net wealth of the firm or the association on the valuation date shall first be determined.
That portion of the net wealth of the firm or association as is equal to the amount of its capital shall be allocated among the partners or members in the proportion in which capital has been contributed by them.
The residue of the net wealth of the firm or association shall be allocated among the partners or members in accordance with the agreement of partnership or association for the distribution of the assets in the event of dissolution of the firm or association, or, in the absence of such agreement, in the proportion in which the partners or members are entitled to share profits.
The sum total of the amounts to so allocated to a partner or member shall be treated as the value of the interest of that partner or member in the firm or association.
" The aforesaid rule clearly says that in order to determine valuation of a partner 's interest in the firm, first the net wealth of the firm has to be determined, which determination, of course, is governed by sec.
7 of the Act and the rule goes on to provide as to how the net wealth of the firm so determined shall be allocated among the partners of the firm, which allocated amount will be regarded as the value of the interest of each partner in the firm.
Coming to the precise contention raised by counsel, the material provisions of the Act and the Rules having a bearing thereon would be sec.
7 (1), 7 (2) (a), 7 (3) and Rules 2A and 2B and these are as under: "Value of assests, how to be determined.
(1) Subject to any rules made in this behalf the value 47 of any asset, other than cash, for the purposes of this Act, shall be estimated to the price which in the opinion of the Wealth tax Officer it would fetch if sold in the open market on the valuation date.
(Explanation. . . . . . . ) (2) Notwithstanding any thing contained in sub section (1), (a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth tax officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed.
(3) Notwithstanding any thing contained in sub section (1), where the valuation of any asset is referred by the Wealth tax officer to the Valuation officer under section 16A, the value of such asset shall be estimated to be the price which, in the opinion of the Valuation Officer, it would fetch if sold in the open market on the valuation date, or, in the case of an asset being a house referred to in sub section (4), the valuation date referred to in that sub section.
" Rules 2A and 2B run thus: "Determination of the net value of assets of business as a whole.
Where the Wealth tax officer determines under clause (a) of sub section (2) of section 7 the net value of the assets of the business as a whole having regard to the balance sheet of such business, he shall make the adjustments specified in rules 2B, 2C, 2D, 2E, 2F and 2G." "Adjustments in the value of an asset disclosed in the balance sheet.
2B. (1) The value of an asset disclosed in the Balance sheet shall be taken to be 48 (a) in the case of an asset on which depreciation is admissible, its written down value; (b) in the case of an asset on which no depreciation is admissible, its book value; (c) in the case of closing stock, its value adopted for the purposes of assessment under the Income tax Act, Act, 1961, for the previous year relevant to the corresponding assessment year.
(2) Not withstanding any thing containing in sub rule (1) where the market value of an asset exceeds its written down value or its book value or the value adopted for purposes of assessment under the Income tax Act, 1961, as the case may be, by more than 20 per cent, the value of that asset shall, for the purposes of rule 2A, be taken to be its market value.
" On a fair reading of the aforesaid provisions it will appear clear that the primary method of determining the value of assets for the purposes of the Act is the one indicated in sec.
7 (1), inasmuch as it provides that the value of any assets, other than cash, for the purposes of this Act shall be estimated to be its market price on the valuation date.
Then comes sub sec.
(2) which provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustments therein as may be prescribed.
It is true that sub sec.
(2) commences with a non obstante clause, but even so, the provision itself is an enabling one conferring discretion on the Wealth tax officer to determine the net value of the assets of the business as a whole having regard to its balance sheets as on the valuation date, instead of proceeding under sub sec.
In other words, it is optional for the Wealth tax officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined.
Thirdly, even when he proceeds under sub sec.
(2) he has to determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date; the phrase "having regard to the balance sheet of such business" as judicially interpreted means that the Wealth tax officer has to take into consideration or account the balance 49 sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein.
Fourthly, the said sub section also says that the Wealth tax officer has to "make such adjustments therein as may be prescribed" and in this behalf Rule 2A and 2B already quoted above indicate what adjustments the Wealth tax officer has to make while determining the net value of the business as a whole.
Particularly sub rule (2) of Rule 2B clearly provides that where the market value of an asset exceeds its written down value or book value by more than 20 per cent, the value of that asset for the purposes of Rule 2A shall be taken to be its market value.
In other words, it is clear that even where the Wealth tax officer has resorted to sec.
7 (2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth tax officer has to adopt the market value of such assets for the purposes of this Act.
This is apart from the position that the resort to sec. 7 (2) itself is discretionary and optional, the provision being an enabling one.
Since in the instant case the Wealth tax officer was of the view that the book values of specific house properties as indicated in the returns filed by appellant No. 2 were far far below their market values, he was justified in making a reference to the Valuation officers under sec.
16A of the Act and the notices issued by the Valuation officers in pursuance of such reference were also valid.
In the result the appeal fails and is dismissed with costs.

Output:
The assessee (Appellant No. 2) who was Karta of a Hindu Undivided Family was a partner of the family firm (Appellant No. 1) and was being assessed to wealth tax as a HUF.
For the purpose of evaluating the interest of the family 's interest in the firm, the assessee adopted the book value of buildings owned by the firm.
On the view that the market value of the buildings was much more than their book value, the Wealth Tax Officer (Respondent No. 1) referred, under section 16A on the Wealth Tax Act, 1957, to the Valuation Officers (Respondent Nos. 2 Valuation Officers issued notices under section 38A(1) (b) for inspection of buildings and records relating to them, and the assessees objections to such procedure were overruled.
The High Court dismissed the assessee 's writ petition holding: (1) having regard to section 29 of the Partnership Act which enables a partner to transfer his interest in the partnership firm and Section 2(e) and Section 4(1) (b) of the Act the interest of a partner in the partnership firm will have to be regarded as a part of his net wealth under the Act.
