Input:
Civil Appeal No. 2542 (NCE) of 1986.
From the Judgment and Order dated 24.1.1986 of the Orissa High Court in Election Petition No. 7 of 1985.
S.P. Singh and S.K. Jain for the Appellant.
G.L. Sanghi, M.A Firoz and R.K. Mehta for the Respondents.
The Judgment of the Court was delivered by KANIA, J.
This is an appeal from the judgment of a learned Single Judge of the Orissa High Court dismissing Election Petition No. 7 of 1985 filed by the appellant in that Court.
The facts of the case have been fully set out in the impugned judgment of the High Court and hence, little pur pose would be served in setting them out here again.
It should be sufficient to note only the few facts required to be set out to appreciate the controversy arising before us.
The election in question was to the Legislative Assembly of the Orissa State from 74 Gopalpur (SchedUled Caste) Assembly Constituency.
This election was held in March 1985.
The last date for filing the nomination papers was February 8, 1985.
The date of scrutiny was 102 as February 9, 1985.
The last date for withdrawal of the nominations was February 11, 1985, February 10, 1985 being a Sunday.
The appellant duly filed his nomination papers for the seat and along with the other papers, he filed an at tested copy of the relevant part of the electoral roll relating to 67 Sorada Assembly Constituency in which he was an elector.
This was required because he was standing for election from a constituency other than the one in which he was an elector.
On an objection by one of the candidates, the said nomination paper was rejected for non compliance with section 33(5) of the Representation of the People Act, 1951 (hereinafter referred to as "the said Act").
The con tention of the appellant is that he had produced before the Returning Officer an attested copy of the relevant part of the electoral roll of the constituency in which he was an elector and hence, the rejection of his nomination paper on the ground of non compliance with section 33(5) of the said Act was wrong and bad in law.
As we have already pointed out, it is common ground that what the appellant produced before the Re.turning Officer was an attested copy of the relevant part of the electoral roll of the constituency in ' which he was an elector and that copy admittedly was dated July 13, 1983.
There is a finding that the appellant had obtained the said copy on July 19, 1983 although he sought to contend that he had obtained it on July 19, 1984.
The correctness of that find ing has rightly not been assailed before us.
Section 15 of the Representation of the People Act, 1950 (hereinafter referred to as "the 2950 Act") provides that for any con stituency there shall be an electoral roll which shall be prepared in accordance with the provisions of that Act under the directions and supervision of the Election Commission.
It is the admitted position in the case before us that the electoral roll of the Orissa Legislative Assembly, was directed to be revised and was, in fact, revised as on January 1, 1984 and the supplementary electoral roll notify ing the changes to be incorporated on the revision was published and available before February 1985.
Section 21 of the 1950 Act deals with the preparation and revision of electoral rolls.
Sub section (1) of that section states that the electoral roll for each constituency shall be prepared in the prescribed manner by reference to the qualifying date and shall come into force immediately upon its publication according to law.
Clause (a) of sub section (2) of that section provides unless otherwise directed by the Election Commission the electoral roll shall be revised in the pre scribed manner with reference to the qualifying date before each General Election to the House of the People or to the Legislative Assembly of a State.
The provisions 103 of Rule 22 of the Registration of Electors Rules, 1960 (hereinafter referred to as "the said Rules of 1960") read with the provisions of Rules 15 to 21 A thereof show that when the electoral roll has to be revised the names of persons inadvertently omitted have to be included and the names of dead electors and of persons who ceased to be or are not ordinarily resident in the constituency have to be deleted from the electoral roll and so on.
After this, the officer concerned prepares the list of amendments to be carried out to the electoral roll.
Provisions are also made for the correction of any clerical or printing errors in the earlier roll.
After the completion of this task, either the entire revised electoral roll is to be prepared or the amendments in the existing electoral roll have to be made and incorporated in the electoral roll and published sepa rately along with the original electoral roll.
A complete electoral roll is made available for inspection and a notice to that effect is displayed in Form No. 16.
Rule 22(2) of the said Rules of 1960 lays that on such publication, the roll together with the list of amendments shall be the electoral roll of the constituency.
Subrule (3) of Rule 22 of the said Rules of 1960 shows that these amendments may be incorporated and an integrated roll may be published subject to any general or special directions issued by the Election Commission.
It is clear on the reading of these provisions that the publication of the integrated roll is not essential for the revision of the electoral roll to be complete and the electoral roll with the amendments duly published be comes the final electoral roll for the constituency.
In the present case, it is clear that what the appellant produced before the Returning Officer was not an attested copy of the final electoral roll for the said constituency for the election in question although the final roll was available.
What he produced was an attested copy of the electoral roll as it stood on July 21, 1983 and the production of such attested copy of the relevant part of the electoral roll as it stood before the final revision cannot amount to compli ance with the provisions of sub section (5) of section 33 of the said Act.
His nomination was, therefore, rightly reject ed.
We are supported in our views by the decision of this Court in Ranjit Singh vs Pritam Singh & Ors., ; It was held that: "When section 33(5) refers to a copy of the rele vant parts of the electoral roll, it means a part as defined in rule 5.
A complete copy would carry the various amendments made in the roll and enable the Returning Officer to see whether the name of the candidate continued in the roll for the whole of the relevant period." 104 In the aforesaid judgment, it has been held that when section 33(5) of the said Act refers to a copy of the rele vant part of the electoral roll, it means a part as defined in Rule 5 of the said Rules of 1960.
The complete copy would carry the various amendments made in the roll to enable the Returning Officer to see whether the name of the candidate continues in the roll.
Learned counsel for the appellant placed a strong reli ance on the decision of this Court in Jagannath Ramchandra Nunekar vs Gene Govind Kadam & Ors., [1988] 3 Judgments Today 662.
That judgment is, however, clearly distinguisha ble on facts.
In that case, a certified copy of the relevant entry in the electoral roll was furnished to the appellant on January 8, 1986 which was only one day before the date on which he filed his nomination paper.
The presumption would, therefore, arise that such a certified copy would be of the relevant entry in the final electoral roll and that presump tion was justified on the actual facts.
That decision has no application to this case where a certified copy of the relevant part of the electoral roll was applied for and obtained several months before the revision of the electoral roll.
The ratio of the judgment cited is, therefore, not applicable to the case before us.
In the result, the appeal fails and is dismissed with costs.
N.P.V. Appeal dismissed.

Output:
The appellant was a candidate for election to the Legis lative Assembly.
As he was standing for election from a constituency other than the one in which he was an elector, he filed an attested copy of the relevant part of the elec toral roll relating to the constituency in which he was an elector, along with the nomination paper.
On an objection by one of the candidates, the Returning Officer rejected the.
appellant 's nomination paper for non compliance with Section 33(5) of the Representation of the People Act, 1951.
The appellant filed an Election Petition before the High Court, which dismissed the same.
In the appeal filed before this Court, the appellant contended that since he had produced before the Returning Officer an attested copy of the relevant part of the elec toral roll of the constituency in which he was an elector, the rejection of his nomination paper on the ground of non compliance with Section 33(5) of the said Act was wrong and bad in law.
Dismissing the appear, this Court, HELD: The publication of the integrated roll is not essential for the revision of the electoral roll to be complete and the electoral roll with the amendments duly published becomes the final electoral roll for the constitu ency.
[103D] In the instant case, admittedly, the electoral roll of the State Assembly was directed to be revised and was, in fact, revised as on January 1, 1984 and the supplementary electoral roll notifying the 101 changes to be incorporated on the revision was published and available before February 1985.
[102F] However, what the appellant produced before the Return ing Officer was not an attested copy of the final electoral roll for the said constituency although the final roll was available, but only an attested copy of the electoral roll as it stood on July 21, 1983.
The production of such attest ed copy of the relevant part of the electoral roll as it stood before the final revision cannot amount to compliance with the provisions of sub section (5) of Section 33 of the said Act.
His nomination was, therefore, rightly rejected.
[103F] Ranjit Singh vs Pritam Singh & Ors., ; , relied on.
Jagannath Ramchandra Nunekar vs Gene Govind Kadam & Ors., [1988] 3 Judgments Today 662, distinguished.


Input:
Appeal No. 791 of 1962.
Appeal by special leave from the judgment and order dated March 22, 1960, of the Bombay High Court in Award No. 18 of 1959.
section T. Desai and I. N. Shroff, for the appellant.
B. C. Misra, for the respondent.
April 29, 1964.
The Judgment of the Court was delivered by HIDAYATULLAH J.
