Input:
minal ' Appeal No. 93 of 1956.
Appeal by special leave from the judgment and order dated the April 14, 1955, of the Bombay High Court in Criminal Appeal No. 156 of 1955 and Criminal Revision Application No. 435 of 1955 arising out of Judgment dated the January 3,1955, of the Court of 636 the Additional Chief Presidency Magistrate, Bombay, in Case No. 9/p of 1954.
Purshottam Tricumdas, J. B. Dadachanji, section N. Andley and Rameshwar Nath, for the appellant.
C. K. Daphtary, Solicitor General of India, Porus A. Mehta and R. H. Dhebar, for the respondent.
February 12.
The Judgment of the Court was delivered by BHAGWATI J.
This appeal with special leave under article 136 of the Constitution raises the question whether the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 (Ordinance No. III of 1946) promulgated by the Governor General of India on January 12, 1946, was in operation on July 11, 1953, when the offence under section 7 read with section 4 thereof was committed by the appellant herein.
The appellant who was the accused No. 1 before the Additional Chief Presidency Magistrate 's Court, Bombay, was charged along with the accused Nos. 2, 3, 5 and 6 with having on or about July II, 1953, transferred by sale 10 High Denomination Bank Notes of the Denomination of Rs. 1,000 each to one Velji Lakhamshi Joshi for Rs. 1,800 at the rate of Rs. 180 per note and thus contravened the provisions of section 4 of the Ordinance and committed an offence punishable under section 7 of the Ordinance read with section 109 of the Indian Penal Code.
A preliminary objection was urged by the learned counsel for the appellant that the said Ordinance was not in operation at the date when the offence was alleged to have been committed and that therefore the prosecution was not maintainable.
This objection was overruled by the learned Presidency Magistrate and the trial ended in the conviction of the appellant along with the co accused of the offence with which they had been charged.
The appellant was sentenced to pay a fine of Rs. 8,000 and in default suffer six months ' rigorous imprisonment and the co accused of the appellant were awarded varying sentences of fine with which however we are not concerned.
The appellant took an appeal to the High Court of Judicature at Bombay being Criminal Appeal No. 156 637 of 1955.
The State of Bombay, the respondent herein, also filed an application for enhancement of the sentence, being Criminal Revision Application No. 435 of 1955.
The co accused of the appellant had also filed appeals against their convictions and sentences of fine imposed upon them and all these appeals and the application of the respondent were heard together by a Division, Bench of the High Court.
The High Court agreed with the learned Presidency Magistrate in regard to the finding of fact and held that the appellant had in fact transferred by sale 10 High Denomination Bank Notes of Rs. 1,000 each to the possession of Velji Lakhamshi and his act fell within the prohibition enacted in section 4 of the Ordinance.
The High Court also overruled the contentions which were urged before it in regard to the Ordinance having lapsed and ceased to be in operation before July 11, 1953, the date on which the offence was alleged to have been committed.
It accordingly confirmed the conviction recorded against the appellant by the learned Additional Chief Presidency Magistrate.
In regard to the sentence the High Court saw no ground for enhancing the same and confirmed the sentence of fine of Rs. 8,000 and in default six months ' rigorous imprisonment which had been awarded by the learned Presidency Magistrate to the appellant.
The appellant applied to the High Court for a certificate under article 134 (1) (c) of the Constitution.
The said application was however dismissed by the High Court with the result that he applied for and obtained from this Court special leave under article 136 of the Constitution.
The decision of this appeal turns on the construction of section 72 of the 9th Sch.
of the Government of India Act, 1935 (25 and 26 Geo.
42) and section 1 (3) of the India and Burma (Emergency Provisions) Act, 1940 (3 and 4 Geo.