(2) Section 3 the charging provision expressly levied wealth tax on the net wealth of every Hindu undivided family, and consequently the interest of a H.U.F. in a partnership firm, which is property, could be regarded as a part of its assets liable to be charged under this Section.
(3) Rule 2, section 7 and section 16A (1) (i) (ii) had 36 to be read harmoniously and Rule 2 did not exclude the application of sections 7 and 16A for valuing an asset of a partner in a partnership firm.
(4) Section 7(2) was an enabling provision giving a discretion to the Wealth tax Officer either to value the assets of a business as a whole or valuing each asset thereof separately and in that behalf he had the power to refer such valuation to the Valuation Officer under Section 16A. (5) Appellant No. 2 as a partner could be regarded as an agent of appellant No. 1 firm and the Valuation Officers could issue notices requiring affording of facilities for inspection of buildings and production of books, documents and records.
In the Appeal to this Court it was contended that: (1) there was no provision for inclusion of a 'Karta 's interest in a partnership firm in the H.U.F. 's net wealth for wealth tax purposes under the Act, and (2) even assuming that appellant No.2 's interest (as a Karta of his H.U.F.) in the appellant No.1 's firm is eligible to tax under the Act, the valuation of such interest would be governed by section 7(2) (a) of the Act read with rule 2A of the Wealth Tax Rules 1957 and it was not open to the Wealth Tax Officer to refer the valuation to the valuation Officer under section 16A. Dismissing the Appeal, ^ HELD: 1(i) Section 3 of the Act read with the definitions of "net wealth" as given in Section 2(m) and "assets" given in section 2(e) clearly brings out the exigibility of a partner 's interest in a firm either in his individual capacity or his capacity as Karta of a H.U.F. to wealth tax under the Act.
[44 B C] (ii) There is no lacuna in the Act as regards the making of a Karta 's interest (representing his H.U.F.) in the partnership firm exigible to wealth tax.
[45 C] (iii) Section 4 (1) deals with the computation of the net wealth of an individual.
It enacts a deeming provision.
Certain assets which do not in fact or in reality belong to the individual (the assessee) but some one else are to be treated as belonging to that individual and are to be included in his net wealth.
Analysis of Clauses (a) and (b) of section 4(1) make it clear that there is a great difference between the cases covered by clause (b).
Clause (a) refers to five situations in all of which the asset is held by some one other than the individual concerned (the assessee).
It is provided that such asset held by that some one else shall be treated as belonging to the assessee.
Clause (b) provides that where the individual assessee is a partner in a firm it is the value of his interest in the firm determined in the prescribed manner that is to be treated as belonging to him and is includible in his net wealth.
[43 C F] (iv) It cannot be said that the interest of the partner in a firm does not belong to him.
The proper way to interpret clause (b) would be that the deeming part of it relates to the quantum of his interest in the firm determined in the prescribed manner which is to be treated as belonging to him and includible in his net wealth.
[43 F G] (v) A partner 's interest in a firm, either in his individual capacity or in his capacity as a Karta of a HUF, is property and is otherwise exigible to wealth tax under the other provisions of the Act.
[43 H] 37 2(i) Even where the Wealth tax Officer has resorted to section 7(2) for determining the value of assets of a business as a whole the written down values or book values of specific assets as appearing in the balance sheet are not sacrosanct and when the market value exceeds the written down value or book value by more than 20 per cent, the Wealth tax Officer has to adopt the market value of such assets for the purposes of the Act.
[49 C D] (ii) In order to determine the valuation of a partner 's interest in the firm, first the net wealth of the firm has to be determined under section 7 of the Act and Rule 2 provides that the net wealth of the firm so determined shall be allocated among the partners of the firm, which allocated amount will be the value of the interest of each partner in the firm.
[46 F G] (iii) The primary method of determining the value of the assets for the purposes of the Act is the on indicated in section 7(1), which provides that value of any assets, other than cash, shall be estimated to be its market price on the valuation date.
Sub section (2) provides that in the case of a business for which accounts are maintained by the assessee regularly the Wealth tax Officer may instead of determining separately the valuation of each asset held by the assessee in such business, determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date and making such adjustment to therein as may be prescribed.
[48 D F] (iv) It is optional for the Wealth tax Officer to resort to either of the methods even in the case where the net value of a business carried on by the assessee is to be determined.
Even when he proceeds under sub section (2) he has to determine the net value of the business as a whole having regard to the balance sheet of such business as on the valuation date.
[48 G H] (v) The phrase "having regard to the balance sheet of such business" as judicially interpreted means that the Wealth tax Officer has to take into consideration or account the balance sheet of such business for such valuation and not that such balance sheet is conclusive or binding or decisive of the values of assets appearing therein.
[48 H;


Input:
vil Appeal Nos.
4209 10 of 1989.
From the Judgment and Order dated 10.4.1987 of the Kerala High Court in M.F.A. No. 291 and 304 of 1982.
K.N. Bhat and Mukul Mudgal for the Appellant.
M.M. Abdul Khader and T.T. Kunhikanan for the Respond ents.
The Judgment of the Court was delivered by RAY, J.
Special leave granted.
These appeals on special leave have been filed by the con tractor, 401 K.V. George against the judgment and order passed on 10th April, 1987 by the Kerala High Court in M.F.A. No. 291 and 304 of 1982 whereby the High Court set aside the judgment of the Sub Court, Trivandrum in O.P. (Arb.) No. 296 of 1981 as also the award of the Arbitrator in A.C. No. 276 of 1980 and directed that the Arbitrator will dispose of the Arbitration case No. 132 of 1980 in the light of the judgment of the Sub Court in O.P. (Arb.) No. 81 of 1981 in accordance with law considering the claim of the contractor appellant and the counter claim of the respondents.
The appellant who is a contractor entered into a con tract with the respondents on April 22, 1978 in connection with the construction of an embankment across Musaliyar Padom between Chaniage 2573.5 M to 2827 M of E.B. Main canal of Kallada Irrigation Project.