This appeal by special leave is directed against an order of the High Court of Bombay dated March 22, 1960 in its ordinary original civil jurisdiction.
The facts are simple.
By a letter dated July 30, 1955, Messrs. Kajaria rraders (India) Ltd., who is the respondent here and Messrs. Foreign Import and Export Association (sole proprietory firm owned by the appellant Jagdish C. Gupta) entered into a partnership to export between January and June 1956, 10,000 tons of manganese ore to Phillips Brothers (India) Ltd., New York.
Each partner was to supply a certain quantity of manganese ore.
We are not concerned with the terms of the agreement but with one of its clauses which provided: "That in case of dispute the matter will be referred for arbitration in accordance with the Indian .
" The company alleged that Jagdish Chander Gupta failed to carry out his part of the partnership agreement.
After some correspondence, the company wrote to Jagdish Chander Gupta on February 28, 1959 that they had appointed Mr. R. J. Kolah (Advocate O.S.) as their arbitrator and asked Jagdish Chander Gupta either to agree to Mr. Kolah 's appointment as sole arbitrator or to appoint his own arbitrator.
Jagdish Chander Gupta put off consideration and on March 17, 1959 the company informed Jagdish Chander Gupta that as he had failed to appoint an arbitrator within 15 clear days they were appointing Mr. Kolah as sole arbitrator.
Jagdish Chander Gupta disputed this and the corn 53 pany filed on March 28, 1959 an application under section 8 (2) of the Indian for the appointment of Mr. Kolah or any other person as arbitrator.
Jagdish Chander Gupta appeared and objected inter alia to the institution of the petition.
Two grounds were urged (i) that section 8(2) of the Indian was not appli cable as it was not expressly provided in the arbitration clause quoted above that the arbitrators were to be by consent of the parties and (ii) that section 69(3) of the afforded a bar to the petition because the partnership was not registered.
The petition was refer red by the Chief Justice to a Divisional Bench consisting of Mr. Justice Mudholkar (as he then was) and Mr. Justice Naik.
The two learned Judges agreed that in the circumstances of the case an application under section 8 of the Indian was competent and that the court had power to appoint an arbitrator.
They disagreed on the second point: Mr. Justice Mudholkar was of the opinion that section 69(3) of the barred the application while Mr. Justice Naik held otherwise, The case was then referred to Mr. Justice K. T. Desai (as he then was) and he agreed with Mr. Justice Naik with the result that the application was held to be competent.
In this appeal it was not contended that the conclusions of the learned Judges in regard to section 8(2) were erroneous.
The decision was challenged only on the ground that section 69(3) was wrongly interpreted and the bar afforded by it was wrongly disallowed.
Section 69 of the may be reproduced here : "69.(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
54 (2) No suit to enforce a right arising from a contract shall be instituted in any Court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the (3) The provisions of sub sections(1) and (2) shall apply also to a claim ofset off or other proceeding to enforce a rightarising from a contract, but shall not affect (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to realise the property of a dissolved firm, or (b) the powers of an official assignee, receiver or Court under the , or the , to realise the property of an insolvent partner.
(4) This section shall not apply (a) to firms or to partners in firms which have no place of business in the territories to which this Act extends, or whose places of business in the said territories are situated in areas to which, by notification under section 56, this Chapter does not apply, or (b) to any suit or claim of set off not exceeding one hundred rupees in value which, in the Presidency towns, is not of a kind specified in section 19 of the , or outside the Presidency towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim 'Me section, speaking generally, bars certain suits and pro ceedings as a consequence of non registration of firms.
Sub 55 section (1) prohibits the institution of a suit between partners inter se or between partners and the firm for the purpose of .enforcing a right arising from a contract or conferred by the Partnership Act unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
Sub section
(2) similarly prohibits a suit by or on behalf of the firm against a third party for the purpose of enforcing rights arising from a contract unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm.
In the third sub section a claim of set off which is in the nature of a counter claim is also similarly barred.
Then that subsection bars "other proceedings".
The only doubt that has arisen in this case is regarding the meaning to be given to the expression "other proceeding".
One way to look at the matter is to give these words their full and natural meaning and the other way is to cut down that meaning in the light of the words that precede them.
The next question is whether the application under section 8 (2) of the can be regarded as a proceeding "to enforce a right arising from a contract", and therefore, within the bar of section 69 of the .
Mr. Justice Mudholkar in reaching his conclusion did not interpret the expression "other proceeding" ejusdem generis with the words "a claim of set off".
He held further that the application was to enforce a right arising from the contract of the parties.
Mr. Justice Naik pointed out that the words used were not "any proceeding" nor "any other proceedings" but "other proceeding" and that as these words were juxtaposed with 'a claim of set off ' they indicated a, proceeding of the nature of a claim in defence.
On the second point Mr. Justice Naik held that this was not a proceeding to enforce a right arising from a contract but was a claim for damages and such a claim, could be enter tained because it was based on something which was inde pendent of the contract to supply ore.
He held that the, right which was being enforced was a right arising from the and not from the contract of the parties.
Mr. Justice K. T. Desai agreed with most of these conclu sions and suggeted that the words preceding "other proceed 56 ing", namely, "a claim of set off" had 'demonstrative and limiting effect '.
He seems to have ascertained the meaning of the expression "other proceeding" by reference to the meaning of the words "a claim of set off", which he considered were associated with it.
Ile first question to decide is whether the present pro ceeding is one to enforce a right arising from the contract of the parties.
The proceeding under the eighth section of the has its genesis in the arbitration clause, because without an agreement to refer the matter to arbitration that section cannot possibly be invoked.
Since the arbitration clause is a part of the agreement constituting the partnership it is obvious that the proceeding which is before the court is to enforce a right which arises from a contract.
Whether we view the contract between the parties as ;a whole or view only the clause about arbitration, it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the .
agreement of the parties.
The words of section 69(3) "a right arising from a contract" are in either sense sufficient to cover the present matter.
It remains, however, to consider whether by reason of the fact that the words "other proceeding" stand opposed to the words "a claim of set off" any limitation in their eaning was contemplated.
It is on this aspect of the case that the learned Judges have seriously differed.
When in a statute particular classes are mentioned by name and then are followed by general words, the general words are sometimes construed ejusdem generis, i.e. limited to the same category or genus comprehended by the particular wordsbut it is not necessary that this rule must alwavs apply.
The nature of the special words and the general words must e considered before the rule is applied.
In Allen vs Emerson (1), Asquith J. gave interesting examples of particular words followed by general words where the Principle of ejusdem generis might or might not apply.
We ink that the following illustration will clear any difflculty.
In the expression "books, pamphlets, newspapers and other (1) [i944] 1 K.B. 362.
57 documents" private letters may not be held included it 'other documents ' be intepreted ejusdem generis with what goes before.
But in a provision which reads "newspapers or other document likely to convey secrets to the enemy", the, words 'other document ' would include document of any kind and would not take their colour from 'newspapers '.
It follows, therefore, that interpretation ejusdem generis or noscitur a sociis need not always be made when words showiig particular classes are followed by general words.
Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted.
Here the expression "claim of set off" does not disclose a category or a genus.
Set offs are of two kinds legal and equitable and both are already comprehended and it is difficult to think of any right "arising from a contract" which is of the same nature as a claim of set off and can be raised by a defendant in a suit.
Mr. B. C. Misra, whom we invited to give us examples, admitted frankly that it was impossible for him to think of any proceeding of the nature of a claim of set off other than a claim of set off which could be raised in a suit such as is described in the second sub section.
In respect of the first sub secton he could give only two examples.
They are (i) a claim by a pledger of goods with an unregistered firm whose goods are attached and who has to make an objection under 0.
21 r. 58 of the Code of Civil Procedure and (ii) proving a debt before a liquidator.
The latter is not raised as a defence and cannot belong to the same genus as a "claim of set off".
The former can be made to fit but by a stretch of some considerable imagination.
It is difficult for Lis to accept that the Legislature was thinking of such far fetched things when it spoke of "other proceeding" ejusdem generis with a claim of set off.
Mr. Justice Naik asked the question that if all proceedings were to be excluded why was it not considered suffi cient to speak of proceedings along with suits in sub sections
(1) and (2) instead of framing a separate subsection about proceedings and coupling 'other proceeding, ' with 'a 58 the search for the answer in the ' scheme of the section itself gives the clue.
The section thinks in terms of (a) suits and (b) claims of set off which are in a sense of the nature of suits and (c) of other proceedings.