Section 72 of the 9th sch.
of the Government of India Act, 1935, read as follows: " The Governor General may, in cases of emergency, make and promulgate ordinances for the peace and good Government of British India or any part thereof, and any ordinance so made shall, for the 638 space of not more than six months from its promulgation, have the like force of law as an Act passed by the Indian Legislature; but the power of making ordinances under this section is subject to the like restrictions as the power of the Indian Legislature to make laws; and any ordinance made under this section is subject to the like disallowance as an Act passed by the Indian Legislature, and may be controlled or ,superseded by any such Acts.
" Section 1 (3) of the India and Burma (Emergency Provisions) Act, 1940, ran as under: " Section seventy two of the Government of India Act, (which, as set out in the Ninth Schedule to the Government of India Act, 1935, confers on the Governor General power to make Ordinances in cases of emergency) shall, as respects Ordinances made during the period specified in section three of this Act, have effect as if the words "for the space of not more than six months from its promulgation" were omitted; and, notwithstanding the provision in the said section seventy two that the power of making Ordinances thereunder is subject to the like restrictions as the power of the Indian Legislature to make laws (a) Ordinances may, during the said period, be made under that section affecting the Army Act, the Air Force Act, or the Naval Discipline Act; and (b) Section one hundred and eleven of the Government of India Act, 1935 (which exempts certain British subjects from certain Indian Laws) shall not apply to any ordinance made under the said section seventy two during that period.
" Section 3 referred to hereinabove was in the terms following: " The period referred to in the preceding sections is the period beginning with the date of the passing of this Act and ending with such date as His Majesty may by Order in Council declare to be the end of the emergency which was the occasion of the passing of this Act.
" The India and Burma (Emergency Provisions) Act, 1940, was passed on June 27, 1940 , and was an Act to 639 make emergency provisions with respect to Government of India and Burma.
On April 1, 1946, was published in the Gazette of India Extraordinary His Majesty 's Order in Council called " The India and Burma (Termination of Emergency) Order, 1946 ".
By the said order the period of emergency referred to in section 3 of the India and Burma (Emergency Provisions) Act, 1940, was declared to have ended on April 1, 1946.
The period specified in section 3 of the said Act thus extended from June 27, 1940, to April 1, 1946.
The Ordinance in question was promulgated on January 12, 1946, and was therefore within the said period.
The argument which was addressed before us by the learned counsel for the appellant based on these provisions was (a) that as soon as the declaration that the emergency was at an end was made on April 1, 1946, the original position was restored and the Ordinance in question which had been promulgated in exercise of the emergency powers ipso facto lapsed when the emergency was declared to have ended, (b) that, in the alternative, section 72.
of the 9th Sch.
of the Government of India Act, 1935, having been thus restored with effect from April 1, 1946, one must look to its terms as they originally stood to justify the continuance of the ordinance in question after April 1, 1946, whensoever it may have been promulgated.
It will be useful at this stage to see what was the scheme provided in the Government of India Act, 1935, for enacting legislative measures.
It may be noted that the Act envisaged the establishment of the Federation of India.
Part II, ch. 3 provided for the constitution of the Federal Legislature which was to consist of two chambers known respectively as the Council of States and the House of Assembly.
The normal legislative procedure required a bill to be passed by both the Chambers of the Federal Legislature and assented to by the Governor General.
There was a distribution of legislative powers between the Federal Legislature and the Provincial Legislatures and the Federal Legislature was invested with the power to make laws for.
the whole or any part of British India or for any Federated State with respect to any of the matters enumerated 640 in the Federal Legislative List and any of the matters enumerated in the Concurrent Legislative List.
Power was however given, to the Federal Legislature, if the Governor General in his discretion declared by a "Proclamation of Emergency" that a grave emergency existed whereby the security of India was threatened, whether by war or internal disturbance, to make laws for a Province or any part thereof with respect to any of the matters enumerated in the Provincial Legislative List.
These were the powers of the Federal Legislature to enact legislative measures.
The Governor General was, however, conferred certain legislative powers in Part II, ch. 4.
Power was conferred upon him to promulgate Ordinances if at any time when the Federal Legislature was not in session he was satisfied that circumstances existed which rendered it necessary for him to take immediate action.