The work was required to be completed by 30th March, 1980 i.e. two years from the date of selection notice which was dated 30th March, 1978.
As the appellant failed to complete the work as per the terms of the contract, the respondents sent a notice dated April 26, 1980 to the appellant cancelling the contract at his risk and cost.
On July 2, 1980 the appellant filed a claim being arbitration case No. 132 of 1980 before the named Arbitrator i.e. the Chief Engineer (Arbitration), Vellayambalam, Tri vandrum claiming enhancement of rates in respect of the earth work involved in the contract, interest on delayed payments and costs.
The second respondent, the Superintend ing Engineer, K.I.P. Circle, Karnataka filed a defence statement stating inter alia in para 2(1) that the time of completion of the work was fixed as 24 months from the date of handing over site to the contractor and he could have anticipated all such variations before quoting rates.
As per agreement the rates once agreed will not be enhanced.
The department is not bound to pay the claimant a revision of schedule.
In para 2(m) it has also been pleaded that as per agreement the contractor is bound to carry out additional and extra items of works that arise during execution.
The additional and extra items of works done by the contractor are quite meagre when compared to the total volume of the work.
The extra and excess items were covered by supplemen tal agreement.
The contractor was not able to complete even 35% of the total work within the time of completion of the work and as such the claimant is not entitled to attributed delay on this account.
A counterclaim was filed by the Superintending Engineer, K.I.P. Circle, Kottarakkara, the respondent No. 2 wherein a claim of a sum of Rs.28,84,000 was made.
The Arbitrator by his order dated January 22, 1981 made the 402 award in regard to claim No. 1 directing the respondents to pay 35% increase in the agreed rate for the item of Earth work excavating and filling for forming the compacted em bankment with earth from barrow area.
Claim No. 1 was thus allowed.
Claim Nos. 2 and 3 regarding interest were disal lowed.
As regards counter claim Nos. 1 and 2, it was ordered that those issues will be considered separately and so no award was made.
The appellant thereafter filed O.P. (Arb.) No. 81 of 1981 in the court of Sub Judge, Trivandrum under section 14 of the Arbitration Act for making the award a rule of the court.
On objections being raised by the respondents, the Court of the Sub Judge after hearing the parties by order dated August 18, 1981 remitted the reference to the Arbitra tor for fresh consideration on the ground that the Arbitra tor did not consider the counter claims made by the respond ents.
The appellant thereafter filed I.A. No. 3780/81 in the court of Sub Judge praying that the order dated August 18, 1981 may be reviewed.
In the, meantime, the appellant filed another arbitration case No. 276 of 1980 before.
the same Arbitrator in respect of the wrongful termination of the contract and also raised 13 items of claims therein.
The Arbitrator after going through the objections of the re spondent made an award on October 29, 1981 whereby he or dered that the re arrangement of the work should not be at the risk and cost of the appellant.
As regards claim No. 2, he ordered 30% increase in rates (as per original and sup plemental agreement) for all items of work carried out by the appellant except on items covered by Award No. 132 of 1980 dated 22.1.1981.
Claim Nos. 3 and 5 were rejected.
As regards claim No. 4 an increase of 20 per cent in the agreed rates for these items was allowed.
Claim No. 11 regarding interest was disallowed.
It was also stated in the award inter alia that the claimant shall be entitled to the refund of the security amount as well as refund of the retention amounts, the claimant shall be entitled to his final bill in terms of the Award, the counter claim for recovery of costs of rearrangement of work and also the counter claims filed by the respondent dated April 8, 1981 were declined.
The appellant filed O.P. (Arb) No. 296 of 1981 for making the second award a rule of the court.
A statement of defence was filed by the respondents wherein,it has been stated inter alia in para 6 that: "The claims made in this petition under paras 6(ii), (iii), (iv), (v), (vi) (vii) and (viii) are barred by resjudicata and constructive resjudicata.
No work was done by the claimant after termination of the contract on June 24, 1980.
403 The claim petition in Arbitration case No. 132/80 was filed by the claimant before the Hon 'ble Arbitrator on 2.7.1980.
It was open to him to raise these claims in that Arbitration petition.
Having not done this raising of these claims now which are all bogus and imaginary is barred by constructive resjudica ta.
He had not raised these claims before Chief Engineer (next Superior Authority) and also before the Hon 'ble Arbitrator in his petition dated 27.10.1980.
Hence it is prayed that the above claims may not be taken up for arbitration and they may be rejected.
" It has also been stated in sub para (iv) of para 6 that: "(iv) As above.
Also there had been no error in the rates.
The claimant was paid at his agreed rates, and he had received it and also no dispute lies on it.
Claim may be rejected.
Work done was recorded as per item No. 7 of Appl.
of agreement and was paid as per agree ment.
" The Sub Judge by order dated March 18, 1982 made the award a rule of the court dismissing the plea of res judica ta raised by the respondents in O.P. (Arb.) No. 296 of 1981.
The respondents filed two appeals being FMA Nos. 291 of 304 of 1982 before the High Court of Kerala at Ernakulam which held that the Arbitrator could not review its order on the facts of the present case and so allowed F.M.A. No. 291 and 1982.
The High Court also allowed F.M.A. No. 304 of 1982 holding that principles of constructive res judicata would apply to the arbitration case.
Feeling aggrieved by the aforesaid judgment and order passed in F.M.A. Nos. 291 and 304 of 1982, the appellant contractor has preferred the instant appeals on special leave.
Mr. Bhatt, learned counsel appearing on behalf of the appellant has submitted in the first place that the High Court was wrong in reversing the judgment and order of the trial court without considering the provisions of Section 114 as well as Order 47, Rule 1 of the Code of Civil Proce dure in as much as Order 47, Rule 1 clearly provides that review of an order may be made either on account of some mistake or enor apparent on the face of the record, or for any other sufficient reason.