The section first provides for exclusion of suits in sub sections
(1) and (2).
Then it says that the same ban applies to a claim of set off and other proceeding to enforce a right arising from a contract.
Next it excludes the ban in respect of the right to sue (a) for the dissolution of a firm, (b) for accounts of.
a dissolved firm and (c) for the realisation of the property of a dissolved firm.
The emphasis in each case is on dissolution of the firm.
Then follows a general exclusion of the section.
The fourth sub section says that the section as a whole, is not to apply to firms or to partners and firms which have no place of business in the territories of India or whose places of business are situated in the territories of India but in areas to which Chapter VII is not to apply and to suits or claims of set off not exceeding Rs. 100 in value.
Here there is no insistence on the dissolution of the firm.
It is significant that in the latter part of clause (b) of that section the words are "or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim" and this clearly shows that the word "proceeding" is not limited to a proceeding in the nature of a suit or a claim of set off.
Subsection (4) combines suits and a claim of set off and then speaks of "any proceeding in execution" and "other proceeding incidental to or arising from any such suit or clainm" as being outside the ban of the main section.
It would hardly have been necessary to be so explicit if the words other proceeding in the main section had a meaning as restricted as is suggested by the respondent.
It is possible that the draftsman wishing to make exceptions of different kinds in respect of suits, claims of set off and other proceedings grouped suits in sub sections
(1) and (2), set off and other proceedings in sub section
(3) made some special exceptions in respect of them in sub section
(3) in respect of dissolved firms and then viewed them all together in sub section
(4) providing for a complete exclusion ' of the section in respect of suits of particular classes.
For convenience of drafting this 59 scheme was probably followed and nothing can be spelled out from the manner in which the section is sub divided.
Some cases noticed by the High Court were cited to us but none of them appears to be really in point.
In Hafiz Qamar Din vs Nur Din( ') and Babutal Dhandhania vs Messrs. Gauttam and Co.( ') proceedings were started on an award, in one to make it a rule of the Court and in the other to get it set aside.
These cases are distinguishable because they deal with awards and it is not necessary to decide whether after an award the proceeding is one to enforce a right arising from a contract.
We do not refer to them.
In Kottamasu Sreemannarayanamuthy and another vs Chakka Arjanadu() a petition for adjudication of a partner as insolvent was held to be a right arising not from, a contract but from statute.
Here the right that is being enforced through the medium of the arises from the contract between the parties and is a part of it.
In Jamal vs Firm Umar Haji Karim (4 ) the bar of section 69(3) was claimed during the execution of a consent decree and was disallowed.
Grille C. J. observed that the expression 'other proceeding ' indicated something which was 'sui generis of a claim of set off '.
If the partners of an unregistered firm.
go to court without either asking for a dissolution of the firm or dissolving it themselves and enter into an agreement and compose their differences it is possible to say that the enforcement of the consent decree is no more than the enforcement of a right arising from a contract and is within the ban.
It is, however, not necessary to decide this point here.
in Ram Lal Harnam Das vs Pal Krishan and others() it was expressly pointed out that the expression 'other proceeding ' in the third sub section applied to proceedings of the nature of a claim of set off and nothing else.
This case cannot be said to interpret the sub section correctly.
Similarly, Mahendra vs Gurdeyal( '), which lays down that section 69 does not bar a partner of an unregistered partnership firm from applying to the court under section 8 of the for referring the dispute (1) A.T.R (3) A.I.R. 1939 Mad.
(5) A.I.R. 1917 Punjab 159.
(2) A.r.
R. (4) I.L.R. (6) I.L.R. 30 Pat.
109. 60 between partners to arbitrator as provided in the condition of their agreement, cannot be accepted as sound.
The ,reason given by the Divisional Bench that as section 69 allows dissolution and accounts of unregistered partnership it cannot bar such an application appears to us to be not quite in Point.
In our judgment, the words 'other proceeding ' in sub section (3) must receive their full meaning untramelled by the words 'a claim of set off '.
The latter words neither intend nor can be construed to cut down the generality of the words 'other proceeding '.
The sub section provides for the application of the provisions of sub sections
(1) and (2) to claims of set off and also to other proceedings of any Kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in sub section
(3) and sub section
The appeal is, therefore, allowed.
The decision of the High Court will be set aside and the application under section 8(2) of the shall stand dismissed with costs throughout on the applicant in the High Court.

Output:
The respondent entered into a partnership agreement with the appellant.
But this was not registered.
There was an arbitration clause sti 51 pulating that in case of dispute the matter will be referred for arbitration in accordance with .
Dispute having arisen between the respondent and the appellant the former wrote to the latter stating that the dispute be referred for arbitration and that the respondent has appointed one K as the sole arbitrator.
On the failure of the appellant to agree to this the respondent filed an application under section 8(2) of the Indian for the appointment of arbitrator.
The application was heard by a Division Bench of the High Court before which the appellant contended that section 69(3) of the afforded a bar to the petition because the partnership was not registered.
One of the Judges upheld the contention while the other rejected it and the matter was referred to another Judge who held that the application was competent.
The present appeal was filed by special leave granted by this Court.
HELD: (i) Thai since the arbitration clause formed a part of the agreement constituting the partnership it is obvious that the proceeding which is before the Court is to enforce a right which arises from a contract.
Whether one views the contract between the parties as a whole or one views only the arbitration clause it is impossible to think that the right to proceed to arbitration is not one of the rights which are founded on the agreement of the parties.
The words of section 69(3) "a right arising from a contract" are in either sense sufficient to cover the present matters.
(ii) Interpretation ejusdem genuris or noscitur a sociis need not always be made when showing particular classes are followed try general words.
Before the general words can be so interpreted there must be a genus constituted or a category disclosed with reference to which the general words can and are intended to be restricted.
The expression "claim of set off" does not disclose a category or a genus.
Set offs are of two kinds legal and equitable and both are already comprehended and it is difficult to think of any right "arising from a contract ' which is of the same nature as a claim of set off and can be raised by a dependent in suit.
Allen vs Emerson, , referred to.
Hafiz Qamar Din vs Nur Din, A.I.R. 1936 Lah.
136, Babulal Dhan Dhania vs M/s. Gautam & Co. A.I.R. 1950 Cal.
341, Kottamasu sreemannarayanmurthy vs Chokka Arjanadtu, A.I.R. , Jamal vs Firm Umar Haji Karim, I.L.R. , and Ram Lal Harnam Das Y. Bal Kishan, A.I.R. 1957 Punj. 159, distinguished.
(iii) The words "other proceeding" in sub section (3) must receive their full meaning untramelled by the words "a claim of set off.
The latter words neither intend nor can be construed to cut down the generality of the words "other proceeding".
The sub section provides for the application of the provisions of sub sections (1) and (2) to claims of set off and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in subsections (3) and (4).


Input:
Appeal No. 388 of 1960.
Appeal by special leave from the judgment and order dated February 3, 1959, of the Patna High Court in Election Appeal No. 10 of 1958.
section P. Varma, for the appellant.
L. K. Jha and D. Govardhan, for respondent No. 1.
L. K. Jha and K. K. Sinha, for respondent No. 2. 1960.
November 17.
The Judgment of the Court was delivered by 471 GAJENDRAGADKAR, J.
Is the appellant Ram Padarath Mahto disqualified for membership of the Bihar Legislature under section 7(d) of the Representation of the People Act, 1951 (hereafter called the Act)? That is the short question which arises for our decision in the present appeal by special leave.
The appellant was one of the candidates for the Dalsinghsarai Constituency in the District of Darbhanga in Bihar for the State Legislature.
The said Constituency is a Double Member Constituency; it was required to elect two members, one for the general and the other for the reserved seat for scheduled castes in the Bihar Legislative Assembly.
It appears that the said Constituency called upon voters to elect members on January 19, 1957.
January 29, 1957 was fixed as the last date for the filing of the nomination papers.
The appellant filed his nomination paper on January 28, 1957, and on the next day seven other members filed their nomination papers.
On February 1, 1957, the nomination paper filed by the appellant was rejected by the returning officer on two grounds; he held that the appellant being an Inspector of Co operative Societies was a Government servant at the material time and so was disqualified from standing for election.
He also found that the appellant was a member of a joint and undivided Hindu family which carried on the business of Government as stockiest of grain under a contract between the Government of Bihar and a firm of the joint family known as Nebi Mahton Bishundayal Mahto.
Thereafter the election was duly held, and Mr. Mishri Singh and Mr. Baleshwar Ram, respondents 1 and 2 were declared duly elected to the general and reserved seat respectively.