Ordinances thus promulgated were to have the same force and effect as Acts of the Federal Legislature assented to by the Governor General.
But every such Ordinance would cease to operate at the expiration of six months from the re assembly of the Legislature.
Similar power was conferred upon the Governor General to promulgate Ordinances if at any time he was satisfied that circumstances existed which rendered it necessary for him to take immediate action for the purpose of enabling him satisfactorily to discharge his functions in so far as he was required in the exercise thereof to act in his discretion or to exercise his individual judgment.
Such Ordinances also were to have the same force and effect as the Acts of the Federal Legislature assented to by the Governor General and were to continue in operation for such period not exceeding six months as may be specified therein but could by subsequent Ordinances be extended for a further period not exceeding six months.
Power was also conferred upon the Governor General if at any time it appeared to him that for the purpose of enabling him satisfactorily to discharge his functions in so far as he was required in the exercise thereof to act in his discretion or, to exercise his individual judgment it was essential that provision should be made by legislation, to enact I SUPREME COURT REPORTS 641 Governor General 's Acts which when enacted were to have the same force and effect as Acts of the Federal Legislature assented to by the Governor General.
These were the special legislative powers conferred upon the Governor General which could be exercised by him when the normal legislative procedure could not be resorted to.
It is worthy of note however that howsoever and under whatever circumstances the legislative powers vested in the Governor General were exercised by him, the Governor General 's Acts thus enacted and the Ordinances thus promulgated were equated with the Acts of the Federal Legislature assented to by the Governor General.
Part XIII enacted Transitional Provisions.
A period of time was bound to elapse between the commencement of Part III of the Act which related to the Governor 's Provinces and the establishment of the Federation and section 317 of the Act continued in force certain provisions of the Government of India Act with amendments consequential on the provisions of the Act set out in the 9th Sch.
thereof until the estab lishment of the Federation.
Section 72 above quoted formed part of the 9th Sch.
under the caption " Indian Legislature" and conferred upon the Governor General power to make and promulgate Ordinances for the peace and good Government of British India or any part thereof in cases of emergency.
Ordinances thus promulgated by the Governor General in exercise of the power thus conferred upon him were to continue in operation for the space of not more than six months from the date of their promulgation and were to have the like force of law as Acts passed by the Indian Legislature.
They were also equated with the.
Acts passed by the Indian Legislature by having resort to the normal legislative procedure set out in the Government of India Act.
Even though the Governor General 's Acts and the Ordinances promulgated by him were thus equated with the Acts passed by the Federal Legislature or the Indian Legislature as the case may be, the period of duration thereof had to be determined.
Every statute for which no time is limited is I 642 SUPREME COURT REPORTS [1957] called a perpetual Act, and its duration is prima facie perpetual.
It continues in force until it is repealed.
(Vide Craies on Statute Law, 5th Ed.
p. 374; Halsbury 's Laws of England, Hailsham Ed., Vol.
XXXI, p. 511, para.
If an Act contains a proviso that it is to continue in force only for a certain specified time, it is called a Temporary Act.
This result would follow not only from the terms of the Act itself but also from the fact that it was intended only as a temporary measure.
This ratio has also been applied to emergency measures which continue during the subsistence of the emergency but lapse with the cessation thereof.
It was therefore contended that Ordinances promulgated under the emergency powers vested in the Governor General would be in operation during the period of emergency but would cease to be in operation once the emergency was declared to have ended.
In the instant case before us the Ordinance in question was promulgated in exercise of the emergency powers vested in the Governor General under section 72 of the 9th Sch.
of the Government of India Act, 1935, and it was urged that the Ordinance thus promulgated would cease to be in operation after the emergency was declared to have ended on April 1, 1946, by the India and Burma (Termination of Emergency) Order, 1946, in spite of the words of limitation " for the space of not more than six months from its promulgation " having been omitted from section 72 by section 1(3) of the India and Burma (Emergency Provisions) Act, 1940.