In the instant case, the first award was set aside by the Trial Court on the ground that the counter claim filed on behalf of the respondents was not considered by the Arbitrator and so it remitted the same for consideration afresh.
It has been held by the High Court that the refusal to consider the counter claims had rendered the prior 404 award liable to be set aside for mis conduct of the Arbitra tor and the proceedings.
It has been urged by the learned counsel that the counter claim has been fully considered in the second award made by the Arbitrator and as such the first award cannot be set aside on the ground of non consid eration of a counter claim and it cannot be treated as mis conduct of the Arbitrator/and the proceedings for nonconsid eration of the counter claim in the first award.
It has been further contended in this connection that the finding of the High Court to the effect that the subsequent award passed by the Arbitrator dealing with the counter claims did not have the effect of mitigating the mis conduct of the Arbitrator or of condoning the error on the face of the award, is also not sustainable in as such as the counter claim filed by the respondents was duly considered by the Arbitrator in the second award made by him.
It has also been submitted by the learned counsel for the appellant that the principles of res judicata and con structive res judicata are not applicable to the award made in Arbitration case No. 291 of 1981 in as much as the dis putes that were raised were not ripe for being referred to Arbitration in view of the terms of the contract that the contractor had to raise the dispute before the Superintend ing Engineer and thereafter before the Chief Engineer and had to wait till the end of the stipulated period.
It has been further submitted that since the period was not over, the claims that have been raised subsequently in the second claim petition before the Arbitrator could not be raised in the first claim petition before the Arbitrator and as such the second award made by the arbitrator cannot be said to have been barred by res judicata as provided in Section 11 of the Code of Civil Procedure or by the rules of construc tive res judicata.
The judgment and order of the High Court in allowing F.M.A. No. 304 of 1982 setting aside the award made in Arbitration case No. 296 of 1981 is unwarranted and as such it is not sustainable.
It has also been contended that the claim made in the second claim petition before the Arbitrator is not barred by order 2, rule 2 of the Code of Civil Procedure in as much as the disputes raised in the second claim petition before the Arbitrator were not ripe for reference as the appellant had to wait till the end of the stipulated period in accordance with the terms of the contract.
The judgment and order of the High Court in allow ing the F.M.A. No. 304 of 1982 is not legal and valid and is liable to be set aside.
Mr. Abdul Khadir, learned counsel appearing on behalf of the respondents on the other hand urged before this Court that the SubJudge acted legally in directing the Arbitrator to dispose of the arbitra 405 tion case No. 132/80 in the light of the judgment of the Sub Court in O.P. (Arb.) No. 81 of 1981 and in setting aside the order of review because no case for review nor any sufficient cause has been made out for exercising the power of review under Section 114 read with Order 47, Rule 1 of the Code of Civil Procedure.
The High Court, it has been submitted, was right in holding that the order of review was unwarranted and in setting aside the same and directing the Arbitrator to dispose of the reference in accordance with law considering the claim of the contractor appellant and the counter claim of the respondents.
It has been further submitted by Mr. Abdul Khadir that in view of the provisions of Section 41 of the Arbitration Act which specifically provides that the provisions of the Code of Civil Procedure shall apply to arbitration proceedings, the principles of res judicata or of constructive res judicata will apply to arbitration proceeding.
The appellantcontractor having not raised all his claims in his first claim petition made to the Arbitrator for decision and award having been made thereon, the second claim petition before the Arbitrator making certain other claims in Arbitration Case No. 276 of 1980 is barred by the principles of constructive res judica ta in as much as on the termination of the contract by order dated April 26, 1980 the contractor could have raised all his disputes arising out of the contract at that time, but the appellant chose to take only some of the issues arising from the said breach of contract before the Arbitrator.
The second claim petition raising some issues before the Arbi trator is therefore, hit by the principles of constructive res judicata and the High Court rightly allowed the appeal setting aside the award made in Arbitration Case No. 276 of 1980.
It has also been submitted that the provisions of Order 2, Rule 2 of the Code of Civil Procedure apply to the arbitration case and the appellant having not sought refer ence of all the issues, he should be deemed to have surren dered those issues and he is debarred from raising those issues in a subsequent claim petition made before the Arbi traror.
In this connection, he has cited the ruling in Muhammad Hafiz and Anr.
vs Mirza Muhammad Zakaria and Ors., AIR 1922 (PC) 23.
The learned counsel drew our attention to para 2(i) of the objections filed by the respondents in Arbitration Case No. 132 of 1980 wherein it has been stated that: " . .
As per agreement the rates once agreed will not be enhanced.
The department is not bound to pay the claimant a revision of schedule.
" It has been further submitted by the learned counsel on behalf of the respondents that the appellant was not enti tled to an increase in 406 the rates as he claimed increase with the agreement and the claim that has been made is untenable.
It has been lastly submitted on behalf of the respond ents that the Arbitrator has mis conducted himself and the proceedings by not deciding the counter claim filed by the Government while considering the claim filed by the appel lant and making a award.
The High Court has rightly held that the Arbitrator mis conducted himself and the proceed ings and allowed the appeal, setting aside the second award made by the Arbitrator in Arbitration Case No. 276 of 1980.
The first question that falls for consideration in this case is whether the finding of the High Court setting aside the order of review made in I.A. No. 3780 of 1981 and set ting arise the order made in O.P. (Arb.) No. 81 of 1981 dated August 18, 1981 whereby the case was remanded to the Arbitrator is sustainable or not.
Admittedly, the appellant filed a claim petition being Arbitration Case No. 132 of 1980 making certain claims before the Arbitrator.
The re spondents filed the counter claims.
The Arbitrator without considering the counter claims kept the counter claims for subsequent consideration and made an award.
The Trial Court set aside the award and remitted the same to the Arbitrator for making a fresh award considering the claims and counter claims filed by the parties.
On an application for review, the Trial Court set aside the order and passed a decree in terms of the award.
It is not disputed that the Arbitrator did not at all consider the counter claims and kept the same for consideration subsequently while making award in respect of the claims filed by the appellant.