The validity of this election was challenged by the appellant by his Election Petition No. 428 of 1957.
To this petition he impleaded the two candidates declared to have been duly elected and five others who had contested in the election.
Before the Election Tribunal the appellant urged that he was not in the employ of the Government of Bihar at the material time.
He pointed out that he had resigned his job on January 13, 472 1957, and his resignation had been accepted on January 25, 1957, relieving him from his post as from the later date.
He also contended that there was a partition in his family and that he had no share or interest in the contract in question.
Alternatively it was argued that even if the appellant had an interest in the said contract it did not fall within the mischief of section 7(d) of the Act.
These pleas were traversed by respondents 1 and 2 who contested the appellant 's election petition.
The Election Tribunal found that the petitioner was not a Government servant on the day he filed his nomination paper, and so according to it the returning officer was wrong in rejecting his nomination paper on the ground that he was a Government servant at the material time.
The Election Tribunal rejected the appellant 's case that there was a partition in the family, and held that at the relevant time the appellant continued to be a member of the joint Hindu family which had entered into the contract in question with the Government of Bihar.
However, in its opinion, having regard to the nature of the said contract it was not possible to hold that the appellant was disqualified under section 7(d), and so it came to the conclusion that the returning officer was in error in rejecting the appellant 's nomination paper on this ground as well.
In the result the Tribunal allowed the election petition, declared that the nomination paper had been improperly rejected, and that the election of the two contesting respondents was void.
Against this decision the two contesting respondents filed two appeals in the High Court at Patna (Election Appeals Nos. 9 and 10 of 1958).
The High Court has confirmed the finding of the Tribunal that the appellant was not a Government servant at the material time.
It has also agreed with the conclusion of the Tribunal that at the relevant time the appellant was a member of the undivided Hindu family.
On the construction of the contract, however, it differed from the view adopted by the Tribunal, and it has held that as a result of the said contract the appellant was disqualified under section 7(d) of the Act.
This finding 473 inevitably led to the conclusion that the appellant 's nomination paper had been properly rejected.
On that view the High Court did not think it necessary to consider whether the Tribunal was right in declaring void the election of not only respondent 1 but of respondent 2 as well.
It is against this decision of the High Court that the appellant has come to this Court by special leave; and the only question which is raised on his behalf is that the High Court was in error in coming to the conclusion that he was disqualified under section 7(d).
The decision of this question naturally depends primarily on the construction and effect of the contract in question.
Section 7 of the Act provides for disqualification for membership of Parliament or of State Legislatures.
Section 7(d), as it stood at the material time and with which we are concerned in the present appeal provides,, inter alia, that a person shall be disqualified for being chosen as, and for being, a member of the Legislative Assembly of a State, if whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for the supply of goods to, or for the execution of any works or the performance of any services undertaken by, the appropriate Government.
On the concurrent findings recorded by the High Court and the Tribunal it cannot now be disputed that the appellant has interest in the contract in question; so that the first part of section 7(d) is satisfied.
The High Court has found that the contract attracts the last part of section 7(d) inasmuch as according to the High Court the Government of Bihar had undertaken to discharge the service of supplying grain to the residents of Bihar and the firm of the appellant 's family had entered into a contract for the performance of the said services.
The last part of section 7(d) postulates that the appropriate Government has undertaken to perform certain specific services, and it is for the performance of such services that the contract had been entered into by a citi zen.
In other words, if a citizen has entered into a contract with the appropriate Government for the 60 474 performance of the services undertaken by the said Government he attracts the application of section 7(d).
This provision inevitably raises two questions: what are the services undertaken by the appropriate Government? Has the contract been entered into for the performance of the said services? At this stage it is necessary to consider the material terms of the contract.
This contract was made on February 8, 1956, between the Governor of Bihar who is described as the first party and the firm which is described as the second party.
The preamble to the contract shows that the first party had to stock and store foodgrains in Darbhanga District for sale in pursuance of the Grain Supply Scheme of the Government for which a proper custodian and bailee for reward was necessary.
It also recites that the second party had applied to become such custodian and bailee of such stock of foodgrains as the first party shall deliver to the second party in one lump or from time to time on terms and in the manner expressly specified under the contract, or as may be necessarily implied.
Clause 1 of the contract provides that the second party shall, at the direction of the first party, take over foodgrains from the railway wagons or from any place as directed by the first party; thereafter the second party had to cause the grains to be stored in his godown at Dalsinghsarai and had to redeliver the same to the first party after weighing either at the second party 's godown approved by the first party or at any other place as directed by the first party.
The movement of the grain had to be done by the second party himself or by a transport contractor appointed by the first party.
Clause 2 imposed on the second party the liability to maintain a register and keep accounts as prescribed thereunder.
Under cl. 3 the second party undertook to keep such stocks and establishments as may be necessary at his own expense.
Clause 4 imposed upon the second party the obligation to protect the stock of foodgrains or to make good the losses except as thereinafter provided: Clauses 5 to 8 are not material for our purpose.
Clause 9 provides that the second party shall deposit the sum of 475 Rs. 5,000 in a Savings Bank account which has been pledged to the District Magistrate, Darbhanga, and comply with the other conditions specified in the clause.
Clause 10 deals with the remuneration of the second party.
It provides that the first party shall be liable to pay to the second party remuneration for the undertaking in this agreement at the rate of Re. 1 per( cent on the value of the stocks moved or taken over from his custody under the orders or directions of the first party or his agent calculated at the rate fixed by the Government from time to time for wholesale sales of grain.
The clause adds that no remuneration shall be payable to the second party if the first party takes over the whole of the balance stock lying with the second party for reasons of the termination of the agreement.
The rest of the clauses need not be recited.
It would thus be seen that the agreement in terms is one of bailment.
The State Government wanted to entrust the work of stocking and storing foodgrains to a custodian or bailee.
In that behalf the appellant 's firm made an application and ultimately was appointed a bailee.
There is no doubt that by this contract the firm has undertaken to do the work of stocking and storing foodgrains belonging to the State Government; and if it can be reasonably held that the service undertaken by the State Government in the present case was that of stocking the foodgrains the contract in question would obviously attract the provisions of section 7(d).
Mr. Varma, however, contends that the service undertaken by the State Government is the sale of foodgrains under its Grain Supply Scheme; and he argues that unless the contract shows that it was for sale of the said goods it cannot attract the provisions of section 7(d).
Unfortunately the scheme adopted by the State Government for the supply of grain has not been produced before the Election Tribunal, and so the precise nature and extent of the services undertaken by the State Government fall to be determined solely by reference to the contract in question.
It is true that the contract relates to the stocking and storing of foodgrains which the State Government wanted to sell to the residents of Bihar; but can it be said 476 that stocking and storing of foodgrains was such an integral or essential part of the selling of goods that a contract for stocking and storing foodgrains should necessarily be regarded as a contract for their sale? In our opinion, it is difficult to accept the argument that stocking and storing of foodgrains is shown to be such an essential and integral part of the supply scheme adopted by the State Government.
Theoretically speaking stocking and storing foodgrains cannot be said to be essential for the purpose of carrying out the scheme of sale of foodgrains, because it would conceivably be possible for the State Government to adopt a scheme whereby goods may be supplied without the State Government having to store them; and so the work of stocking and storing of foodgrains may in some cases be conceivably incidental to the scheme and not its essential part.
It is significant that sale of goods under the contract was never to take place at the godown of the firm.
It had always to take place at other selling, centers or shops; and thus, between the stocking and storing of goods and their sale there is an element of time lag.
The only obligation that was imposed on the firm by this contract was to be a custodian or bailee of the goods, keep them in good order and deliver them after weighment as directed by the first party.
It cannot be denied that the remuneration for the bailee has been fixed at the rate, of Re. 1 per cent on the value of the stocks moved or taken over from his custody; but that only shows the mode or method adopted by the con tract for determining the remuneration including rent of the godowns; it cannot possibly show the relationship of the contract with the sale of goods even indirectly.
Can it be said that the contract entered into by the State Government for purchasing foodgrains from agriculturists who grow them or for transporting them after purchase to the godowns are contracts for the sale or supply of goods? Purchase of goods and their transport are no doubt preparatory to the carrying out of the scheme of selling them or supplying them, and yet it would be difficult to hold that contracts entered into by the State Government with the agriculturists or the transport agency is a contract for the 477 sale of goods.