Reliance was placed in support of this contention on the observations of Vardachariar C. J. in King Emperor vs Benoari Lall Sharma and others(1): " Legislation by Ordinance has no doubt been given the same effect as ordinary legislation and the ambit as to the subject matter is the same in both cases.
But there are two fundamental points of difference which have a material bearing on the present question: One is that by the very terms of s.72 of the Ninth Schedule to the Constitution Act, the operation of the Ordinance is limited to a period of (1) , 137.
643 six months (and even now it is only temporary, though the particular limit has been removed), and secondly, it is avowedly the exercise of a special power intended to meet an emergency." Zafrulla Khan J. also had expressed himself to the same effect in King Emperor vs Sibnath Banerjee (1): " The legislature can at any time enact a measure and such measure can remain in force without any limit of time; but the exercise of the Ordinance making power is limited in two ways (1) by the limitation as to the circumstances in which it can be exercised, and (ii) by the limitation as to the time during which any measure so enacted can remain in operation.
The existence of an emergency is a condition precedent to the exercise of the power.
The fact that the Court cannot go behind a declaration of emergency made by the Ordinance making authority cannot affect this question.
The power was intended to be availed of and could be availed of only in an emergency, whereas ordinary legislation is not governed by any such limitation.
Similarly, an Ordinance is necessarily of limited duration, whether under section 72 or under the terms of the India and Burma (Emergency Provisions) Act of 1940.
" An argument was accordingly addressed before us that even though the Ordinance in question had been promulgated during the period specified in a. 3 of the India and Burma (Emergency Provisions) Act, 1940, viz., between June 27, 1940, and April 1, 1946, and section 72 of the 9th Sch.
of the Government of India Act, 1935, was to be read with the omission of the words " for the space of not more than six months from its promulgation " therefrom, the effect of such omission was not to continue the duration of the Ordinance in question in any event beyond April 1, 1946.
The Ordinance lapsed or ceased to be in operation on the, declaration having been made on April 1, 1946, that the emergency had ended.
This argument however ignores the fact that whatever Governor General 's Acts were enacted or (1) , 12. 83 644 Ordinances promulgated by him in exercise of his special legislative powers or in exercise of the emergency_ power conferred upon him by section 72 of the 9th Sch.
of the Government of India Act, 1935, were all equated with the Acts of the Federal Legislature or the Indian Legislature, as the case may be, assented to by the Governor General.
If there was a limitation to be found in the Acts or the Ordinances themselves in regard to the duration thereof the same was to prevail.
But if no time was limited in the enactment itself for its duration it was to continue in force until it was repealed.
If by the operation of section 1 (3) of the India and Burma (Emergency Provisions) Act, 1940, the words " for the space of not more than six months from its promulgation " were omitted from section 72 during the period specified in section 3 of that Act, viz., June 27,1940 to April 1, 1946, there was no limitation of the period of duration of the Ordinance in question and the Ordinance having the like force of law as an Act passed by the Indian Legislature without any limitation on its duration was to continue in force until it was repealed.
The emergency under which the Governor General was invested with the power to make and promulgate Ordinances for the peace and good government of British India or any part thereof under section 72 was the condition of the exercise of such power, by the Governor General and did not impose any limitation on the duration of the Ordinances thus promulgated.
For determining the duration of such Ordinances one had to look to the substantive provisions of section 72 which in terms enacted and laid down the limitation of "not more than six months from its promulgation " on the life of the Ordinance.
If these words had not been omitted by section 1 (3) of the India and Burma (Emergency Provisions) Act, 1940, the Ordinances thus promulgated would have been of a duration of not more than six months from their promulgation.