Undoubtedly, this award made by the Arbitrator is not sus tainable in law and the Arbitrator has mis conducted himself and in the proceedings by making such an award.
It is the duty of the Arbitrator while considering the claims of the appellant to consider also the counter claims made on behalf of the respondents and to make the award after considering both the claims and counter claims.
This has not been done and the Arbitrator did not at all consider the counter claims of the respondents in making the award.
As such the first award dated January 22, 1981 made by the Arbitrator in Arbitration Case No. 132 of 1980 is wholly illegal and unwarranted and the High Court was right in holding that the Arbitrator mis conducted himself and the proceedings in making such an award and in setting aside the same and directing the Arbitrator to dispose of the reference in accordance with law considering the claim of the contractor and the counter claim of the respondents.
The order allowing the application for review by the Trial Court is also bad in as much as there was no mistake or error 407 apparent on the face of the order dated August 18, 1981 made in O.P. (Arb.
) No. 81 of 1981 nor any sufficient reason has been made out for review of the said order.
The order dated August 18, 1981 is legal and valid order and the order dated March 18, 1982 allowing the, application for review being I.A. No. 3780 of 1981 and setting aside the order in O.P. (Arb.) 81 of 1981 dated August 18, 1981 is, therefore, bad and unsustainable.
With regard to the submission that the issues that have been raised in the second claim petition before the Arbitra tor is barred under the provisions of Order 2, Rule 2 of the Code of Civil Procedure, it is convenient to refer to a passage in Mulla 's Code of Civil Procedure (Volume II, Fourteenth Edition) at page 894: " .
This rule does not require that when several causes of action arise from one trans action, the plaintiff should sue for all of them in one suit.
What the rule lays down is that where there is one entire cause of ac tion, the plaintiff cannot split the cause of action into parts so as to bring separate suits in respect of those parts.
" It is pertinent to refer in this connection to the decision in Muhammad Hafiz and Anr.
vs Mirza Muhammad Zaka riya and Ors.
, AIR 1922 (PC) 23 wherein a mortgage deed provided that if the interest was not paid for six months the creditor should be competent to realise either the unpaid amount of the interest due to him or the amount of principal and interest, by bringing a suit in court without waiting for the expiration of the time fixed, and the Plain tiff, more than 3 years after (i.e. time fixed), brought a suit for interest alone and got a decree.
It was held that the second suit for principal and arrears of interest was not maintainable as under Order 2, Rule 2, C.P.C. he must be deemed to have relinquished his claim for further relief, he having exercised the option of suing for interest alone.
It was further held that the cause of action referred to in the rule is the case of action which gives occasion to, and forms the foundation of, the suit, and if that cause enables a man to seek for larger and wider relief than that to which he limits his claim, he cannot afterwards seek to recover the balance by independent proceedings.
In the instant case, the contract was terminated by the respondents on April 26, 1980 and as such all the issues arised out of the termination of the contract and they could have been raised in the first claim petition filed before the Arbitrator by the appellant.
This having 408 not been done the second claim petition before the Arbitra tor raising the remaining disputes is clearly barred.
With regard to the submission as to the applicability of the principles of res judicata as provided in Section 11 of the Code of Civil Procedure to arbitration case, it is to be noted that Section 41.
of the Arbitration case provides that the provisions of the Code of Civil Procedure will apply to the Arbitration proceedings.
The provisions of res judicata are based on the principles that there shall be no multi plicity of proceedings and there shall be finality of pro ceedings.
This is applicable to the arbitration proceedings as well.
It is convenient to refer to the decision in Daryao and Ors.
vs The State of U.P. & Ors., ; at 582 83 wherein it has been held that the principles of res judicata will apply even to proceedings under Article 32 and 226 of the Constitution of India.
It has been observed that: "Now, the rule of res judicata as indicated in section 11 of the Code of Civil Procedure has no doubt some technical aspects, for instance the rule of constructive res judicata may be said to be technical; but the basis on which the said rule rests is rounded on considerations of public policy.
It is in the interest of the public at large that a finality should attach to the binding decisions pronounced by Courts of competent jurisdiction, and it is also in the public interest that individuals should not be vexed twice over with the same kind of litigation.
If these two principles form the foundation of the general rule of res judicata they cannot be treated as irrelevant or inad missible even in dealing with fundamental rights in petitions filed under article 32.
" In Satish Kumar and Ors.
vs Surinder Kumar and Ors,, AIR 1970 (SC) 833 it has been ob served that: "The true legal position in regard to the effect of an award is not in dispute.
It is well settled that as a general rule, all claims which are the subject matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after an award has been pronounced, the rights and liabilities of the parties in respect of the said claims can be determined only on the basis of the said award.
After an award is pronounced, no action can be started on the original claim which had been the subject matter of the reference . . .
This con 409 clusion, according to the learned Judge, is based upon the elementary principle that, as between the parties and their privies, an award is entitled to that respect which is due to judgment of a court of last resort.
There fore, if the award which has been pronounced between the parties has in fact, or can, in law, be deemed to have dealt with the present dispute, the second reference would be incom petent.
This position also has not been and cannot be seriously disputed.
" Considering the above observations of this Court in the aforesaid cases we hold that the principle of res judicata or for that the principles of constructive res judicata apply to arbitration proceedings and as such the award made in the second arbitration proceeding being Arbitration Case No. 276 of 1980 cannot be sustained and is therefore, set aside.
The High Court has rightly allowed the F.M.A. No.304 of 1982 holding that the appellant contractor was precluded from seeking the second reference.
No other points have raised before us by the appellant.
In the premises aforesaid, we dismiss these appeals with costs quantified at Rs.5,000 and affirm the judgment and order dated April 10, 1987 made by the High Court.
Y. Lal Appeals dismissed.

Output:
The appellant, a contractor had entered into a contract with the Respondent on 22nd April 1978 for the construction of an embankment across Musaliyar Podom between chainage 2573.5 M to 2827 M of E.B. Main conal of Kallada Irrigation Project.