We have carefully considered the material terms of this contract, and on the record as it stands we are unable to accept the conclusion of the High Court that a contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godown can be said to be a contract for the purpose of the service of sale of grain which the State Government had undertaken within the meaning of section 7(d).
It appears that before the High Court it was not disputed by the appellant that the service whose performance had been undertaken by the State Government consisted in the supply of grain to the people of the State of Bihar; and the High Court thought that from this concession it inevitably followed that the firm had a share and was interested in the contract for the performance of the service undertaken by the Government of Bihar.
It seems to us that the concession made by the appellant does not inevitably or necessarily lead to the inference drawn by the High Court.
If the service undertaken by the State Government is one of supplying grain how does it necessarily follow that a contract by which the bailee undertook to store the grain was a contract for the supply of grain? It may sound technical, but in dealing with a statutory provision which imposes a disqualification on a citizen it would be unreasonable to take merely a broad and general view and ignore the essential points of distinction on the ground that they are technical.
The narrow question is: if the State Government undertook the work of supplying the grain, is the contract one for the supply of grain?; in our opinion, the answer to this question must be in the negative; that is why we think the High Court did not correctly appreciate the effect of the contract when it held that the said contract brought the appellant 's case within the mischief of section 7(d).
In coming to its conclusion the High Court thought that its view was supported by a decision of this Court in N. Satyanathan vs K. Subramanyan (1).
In that case the appellant who was a contractor had entered into an agreement with the Central Government (1) ; 478 whereby he had offered to contract with the Governor General for the provision of a motor vehicle service for the transit and conveyance of all postal articles for the period specified in the contract, and the Governor General had accepted the offer.
As a consideration for the same the Government had agreed to pay to the contractor Rs. 200 per month during the subsistence of the agreement "as his remuneration for the service to be rendered by him".
It appears that on this contract two questions were raised before this Court.
First it was urged that it could not be said that the Central Government had undertaken any service within the meaning of section 7(d) of the Act when it made arrangements for the carriage of mailbags and postal articles through the contractor.
This contention was rejected on the ground that though the Government was not bound in the discharge of its duties as a sovereign State to make provision for postal mail service, it had in fact undertaken to do so under the Indian Post Offices Act for the convenience of the public. "It cannot be gainsaid", observed Sinha, J., as he then was, "that the postal department is rendering a very useful service, and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route"; and he added, "the present case is a straightforward illustration of the kind of contract contemplated under section 7(d) of the Act".
This straightforward illustration, in our opinion, clearly brings out the class and type of contracts which fall within section 7(d) of the Act.
Government must undertake to render a specified service or specified services and the contract must be for the rendering of the said service or services.
That was precisely what the contract in the case of N. Satyanathan (1) purported to do.
It is difficult to see how this case can be said to support the conclusion of the High Court that the contract for stocking and storing of goods is a contract for rendering the service of supplying and selling the same to the residents of the place.
In this connection Mr. Jha, for the respondents, has drawn our attention to a decision of the Madras High (1) ; 479 Court in V. V. Ramaswamy vs Election Tribunal, Tirunelveli (1).
In that case the Court was concerned with four contracts by which the contracting party agreed "to hold the reserve grain stock belonging to the Government of Madras, safely store it, and dispose of it according to the directions of the Government".
In other words, it was a contract not only for the stocking and storing of foodgrains but also of disposing of it, and that naturally meant that the contract was for service which the State Government had undertaken to perform.
This decision cannot assist the respondents in the present appeal.
In the result we hold that the High Court was not justified in reversing the finding of the Tribunal that the contract in question did not attract the provisions of section 7(d) of the Act.
The appeal must, therefore, be allowed and the order passed by the High Court set aside.
We cannot finally dispose of the matter, because one question still remains to be considered, and that is whether the conclusion that the appellant 's nomination paper had been improperly rejected would lead to the decision that the election of not only respondent 1 but also respondent 2 should be declared to be void.
The Election Tribunal has declared the whole election to be void, and in their respective appeals filed before the High Court both the respondents have challenged the correctness of that finding.
The High Court, however, thought that since in its opinion the nomination paper of the appellant had been properly rejected it was unnecessary to deal with the other point.
The point will now have to be considered by the High Court.
We would, therefore, set aside the order passed by the High Court and remand the pro ceedings to it in order that it may deal with the other question and dispose of the appeals expeditiously in accordance with law.
In the circumstances of this case we direct that the parties should bear their own costs in this Court.
Costs in the High Court will be costs in the appeal before it.
Appeal allowed.

Output:
The appellant was a member of a joint Hindu family which carried on the business of Government stockists of grain under a contract with the Government of Bihar.
His nomination for election to the Bihar Legislative Assembly was rejected on the ground that he was disqualified under section 7(d) of the Representation of the People Act, 195T, as he had an interest in a contract for the performance of services undertaken by the Bihar Government.
The appellant contended that the service undertaken by the Government was the sale of foodgrains under the Grain Supply Scheme and the contract was not for the sale of such foodgrains and did not attract the provisions of section 7(d).
Held, that the contract was not one for the performance of any service undertaken by the Government and the appellant was not disqualified under section 7(d).
A contract of bailment which imposed on the bailee the obligation to stock and store the foodgrains in his godowns was not a contract for the purpose of the service of sale of grain which the Government had undertaken.
The Government had undertaken the work of supplying grain but the contract was not one for the supply of grain.
N. Satyanathan vs K. Subramanyam, ; and V. V. Ramaswamy vs Election Tribunal, Tirunelveli, , distinguished.


Input:
vil Appeal No. 262 (NC) of 1976.
From the Judgment and Order dated 24.4.1975 of the Rajasthan High Court in D.B. Civil I.T.R. No. 45 of 1969.
Mrs. Anjali Verma for JBD & Co. and D.N. Misra for the Appellant.
O.P. Vaish, section Rajappa, Vinay Vaish, S.K. Aggarwal and Ms. A. Subhashini for the Respondents.
The Judgment of the Court was delivered by SINGH, J.
This appeal is directed against the judgment and order of the High Court of Rajasthan dated 24.4.1975 answering the question referred to it by the Income Tax Appellate Tribunal in the negative, in favour of the Revenue and against the assessee.
The question referred to the High Court was as under: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the payment of Rs.3 lakhs to the Northern Railway was a revenue expenditure and was a deduction allowable under the Income Tax Act.
1961?" The circumstances leading to the reference and the appeal was necessary to be stated.
The Natural Science (India) Ltd. predecessor ininterest of the assessee acquired a lease from the Maharaja of the 317 erstwhile Bikaner State on September 29, 1948 for mining of gypsum for a period of 20 years over an area of 4.27 square miles at Jamsar.
The lease was liable to be renewed after expiring of 20 years.
The Natural Science (India) Ltd. by a deed of assignment dated December 11, 1948 assigned the rights under the lease to the Bikaner Gypsums Ltd., a compa ny wherein the State Government owned 45 per cent share.
The Bikaner Gypsums Ltd. (hereinafter referred to as the asses see) carried on the business of mining gypsum in accordance with the terms of conditions stated in the lease.
The asses see entered into an agreement with Sindri Fertilizers, a Government of India Public Undertaking for the supply of gypsum of minimum of 83.5 per cent quality.
Under the lease, the assessee was conferred the liberties and powers to enter upon the entire leased land and to search for win, work, get, raise, convert and carry away the gypsum for its own benefits in the most economic, convenient and beneficial manner and to treat the same by calcination and other proc esses.
Clause 2 of Part II of the lease authorised the lessee to sink, dig, drive, quarry, make, erect, maintain and use in the said lands any borings, pits, shafts, in clines, drifts, tunnels, trenches, levels, water ways, airways and other works and to use, maintain, deepen or extend any existing works of the like nature in the demised land for the purpose of winning and mining of the mineral.
Clause 3 granted liberty to erect, construction, maintain and use on or under the land any engines, machinery, plant, dressing, floors, furnaces, brick kilns, like kilns, plaster kilns etc.
Clause 4 conferred liberty on the lessee to make roads and ways and use existing roads and ways.
Clause 7 granted liberty to the assessee to enter upon and use any part of parts of the surface of the said lands for the purpose of stacking, heaping or depositing thereon any produce of the mines or works carried on and any earth materials and substance dug or raised under the liberties and powers.
Clause 8 conferred liberty on the lessee to enter upon and occupy any of the surface lands within the demised lands other than such as are occupied by dwelling houses or farms and the offices, gardens and yards.