Once these words were omitted by a. 1 (3) of the India and Burma (Emergency Provisions) Act, 1940, section 72 of the 9th Sch.
of the Government of India Act, 1935, would read as under: 645 The Governor General may, in cases of emergency, make and promulgate ordinances for the peace and good government of British India or any part thereof and any ordinance so made shall. . . have the like force of law as an Act passed by the Indian Legislature; but the power of making ordinances under this section is subject to the like restrictions as the power of the Indian Legislature to make laws; and the like disallowance as an Act passed by the Indian Legislature, and may be controlled or superseded by any such Act.
" The effect of the deletion of these words from section 72 leaving the section to be read as above had the necessary effect of equating the Ordinances which were promulgated between June 27, 1940, and April 1, 1946, with Acts passed by the Indian Legislature without any limitation of time as regards their duration.
Ordinances thus promulgated were perpetual in duration and continued in force until they were repealed.
This position was considered by the Federal Court in J. K. Gas Plant Manufacturing Co., (Rampur) Ltd. and others vs King Emperor (1) where Spens C. J. observed: " These Ordinances were made under the powers conferred on the Governor General by section 72 of the Ninth Schedule to the Constitution Act, as amended by the India and Burma (Emergency Provisions) Act, 1940 (3 & 4 Geo.
6, Ch. 33).
Under the said section 72, as it originally stood, Ordinances were limited to an effective life of six months only from the date of promulgation.
Sub section (3) of section I of the said Act, however, provided that in respect of Ordinances made under section 72 during the period specified in section 3 of the Act, section 72 should have effect as if the words ,for the space of not more than six months from its promulgation" were omitted.
The period specified in section 3 of the Act is " the period beginning with the date of the passing of this Act and ending with such date as His Majesty may by Order in Council declare to be the end of the emergency which was the occasion of the passing of this Act.
" The date of `the passing of the (1) , 161. 646 said Act was the 27th June, 1940, and the emergency was not notified to have come to an end on the 1st April, 1946.
It was contended on behalf of the appellants that the true construction to be given to section 72 as so amended was in effect to substitute in section 72 in respect of the duration of an Ordinance, the period specified in section 3 of the Act for the original six months ' period and that accordingly on the expiration of that period, viz., on the 1st April, 1946, Ordinances made after the passing of the Act automatically came to an end.
It was not made very clear how one could arrive at such a construction.
It appears to be based on the suggestion that the power to promulgate an Ordinance under section 72 was by the section confined to the existence of an emergency, Cf: the words in the sub section "in cases of emergency ", and that the Act was intituled an Act to make emergency provision with respect to the Government of India and Burma and defined the period of emergency.
Unless therefore the construction contended for by the appellants was accepted no period would be provided for the continuance of these Ordinances, and that could not have been the intention of the legislature, as the ordinance making power of the Governor General was recognised as temporary only.
In our opinion, the emergency on the happening of which an Ordinance can be promulgated is separate and distinct from and must not be confused with the, emergency which occasioned the pawing of the Act and the clear effect of the words of the, Act on section 72 is that Ordinances promulgated under that subsection during the period specified in section 3 of the Act are subject to no time limit as regards their existence and validity, unless imposed by the Ordinances themselves, or other amending or repealing legislation, whether by Ordinance or other.
In our judgment, it is clear that the second Lahore Tribunal did not cease to exist or to have jurisdiction in the case under appeal by reason of the expiration on the 1st April, 1946, of the period specified in section 3 of the Act in question.
" In our opinion, the above observations of Spens C. J. enunciate the correct position.
The Ordinance in 641 question having been promulgated during the period between June 27, 1940, 'and April 1, 1946, was perpetual in duration and continued in force until it was repealed.
Our attention has not been drawn to any subsequent Ordinance or Act of the Indian Legislature amending or repealing the said Ordinance with the result that it continues to be in force and was in operation on July 11, 1953, the date on which the offence in question was committed by the appellant.
This position was recognized in the Adaptation of Laws Order, 1950, issued under the Constitution Of India.
In the Second Schedule to the said Order were contained several Central Ordinances enacted between 1940 and 1946 including the High Denomination Bank Notes (Demonetisation) Ordinance, 1946 (Ordinance No. III of 1946) where in section II thereof the words " Part A States and Part C States " were to be sub stituted for "the provinces".