Under the contract agreement, the work was to the completed by March 30, 1980 i.e. two years From the date of selection notice which was dated March 30, 1978.
The appel lant having failed to complete the work as per the terms of the contract, the Respondent by a notice dated 26.4.80 cancelled the contract at his risk and cost.
Consequent there to the appellant filed a claim before the named Arbi trator (Case No. 132 of 1980), claiming enhancement of rates in respect of the earth work involved in the contract.
He also claimed interest on delayed payment and costs.
The respondent resisted the claim and urged that the appellant was not entitled to any enhancement, as the appellant should have visualised and assessed the position before entering into work contract which was to be completed within 2 years.
According to respondent the appellant had not even completed 35% of the work.
Respondent, No. 2, therefore, filed a counter claim for Rs.28,84,000.
The Arbitrator made the award on 22.1.1981 in respect of claim No. 1 thereby directing the Respondents to pay 35 per cent increase in the agreed rate for the item of earth work.
However claim regarding interest on delayed payment was disallowed.
As regards the counterclaim filed by the Re spondent, the Arbitrator ordered that those issues will be considered separately and thus no award in respect thereof was made.
The appellant thereupon filed O.P. (Arbitrator) 81 of 1981 before the Sub Judge Trivandrum for making the award a rule of the Court.
399 The Respondents having raised objection to the making of the award a Rule of the Court, the Sub Judge remitted the reference to the arbitrator by his order dated 18.8.81 for fresh consideration, as the arbitrator had failed to consid er the counter claim made by the respondent.
The appellant applied for review of the said order passed by Sub Judge.
Contemporaneously, the appellant filed another claim peti tion before the arbitrator (case No. 276 of 1980) in respect of the wrongful termination of the contract and made claim in respect of 13 items.
On 29th October 1981, the arbitrator made an award whereby he ordered that the re arrangement of the work should not be at the risk and cost of the appel lants.
He also ordered 30% increase in rates for all items of work carried out by the appellant, except however those items, which stood covered by his earlier award.
Some of the other claims were also allowed.
The appellant filed O.P. (Arbitrator) 296 of 1981 for making the second award a Rule of the Court to which the Respondents raised objections.
The Sub Judge by his order dated March 18, 1982 made the award a rule of the Court dismissing the plea of res judicata raised by the Respondents.
The Respondents being dissatisfied with the order passed by Sub Judge preferred two appeals before the Kerala High Court.
The High Court allowed both the appeals holding that the Sub Judge could not review his order of the facts of the present case.
The High Court also held that principle of constructive res judicata would apply to the arbitration case.
Accordingly the High Court set aside the orders of the Sub Judge as also the award and directed that the arbitrator shah dispose of the Arbitration case No. 132 of 1980 afresh in the light of the Judgment of Sub Judge in O.P. (Arbitrator) No. 81 of 1981 and in accord ance with law after taking into consideration the claim of the appellant and the counter claim of the Respondents.
Hence these appeals by the appellant by Special Leave.
Dismissing the appeals, this Court, HELD: It is the duty of the Arbitrator while considering the claims of the appellants to consider also the counter claims made on behalf of the Respondents and to make the award after considering both the claims and counter claims.
This has not been done and the Arbitrator did not at all consider the counter claims of the respondents in making the award.
As such the first award dated 22.1.81 made by the Arbitrator in Arbitration Case No. 132 of 1980 is wholly illegal and unwarranted and the High Court was right in holding that the Arbitrator misconducted himself and in the proceedings by making such an award, and in setting, aside the same and directing the Arbitrator to dispose of the reference in accordance with law con 400 sidering the claim of the contractor and the counter claim of the respondent.
[406F G] The order allowing the application for review by the Trial Court is also had inasmuch as there was no mistake or error apparent on the face of the order dated August 18, 1981 made O.P. (Arbitrator) No. 81 of 1981 nor any suffi cient reason has been made out for review of the said order.
[406H; 407A] In the instant case, the contract was terminated by the Respondents on April 26, 1980 and as such all the issues arose out of the termination of the contract and they could have been raised in the first claim petition fried before the arbitrator by the appellant.
This having not been done, the second claim petition before the arbitrator raising the remaining disputes is clearly barred.
[407H; 408A] Section 41 of the Arbitration Act provides that the provisions of the Code of Civil Procedure will apply to the Arbitration proceedings.
The provisions of res judicate are based on the principle that there shall be no multiplicity of proceedings and there shall be finality of proceedings.
[408B] Muhammad Hafiz & Anr.
vs Mirza Muhammad Zakaria & Ors., AIR 1922 (PC) 23; Darvao & Ors.
vs The State of U. P. & Ors., ; at 582 83; Satish Kumar & Ors.
V. Surinder Kumar & Ors., , referred to.


Input:
ivil Appeal No. 283 of 1972.
Appeal by Special Leave from the Judgment and Order dated 12 7 1971 of the Delhi High Court in of 1967.
Income Tax Reference No. 31 of 1967.
Bishamber Lal for the Appellant.
V.S. Desai, J. Ramamurthi and R.N. Sachthey for the Res pondent.
The Judgment of the Court was delivered by SARKARIA, J.
This appeal by special leave is directed against a judgment, dated July 12, 1971, of the High Court out of these facts: The appellant (hereinafter referred to as the assessee) is an individual.
The assessment year is 1955 56.
Bharat Union Agencies Pvt. Ltd. had spent Rs.53,398/ after the personal necessities of the assessee during the previous year ending 30 9 1964, without charging for the same.
The assessee was not a director Of the said Company.
He however was the beneficial owner of 1800 shares out of the total of 3000 equity shares of the said Company during the previous year.
Similarly, Alien Berry and Co. Pvt. Ltd. had spent a sum of Rs. 4406/ after the personal necessities of the assessee, without charging for the same.