Clause 9 conferred power on the lessee to acquire, take up and occupy such surface lands in the demised lands as were then in the occupation of any body other than the Government on payment of compensation and rent to such occupiers, and if the lessee is unable to acquire such land from the tenants and occupiers, the Government undertook to acquire such surface land for the lessee at the lessee 's cost.
Clause 15 of Part II conferred liberty and power on the lessee to do all things which may be necessary for winning, working getting the said minerals and also for calcining, smelting, manufac turing, converting and making merchantable.
318 Part III of the lease contained restrictions and condi tions to the exercise of the liberties and powers and privi leges as contained in Part II of the lease.
Clause 2 of Part III provided that the lessee shall not enter upon or occupy surface of any land in the occupation of any tenant or occupier without making reasonable compensation to such tenant or occupier.
Clause 3 prescribed restriction on mining operation within 100 yards from any railway, reser voir, canal or other public works.
It reads as under: "Clause 3: No mining operations or working shall be carried on or permitted to be carried on by the lessee in or under the said lands at or to any point within a distance of 100 yards from any railway, reservoir, canal or other public works or any buildings or inhabited site shown on the plan hereto annexed except with the previous permission in writ ing of the Minister, or some officer authorised by him in that behalf or otherwise then in accordance with such in structions, restrictions and conditions either general or special which may be attached to such permission.
The said distance of 100 yards shall be measured in the case of a Railway Reservoir or canal horizontally from the outer of the bank or of outer edge of the cutting as the case may be and in the case of a building horizontally from the plinth thereof.
" The above clause had been incorporated in the lease to protect the railway track and railway station which was situate within the area demised to the lessee.
Clause 5 of Part VIII of the agreement stated as under: "Clause 5: If any underground or mineral rights in any lands or mines covered and leased to the lessee in accordance with the provisions of those presents be claimed by any 'Jagir dar ' 'Pattedar ', 'Talukdar ', tenant or other person then and in all such cases the Government shall upon notice from the lessee forthwith put the lessee in possession of all such lands and mines free of all costs and charges to the lessee and any compensation required to be paid to any such "Jagir dar", 'Pattedar ', 'Talukdar ', tenant or other person claim ing to have any underground or mineral rights shall be paid by the Government." The assessee company exclusively carried on the mining of 319 gypsum in the entire area demised to it.
The Railway author ities extended the railway area by laying down fresh track, providing for railway siding.
The Railways further con structed quarters in the lease area without the permission of the assessee company.
The assessee company filed a suit in civil court for ejecting the Railway from the encroached area but it failed in the suit.
The assessee company, there upon, approached the Government of Rajasthan which had 45 per cent share of it and the Railway Board for negotiation to remove the Railway Station and track enabling the asses see to carry out the mining operation under the land occu pied by the Railways (hereinafter referred to as the 'Rail way Area ').
Since, on research and survey the assessee company found that under the Railway Area a high quality of gypsum was available, which was required as raw material by the Sindri Fertilizers.
All the four parties namely, Sindri Fertilizers, Government of Rajasthan, Railway Board and the assessee company negotiated the matter and ultimately the Railway Board agreed to shift the railway station, track and yards to another place or area offered by the assessee.
Under the agreement the Railway authorities agreed to shift the station and all its establishments to the alternative site offered by the assessee company and it was further agreed and all the four parties, Sindri Fertilizers, Govern ment of Rajasthan, Indian Railway and the assessee company shall equally bear the total expenses of Rs. 12 lakhs in curred by the Railways in shifting the railway station, yards and the quarters.
Pursuant to the agreement, the assessee company paid a sum of Rs.3 lakhs as its share to the Northern Railway towards the cost of shifting of the Railway Station and other constructions.
In addition to that the assessee company further paid a sum of Rs.7,300 to the Railways as compensation for the surface rights of the leased land.
On the shifting of the Railway track and Sta tion the assessee carried out mining in the erstwhile Rail way Area and it raised gypsum to the extent of 6,30,390 tons and supplied the same to Sindri Fertilizers.
The assessee company claimed deduction of Rs.3 lakhs paid to the Northern Railway for the shifting of the Railway Station for the assessment year 1964 65.
The Income Tax Officer rejected the assessee 's claim on the ground that it was a capital expenditure.
On appeal by the assessee, the Appellate Assistant Commissioner confirmed the order of the Income Tax Officer.
On further appeal by the assessee the Income Tax Appellate Tribunal held that the payment of Rs.3 lakhs by the assessee company was not a capital expenditure, instead it was a revenue expenditure.
On an application made by the Revenue the Income Tax Appellate Tribunal (hereinaf ter referred to as the 320 Tribunal referred the question as aforesaid to the High Court under section 256 of the Income Tax Act, 1961.
The High Court held that since on payment of Rs.3 lakhs to the Rail way the assessee acquired a new asset which was attributable to capital of enduring nature, the sum of Rs. 3 lakhs was a capital expenditure and it could not be a revenue expendi ture.
On these findings the High Court answered the question in the negative in favour of the Revenue against the asses see and it set aside the order of the Tribunal by the im pugned order.
Learned counsel for the appellant contended that since the entire area had been leased out to the assessee for carrying out mining operations, the assessee had right to win, the minerals which lay under the Railway Area as that land had also been demised.
to the assessee.
Since, the existence of railway station, building and yard obstructed the mining operations, the assessee paid the amount of Rs.3 lakhs for removal of the same with a view to carry on its business profitably.
The assessee did not acquire any new asset, instead, it merely spent money in removing the ob struction to facilitate the mining in a profitable manner.
On the other hand, learned counsel for the Revenue urged that in view of the restriction imposed by Clause 3 of Part III of the lease, the assessee had no right to the surface of the land occupied by the Railways.
The assessee acquired that right by paying Rs.3 lakhs which resulted into an enduring benefit to it.
It was a capital expenditure.
Both the counsel referred to a number of decisions in support of their submissions.
The question whether a particular expenditure incurred by the assessee is of Capital or Revenue nature is a vexed question which has always presented difficulty before the Courts.
There are a number of decisions of this Court and other courts formulating tests for distinguishing the capi tal from revenue expenditure.
But the tests so laid down are not exhaustive and it is not possible to reconcile the reasons given in all of them, as each decision is rounded on its own facts and circumstances.
Since, in the instant case the facts are clear, it is not necessary to consider each and every case in detail or to analyse the tests laid down in various decisions.
However, before we consider the facts and circumstances of the case, it is necessary to refer to some of the leading cases laying down guidelines for deter mining the question.
In Assam Bengal Cement Co. Ltd. vs The Commissioner of Income Tax, West Bengal, , 'this Court observed that in the great diversity of human affairs and the complicated nature of business opera tion, it is difficult to lay down a test which would apply to all situations.
One has, therefore, to apply the criteria from the business 320 point of view in order to determine whether on fair appreci ation of the whole situation the expenditure incurred for a particular matter is of the nature of capital expenditure or a revenue expenditure.
The Court laid down a simple test for determining the nature of the expenditure.
It observed: the expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring bene fit of the business it is properly attributable to capital and is of the nature of capital expenditure.
If on the other hand it is made not for the purpose of bringing into exist ence any such asset or advantage but for running the busi ness or working it with a view to produce the profits it is a revenue expenditure.
If any such asset or advantage for the enduring benefit of the business is thus acquired or brought into existence it would be immaterial whether the source of the payment was the capital or the income of the concern or whether the payment was made once and for all or was made periodically.
The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure.
" In K.T.M.T.M. Abdul Kayoom and Another vs Commissioner of Income Tax, , this Court after consider ing a number of English and Indian authorities held that each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect.
The Court observed that what is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired, and their relation inter se, and this is the only key to resolve the issue in the light of the general principles, which are followed in such cases.
In that case the assessee claimed deduction of Rs.6, 111 paid by it to the Government as lease money for the grant of exclusive rights, liberty and authority to fish and carry away all chank shells in the sea off the coast line of a certain area specified in the lease for a period of three years.
The Court held that the amount of Rs.6,111 was paid to obtain an enduring benefit in the shape of an exclusive right to fish; the payment was not related to the chanks, instead it was an amount spent in acquiring an asset from which it may collect its stockin trade.
It was, therefore, an expenditure of a capital nature.
In Bombay Steam Navigation Co. Pvt. Ltd. vs Commissioner of Income Tax, Bombay, ; , the assessee pur chased.
the 321 assets of another Company for purposes of carrying on pas senger and ferry services, it paid part of the consideration leaving the balance unpaid.
Under the agreement of sale the assessee had to pay interest on the unpaid balance of money.