The Income tax Officer treated the total benefit of Rs. 57,804/ received by the assessee from these two Companies, as his `income ' under section 2(6C)(iii) of the Income tax Act, 1922 which was introduced by the Finance Act, 1955 with effect from 1 4 1955, and charged it to tax along with some other items of income.
The assessee carried an appeal to the Appellate Assistant Commissioner who found that the assessee was beneficial owner of the shares of Bharat Union Agencies Pvt.
Ltd. carrying more than 20 per cent of the voting power.
He further held on the basis of certain findings in the Report of the Commission of Inquiry on the administration of Dalmia Jain Companies published in 1963, that the assessee 656 had 100 per cent of the share holding control of Allen Berry and Co. Pvt.
Ltd. The Appellate Assistant Commis sioner did not specifically deal with the question whether the assessee was "concerned in the management" of both these Companies.
In the result he upheld the order of the Income tax Officer.
The assessee preferred a further appeal to the Income tax Appellate Tribunal which held that the assessee was "concerned in the management of the Bharat Union Agencies (P) Ltd., being the beneficial owner of shares carrying more than 20% of the voting power, and as such the benefit of Rs. 53,398/ received by him from that Company was his 'in come ' within the later part of Clause (iii) of section 2(6C) of the Income tax Act, 1922.
On this reasoning the Tribunal dismissed the assessee 's appeal in regard to the item of Rs. 53,398/ .
However, it allowed, on a different ground his appeal with regard to the item of Rs. 4406/ received from Alien Berry and Co. (P) Ltd. In this appeal we are not concerned with that item any more.
At the instance of the assessee, the Tribunal stated the case and referred the following question under section 66(1 ) of the Income tax Act, 1922 to the High Court: "Whether on the facts and in the circum stances of the case, the sum of Rs. 53,398/ spent by Bharat Union Agencies P. Ltd. after the personal necessities of the assessee is income within the meaning of section 2(6C)(iii) of the Income tax Act, 1922".
The High Court answered this question against the asses see.
Hence this appeal.
At the outset, Shri Bishamber Lal, appearing for the appellant, tried to contend that the item of Rs. 53,398/ received by the assessee from Bharat Union Agencies Pvt.
Ltd. was not a "benefit or perquisite" within the contempla tion of section 2(6C)(iii) of the 1922 Act because, firstly, the constituents of this item were not cash amounts but gifts or bounties, and secondly, the receipt of this benefit by the assessee was unauthorised and could not be claimed by him as of right on the basis of any agreement with the Company.
This was altogether a new plea.
It was not even indi rectly raised before the authorities under the Income tax Act or the High Court.
It has not been raised even in the Special Leave Petition under Article 136 of the Constitu tion.
It was never the case of the assessee that this amount of Rs. 53,398/ was not "benefit obtained" by the assessee from the Company within the meaning of section 2(6C) (iii).
On the contrary it is apparent from the judgment of the Tribunal, that there was "no dispute about the fact that the assessee received benefits from both the Companies to the extent stated by the authorities below".
i.e. benefits to the extent of Rs. 53,398/ and Rs. 4406/ were received by the assessee from Bharat Union Agencies P. Ltd. and Allen Berry and Co. Pvt. Ltd. respectively.
The plea now sought to 657 be raised in regard to the item of Rs. 53,398/ involves a question of fact.
We therefore did not permit the Counsel to raise this plea for the first time at the time of argu ments before us.
Counsel next contended that the expression "concerned in the management of the business of the Company" takes in only that person who by virtue of a position or office held by him in the Company, legally and actually participates in the management of its business and not he who holds no such position or office but is in remote control of the Company and its affairs merely on account of being in ownership of a certain number of shares, carrying more than 20 per cent or even the majority of the voting power.
In support of this restricted construction of the term "concerned", Counsel referred to a decision of the Madras High Court in Arya Bhavan, Madras vs
M.S. Narayana Rao(1), wherein Rajamannar C.J. held that the word "concerned" as used in the context of 'workman ' in section 22 of the Industrial Disputes (Appellate Tribunal) Act, 1950, connotes a more intimate and direct relation to the matter than the word "interest" and there fore this term should be given a more restricted meaning than the word "interest".
Mr. Bishamber Lal also referred to the meaning of the terms "concerned", "concerning" as given in the Dictionary, "Words and Phrases", Permanent Edition pp.
504 505 Vol. 8.
Before dealing with this contention, it will be appro priate to examine the material part of section 2(6C)(iii) of the 1922 Act, which runs as follows: "(iii) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by any other person who has a sub stantial interest in the company (that is to say, who is concerned in the management of the business of the company, being the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power), and any sum paid by any such company in respect of any obligation which but for such payment would have been payable by the director or other person afore said.
" From an analysis of Clause (iii), it is clear that it falls in two distinct parts.
The first part is confined to the obtaining of the value of any benefit or perquisite from a Company by a director even if he has no substantial interest in the Company.
The second part applies to a person who may not be a director but has a substantial interest in the Company.
What is "substantiaI interest" is further equated by the succeeding expression, "that is to say", with the coexistence of two elements, namely, (i) concern in the management of the business of the Company, and (ii) beneficial ownership of shares (not being shares entitled to a fixed rate of dividend) carrying not less than twenty per cent of the voting power.
There is no dispute before (1) A.I.R. 1960 Mad.
658 us that the assessee had obtained the benefit of Rs. 53,398/ from Bharat Union Agencies Pvt.
Ltd. It is further admitted that he holds 1800 shares out of the total of 3000 equity shares in this Company, carrying a voting power of 60 per cent.
Thus, the existence of the second element is more than satisfied.
Controversy pivots around the first element, only.
The arguments which have been advanced before us on behalf of the assessee with regard to the construction and application of the expression "concerned in the manage ment" of the business of the Company, were canvassed before the Tribunal, also.
The Tribunal repelled these arguments.
The reasoning of the Tribunal with which the High Court found itself entirely in agreement is as under: "Shri Sharma conceded the position that the assessee was controlling both the Compa nies.
in question.
To exercise control over a Company is something more than to manage the Company.
A person who manages the company may not necessarily be in a position to con trol the business or affairs of the Company.
He may be managing under the instructions of.
those who are controlling the Company.
But a person who controls a Company also directly or indirectly through the managerial staff manages the business of the Company.
It is again not necessary that the person who man ages the business of the Company should be rightfully entitled to do it.
A person who is not rightfully entitled to manage the business of the Company but usurps the power by virtue of his certain position, is, in our opinion, certainly a person covered by this expression.
It is also not necessary. that the management should be carried on in an ostensible manner.
One who carried on the management indirectly and imperceptibly through the persons who outwardly and ostensi bly carry on the management is covered by the expression.
It is not necessary, in our opinion, that the management should be both seen, and felt; it is sufficient if it is felt, without being seen.
" In our opinion, the above is a correct exposition of the law on the point.
The word "concern" is not a term of art, having a precise, fixed meaning.
It has several nuances, and is used to convey diverse shades of meaning over a wide spectrum.
It may mean "to have a relation to, or bearing on, be of interest or, importance" or "to have an anxiety, worry".
"Concerned" as an adjective may mean "interested", "involved".
In one context, it may mean one thing, and in a different context another.
The decisions as to the mean ing of this word used in a different context in another statute, are scarcely of much value in construing it in the setting of the provision with which we are concerned.
The best way therefore to construe this word is with refer ence to the context in which it is used.
In sub clause (iii) of section 2(6C) of the Income tax Act, 1922, the word "concerned" takes its colour from the words "in the manage ment of the business" in association with which it occurs.
In the context of business, "manage" means "to control, to guide, to administer, to conduct or direct affairs; 659 carry on 'business ' (Shorter Oxford Dictionary, Webster New World Dictionary).
"Management" includes the act of manag ing by direction, or regulation, or administration or con trol or superintendence.
Construed with reference to the context, and the circum stances of a case, the expression "person concerned in the management of the business" may take in not only .a person who directly participates or engages in the management of the business but also one who indirectly controls its man agement through the managerial staff, from behind the scenes.
The assessee 's admission that he is in control of the Company necessarily includes an admission of his being "concerned in the management of the business of the Compa ny", We, therefore, agree with the High Court, that the ambit of the term "concerned" in section 2(6C)(iii) cannot be restricted to a person who is an employee of the business or an office holder of the Company.
In the context of "manage ment" it is wide enough to include every person 'interested ' in the management, in the sense of having the direction and control of the managerial staff.
On the facts of the case, the assessee was such a person.
We are therefore, of opinion that the High Court was right in answering the question referred to it, against the assessee.
The appeal fails and is dismissed with costs.
P.B.R. Appeal dismissed.

Output:
Section 2(6C)(iii) of the Income tax Act, 1922 provides that the value of any benefit or perquisite, whether con vertible into money or not, obtained from a company either by a director or by any other person who has a substantial interest in the company (that is to say, who is concerned in the management of the business of the company, being benefi cial owner of shares, not being shares entitled to fixed rate of dividend carrying not less than 20% of the voting power) and any sum paid by any such company in respect of any obligation which, but for such appointment, would have been payable by the director or other person aforesaid is income.
The assessee was the beneficial owner of 1800 out of 3000 equity shares of a company.
He was, however, not its director.
He had a similar interest in another company.
Both the companies had spent on his personal necessities a large sum of money, which the Income tax Officer treated as his income under section 2(6C)(iii) of the Act.
The Appellate Assistant Commissioner, as also the Tribunal, dismissed his appeal against the order of the Income tax Officer and the High Court answered the reference against the assessee.
In appeal to this Court it was contended that the ex pression "concerned" in the management of the business of the company takes in only the person who legally partici pates in the management of its business and not one who has only remote control of its business.
even if he had the majority of voting power.
Dismissing the appeal, HELD: The expression "person concerned in the management of business"may take in not only a person who directly partici pates or engages in the management of the business but also one who indirectly controls its management through the managerial staff from behind the scenes.
[657 B] 1.
(a) The term "concerned" in section 2(6C)(iii) cannot be restricted to a person who is an employee of the business or an office holder of the company.
In the context of "manage ment" it is wide enough to include every person "interest ed" in the management, in the sense of having the direction and control of the managerial staff.
[659 C D] (b) The word "concerned" is not a term of art, having a precise and fixed meaning.
It has several nuances, and is used to convey diverse shades of meaning.
It may mean "to have a relation to.
or bearing on, be of interest 0r importance" or "to have an anxiety, worry".
"Concerned" as an adjective may mean "interested", "involved".
In one context, it may mean one thing and in a different context another.
[658 G H] (c) The word "concerned" takes its colour from the words "in the management of the business" in association with which it occurs.
In the context of business, "manage" means "to control.
to guide.
to administer to conduct or direct affairs ', carry on 'business. "Management" includes the act of managing by direction or regulation or adminis tration or control or superintendence.
[658 H, 659 A] 655 (2) The first part of the clause is confined to the ob taining of the value of any benefit or perquisite from a company by a director, even if he has no substantial inter est in the company.
The second part applies to 2a person who may not be a director but has a substantial interest in the company.
What is "substantial interest" is further equated by the succeeding expression "that is to say" with the co existence of two elements, namely, (i) concern in the management of the business of the company and (ii) benefi cial ownership of shares (not being shares entitled to a fixed rate of dividend) carrying not less than 20% of the voting power.
[657 G H] In the instant case, the assessee, Obtained the benefit from the company holding 1800 out of 3000 shares, that is, carry ing a voting power of 60% and, therefore, satisfied the second element.
His own admission that he was in control of the company necessarily includes an admission of his being "concerned in the management of the business of the company".
[658 A B]