The assessee claimed deduction of the amount of interest paid by it under the contract of purchase from its income.
The court held that the claim for deduction of amount of interest as revenue expenditure was not admissible.
The Court observed that while considering the question the Court.
should con . sider the nature and ordinary course of business and the object for which the expenditure is in curred.
If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit earning process and not for acquisition of an asset or a right of a perma nent character, the possession of which is a condition for the carrying on of the business, the expenditure may be regarded as revenue expenditure.
But, on the facts of the case, the Court held that the assessee 's claim was not admissible, as the expenditure was related to the acquisi tion of an asset or a right of a permanent character, the possession of which was a condition for carrying the busi ness.
The High Court has relied upon the decision of this Court in R.B. Seth Moolchand Suganchand vs Commissioner of Income Tax, New Delhi, , in rejecting the assessee 's contention.
In Suganchand 's case the assessee was carrying on a mining business, he had paid a sum of Rs. 1,53,800 to acquire lease of certain areas of land bearing mica for a period of 20 years.
Those areas had already been worked for 15 years by other lessees.
The assessee had paid a sum of Rs.3,200 as fee for a licence for prospecting for emerald for a period of one year.
In addition to the fee, the assessee had to pay royalty on the emerald excavated and sold.
The assessee claimed the expenditure of Rs.3,200 paid by it as fee to the Government for prospecting licence as revenue expenditure.
The assessee further claimed that the appropriate part of Rs. 1,53,800 paid by it as lease money was allow able as revenue expenditure.
The Court held that while considering the question in relation to the mining leases an empirical test is that where minerals have to be won, extracted and brought to surface by mining operations, the expenditure incurred for acquiring such a right would be of a capital nature.
But, where the mineral has already been gotten and is on the surface, then the expenditure incurred for obtaining the right to acquire the raw material would be a revenue expenditure.
The Court held that since the payment of tender money was for acquisition of capital asset, the same could not be treated as a revenue expenditure.
As regards the claim relating to the prospecting licence 322 fee of Rs.3,200 the Court held that since the licence was for prospecting only and as the assessee had not started working a mine, the payment was made to the Government with the object of initiating the business.
The Court held that even though the amount of prospecting licence fee was for a period of one year, it did not make any difference as the fee was paid to obtain a licence to investigate, search and find the mineral with the object of conducting the business, extracting ore from the earth necessary for initiating the business.
The facts involved in that case are totally dif ferent from the instant case.
The assessee in the instant case never claimed any deduction with regard to the licence fee or royalty paid by it, instead, the claim relates to the amount spent on the removal of a restriction which obstruct ed the carrying of the business of mining within a particu lar area in respect of which the assessee had already ac quired mining rights.
The payment of Rs.3 lakhs for shifting of the Railway track and Railway Station was not made for initiating the business of mining operations or for acquir ing any right, instead the payment was made to remove ob struction to facilitate the business of mining.
The princi ples laid down in Suganchand 's case do not apply to the instant case.
In British Insulated and Helsby Cables Ltd. vs Atherton, , Lord Cave laid down a test which has almost universely been accepted.
Lord Cave observed: ". when an expenditure is made, not only once and for all, but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade, I think that there is very good reason (in the absence of special circum stances leading to an opposite conclusion) for treating such an expenditure as properly attributable not to revenue out to capital." This dictum has been followed and approval by this Court in the cases of Assam Bengal Cement Co. Ltd. (supra); Abdul Kayoom (supra) and Seth Sugancha.nd (supra) and several other decisions of this Court.
But, the test laid down by Lord Cave has been explained in a number of cases which show that the tests for considering the expenditure for the purposes of bringing into existence, as an asset or an advantage for the enduring benefit of a trade is not always true and perhaps Lord Cave himself had in mind that the test of enduring benefit of a trade would be a good test in the absence of special circumstances leading to an opposite conclusion.
Therefore, the test laid down by Lord Cave was not a conclusive one as Lord Cave himself did not regard his test 323 as a conclusive one and he recognised that special circum stances might very well lead to an opposite conclusion.
In Gotan Lime Syndicate vs C. I. T., Rajasthan & Delhi, 18, the assessee which carried on the busi ness of manufacturing lime from limestone, was granted the right to excavate limestone in certain areas under a lease.
Under the lease the assessee had to pay royalty of Rs.96,000 per annum.
The assessee claimed the payment of Rs.96,000 to the Government as a revenue expenditure.
This Court after considering its earlier decision in Abdul Kayoom 's case (supra) and also the decision of Lord Cave in British Insu lated (supra), held that the royalty paid by the assessee has to be allowed as revenue expenditure as it had relation to the raw materials to be excavated and extracted.
The Court observed that the royalty payment including the dead rent had relation to the lime deposits.
The 'Court observed although the assessee did derive an advantage and further even though the advantage lasted at least for a period of five years there was no payment made once for all.
No lump sum payment was ever settled, instead, only an annual royal ty and dead rent was paid.
The Court held that the royalty was not a direct payment for securing an enduring benefit, instead it had relation to the raw materials to be obtained.
In this decision expenditure for securing an advantage which was to last at least for a period of five years was not treated to have enduring benefit.
In M.A. Jabbar vs C.I.T. Andhra Pradesh, Hyderabad; , , the assessee was carrying on the business of supplying lime and sand, and for the purposes of acquiring sand he had obtained a lease of a river bed from the State Government for a period of 11 months.
Under the lease he had to pay large amount of lease money for the grant of an exclusive right to carry away sand within, under or upon the land.
The assessee in proceedings for assessment of incometax claimed deduction with regard to the amount paid as lease money.
The Court held that the expenditure incurred by the assessee was not related to the acquisition of an asset or a right of permanent character instead the expenditure was for a specific object of ena bling the assessee to remove the sand lying on the surface of the land which was stock in trade of the business, there fore, the expenditure was a revenue expenditure.
Whether payments made by an assessee for removal of any restriction or obstacle to its business would be in the nature of capital or revenue expenditure, has been consid ered by courts.
In Commissioner of Inland Revenue vs Carron Company, [1966 69] 45 Tax Cases 13 the assessee carried on the business of iron founders which was incor 325 porated by a Charter granted to it in 1773.
By passage of time many of its features had become archaic and unsuited to modern conditions and the company 's commercial performance was suffering a progressive decline.
The Charter of the company placed restriction on the company 's borrowing powers and it placed restriction on voting rights of certain mem bers.
The company decided to petition for a supplementary Charter providing for the vesting of the management in Board of Directors and for the removal of the limitation on compa ny 's borrowing powers and restrictions on the issue and transfer of shares.
The company 's petition was contested by dissenting share holders in court.
The company settled the litigation under which it had to pay the cost of legal action and buy out the holdings of the dissenting share holders and in pursuance thereof a supplementary Charter was granted.
In assessment proceedings, the company claimed deduction of payments made by it towards the cost of obtain ing the Charter, the amounts paid to the dissenting share holders and expensed in the action.
The Special Commissioner held that the company was entitled to the deductions.
On appeal the House of Lords held that since the object of the new Charter was to remove obstacle to profitable trading, and the engagement of a competent Manager and the removal of restrictions on borrowing facilitated the day to day trading operation of the company, the expenditure was on income account.
The House of Lords considered the test laid down by Lord Cave L.C. in British Insulated Company 's case and held that the payments made by the company, were for the purpose of removing of disability of the company trading operation which prejudiced its operation.
This was achieved without acquisition of any tangible or intangible asset or without creation of any new branch of trading activity.
From a commercial and business point of view nothing in the nature of additional fixed capital was thereby achieved.
The Court pointed out that there is a sharp distinction between the removal of a disability on one hand payment for which is a revenue payment, and the bringing into existence of an advantage, payment for which may be a capital payment.
Since, in the case before the Court, the Company had made payments for removal of disabilities which confined their business under the out of date Charter of 1773, the expendi ture was on revenue account.
In Empire Jute Company vs C.I. T, [1980] 124 ITR I, this Court held that expenditure made by an assessee for the purpose of removing the restriction on the number of working hours with a view to increase its profits, was in the nature of revenue expenditure.
The Court observed that if the advantage consists merely in facilitat ing the assessee 's trading operations of enabling the man agement and conduct of the assessee 's business to be carried on more efficiently or more profitably while leaving 326 he fixed capital untouched, the expenditure would be on revenue account even though the advantage may endure for an indefinite future.
We agree with the view taken in the aforesaid two decisions.
In our opinion where the assessee has an existing right to carry on a business, any expendi ture made by it during the course of business for the pur pose of removal of any restriction or obstruction or disa bility would be on revenue account, provided the expenditure does not acquire any capital asset.
Payments made for remov al of restriction, obstruction or disability may result in acquiring benefits to the business, but that by itself would not acquire any capital asset.
In the instant case the assessee had been granted mining lease in respect of 4.27 square miles at Jamsar under which he had right to sink, dig, drive, quarry and extract mineral i.e. the gypsum and in that process he had right to dig the surface of the entire money, licence fee and other charges for securing the right of mining in respect of the entire area of 4.27 square miles including the right to the miner als under the Railway Area.
The High Court has held that on payment of Rs.3 lakhs, the assessee acquired capital asset of an enduring nature.
The High Court failed to appreciate that Clause 3 was only restrictive in nature it did not destroy the assessee 's right to the minerals found under the Railway Area.
The restriction operated as an obstacle to the assessee 's right to carry on business in a profitable man ner.
The assesse paid a sum of Rs.3 lakhs towards the cost of removal of the obstructions which enabled the assessee to carry on its business of mining in an area which had already been leased out to it for that purpose.
There was, there fore, no acquisition of any capital asset.
here is no dis pute that the assessee completed mining operations on the released land (Railway Area) within a period of 2 years, in the circumstances the High Court 's view that the benefit acquired by the assessee on the payment of the disputed amount was a benefit of an enduring nature is not sustain able in law.
As already observed, there may be circumstances where expenditure, even if incurred for obtaining advantage of enduring benefit may not amount to acquisition of asset.
The facts of each case have to be borne in mind in consider ing the question having regard to the nature of business its requirement and the nature of the advantage in commercial sense.
In considering the cases of mining business the nature of the lease the purpose for which expenditure is made, its relation to the carrying on of the business in a profitable manner should be considered.
In the instant case existence of Railway Station, yard and buildings on the surface of the demised land operated as an obstruction to 327 the assessee 's business of mining.
The Railway Authorities agreed to shift the Railway establishment to facilitate the assessee to carry on his business in a profitable manner and for the purposes the assessee paid a sum of Rs.3 lakhs towards the cost of shifting the Railway construction.
The payment made by the assessee was for removal of disability and obstacle and it did not bring into existence any advan tage of an enduring nature.
The Tribunal rightly allowed the expenditure on revenue account.
The High Court in our opin ion failed to appreciate the true nature of the expenditure.
We are, therefore, of the opinion that the High Court committed error in interfering with the findings recorded by the Income Tax Appellate Tribunal.
We, accordingly, allow the appeal, set aside the order of the High Court and re store the order of the Tribunal.
The appellant is entitled to its costs.
N.V.K. Appeal allowed.

Output:
The appellant assessee carried on the business of mining gypsum.
The predecessor in interest of the assessee acquired a lease from the Maharaja of one of the erstwhile princely State on September 29, 1948 for mining of gypsum for a period of 20 years over an area of 4.27 square miles in the State.
The lease was liable to be renewed after the expiry of 20 years.
By a deed of assignment dated December 11, 1948 the rights under the lease were assigned to the assessee company, in which the State Government owned 45% shares.
The assessee entered into an agreement with a Government of India Public Undertaking for the supply of gypsum of minimum of 83.5% quality.
Under the lease, the assessee was conferred the liberties and powers to enter upon the entire leased land and to search for win, work, get, raise, convert and carry away the gypsum for its own benefits in the most economic convenient and beneficial manner and to treat the same by calcination and other processes.
The lease agreement consisted of several parts and each part contained several clauses.
Clause 3 of part Iii prescribed restrictions on mining operation within 100 yards from any railway, reser voir, canal or other public works.
This clause had been incorporated in the lease to protect the railway track and railway station which was situated within the area demised to the lessee.
The assessee exclusively carried on the mining of gypsum in the entire area demised to it.
The Railway Authorities extended the railway area by laying down fresh track, pro viding for railway siding and further constructed quarters in the leased area without the permission of the assessee.
The assessee company filed a civil suit for ejecting the railways from the encroached area but it failed in the suit.
314 As the assessee company on research and survey found that under the railway area a high quality of gypsum was available, which was required as raw material by the Public Sector Company, all the parties (Public Sector Company, the Railway Board and the assessee company) negotiated the matter, the Railway Board agreeing to shift the railway station, track and yards to an alternative area offered by the assessee, the parties equally bearing the cost of the shifting.
Under the aforesaid agreement, the assessee company paid a sum of Rs.3 lakhs as its share towards the cost of shift ing of the Railway Station and other constructions, and claimed deduction of the said sum for the assessment year 1964 65.
The Income Tax Officer rejected the assessee 's claim on the ground that it was a capital expenditure.
The order was confirmed on appeal by the Appellate Assistant Commissioner.
On appeal by the assessee, the Income Tax Appellate Tribunal held that the payment of Rs.3 lakhs by the assessee company was not a capital expenditure, but a revenue expend iture.
The Tribunal referred the question to the High Court under section 256 of the Income Tax Act, 1961, on an appli cation by the revenue, which held that since on payment of Rs.3 lakhs to the Railways the assessee acquired a new asset which was attributable to capital of enduring nature, the sum of Rs.3 lakhs was a capital expenditure and it could not be a revenue expenditure.
In the appeal to this Court on the question whether the payment of Rs.3 lakhs to the Northern Railway was a revenue expenditure and was a deduction allowable under the Income Tax Act, 1961.
Allowing the appeal, this Court, HELD: 1(a) Where the assessee has an existing right to carry on a business, any expenditure made by it during the course of business for the purpose of removal of any re striction or obstruction or disability would be on revenue account, provided the expenditure does not acquire any capital asset.
[326A] (b) Payments made for removal of restriction, obstruc tion or disability may result in acquiring benefits to the business, but that by itself would not acquire any capital asset.
[326B] Gotan Lime Syndicate vs C.I.T., Rajasthan & Delhi, ; M.A. Jabbar vs C.I.T., Andhra Pradesh, Hyderabad, [1968] 315 2 SCR 413 and Commissioner of Inland Revenue vs Carron Company, [1966 69] 45 Tax Cases 18, referred.
Empire Jute Company vs C. I. T., ; , affirmed.
In the instant case, the assessee have been granted mining lease in respect of 4.27 square miles under which he had right to sink, dig, drive, quarry and extract mineral i.e. the gypsum and in that process he had right to dig the surface of the entire area leased out to him.
The payment of Rs.3 lakhs was not made by the assessee for the grant of permission to carry on mining operations within the railway area, instead the payment was made towards the cost of removing the construction which obstructed the mining opera tions.
On the payment made to the Railway Authorities the assessee did not acquire any fresh right to any mineral nor he acquired any capital asset instead, the payment was made by it for shifting the Railway Station and track which operated as hindrance and obstruction to the business of mining in a profitable manner.
[326C E] 2.
There may be circumstances where expenditure, even if incurred for obtaining advantage of enduring benefit would not amount to acquisition of asset.
The facts of each case have to be borne in mind in considering the question having regard to the nature of business, its requirement and the nature of the advantage in commercial sense.
[326F G] 3(a) The test for considering the expenditure for the purposes of bringing into existence an asset or an advantage for the enduring benefit of a trade is not always true and conclusive.
[327B] 3(b) In considering the cases of mining business the nature of the lease the purpose for which expenditure is made, its relation to the carrying on of the business in a profitable manner should be considered.
[326H] In the instant case, existence of Railway Station, yard and buildings on the surface of the demised land operated as an obstruction to the assessee 's business of mining.
The Railway Authorities agreed to shift the Railway establish ment to facilitate the assessee to carry on his business in a profitable manner and for that purpose the assessee paid a sum of Rs.3 lakhs.
The payment made by the assessee was for removal of disability and obstacle and it did not bring into existence any advantage of an enduring nature.
There was therefore.
no acquisition of any capital asset.
[326H; 327A] 316 British Insulated and Helsby.
Cables Ltd. vs Atherton, , explained.
Assam Bengal Cement Co. Ltd. vs The Commissioner of Income Tax, West Bengal, , referred to.
R.B. Seth Moolchand Suganchand vs Commissioner of Income Tax, New Delhi, , distinguished.
The Tribunal rightly allowed the expenditure on revenue account.
The High Court failed to appreciate the true nature of the expenditure.
It committed an error in interfering with the findings recorded by the Income Tax Appellate Tribunal.
[327B C]