It is not necessary to refer to the other Ordinances appearing in this compilation but suffice it to say that in respect of all the Ordinances which were thus promulgated by the Governor General in exercise of the power conferred upon him under section 72 of the 9th Sch.
of the Government of India Act, 1935, the continuance thereof even after April 1, 1946, was predicated and the adaptations prescribed in the Adaptation of Laws Order, 1950, issued under the Constitution of India were made applicable thereto.
This position is further supported by referring to the relevant provisions of the (II of 1934).
Section 26 of that Act provided ill (1) Subject to the provisions of sub section (2), every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government.
(2)On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination, shall cease to be legal tender save at such office or a agency of the bank and to such extent as may be specified in the notification.
648 Under section 1 (2) of the Act as it stood, the Act extended to whole of India excepting the State of Jammu and Kashmir.
The ' High Denomination Bank Notes (Demonetisation) Ordinance, 1946 (Ordinance No. III of 1946) declared that Denomination Notes of the denominational value of Rs. 500, Rs. 1,000 or Rs. 10,000 ceased to be legal tender in payment or on account at any place in British India on the expiry of January 12, 1946.
The Ordinance having continued in operation even after the declaration of the emergency having come to an end was made on April 1, 1946, the said notes continued to be ineffective as legal tender in India, though the position in Jammu and Kashmir in regard to the same could not be affected by reason of the , not having been made applicable to the State of Jammu and Kashmir as stated above.
On September 25, 1956, however, the (LXII of 1956) being an Act to provide for the extension of certain laws to the State of Jammu and Kashmir was passed by the Parliament.
In the Schedule to that Act was contained the (II of 1934).
The words " except the State of Jammu and Kashmir" were omitted from section 1, sub section
(2) and section 26A was added after section 26 of the Act.
Section 26A provides: ,, Notwithstanding anything contained in section 26, no bank note of the denominational value of five hundred rupees, one thousand rupees or ten thousand rupees issued before the 13th day of January, 1946, shall be legal tender in payment or on account for the amount expressed therein.
The law in the State of Jammu and Kashmir with regard to these High Denomination Bank Notes issued before January 13, 1946, was thus brought into line with the law as it obtained in the rest of India.
This would certainly have not been done but for the acceptance of the position that the Ordinance in question continued in operation even after April 1, 1946, and was in operation right throughout even after April 1, 1946.
649 The alternative argument addressed before us by the learned counsel for the appellant need not detain us at all, for the simple reason that reading section 72 in the manner suggested would be tantamount to giving a retrospective effect to the section as it originally stood in regard to Ordinances which had been promulgated between June 27, 1940, and April 1, 1946.
There is nothing to justify such retrospective operation.
As regards such Ordinances the period of their duration had to be determined having regard to the provisions of section 72 as they stood with the omission of the words " for the space of not more than six months from its promulgation " therefrom during tHe period specified in section 3 of the India and Burma (Emergency Provisions) Act, 1940, and the Ordinance in question was therefore not limited to the space of not more than six months from the date of its promulgation but was perpetual in its duration with the result that it continues in operation until it is repealed.
There is no warrant for reading the provisions of section 72 with the omitted words restored to their original position after April 1, 1946, while determining the duration of the Ordinances which had been promulgated between June 27, 1940, and April 1, 1946.
Both the contentions urged by the learned counsel for the appellant before us having thus failed, it follows that the High Denomination Bank Notes (Demonetization) Ordinance, 1946 (Ordinance No. III of 1946) was in operation on July 11, 1953, the date on which the offence was committed by the appellant and the appellant was rightly convicted by both the courts below.
The appeal will accordingly stand dismissed.
Appeal dismissed.

Output:
Under section 72 Of the 9th Sch.
of the Government of India Act, 1935: " The Governor General may, in cases of emergency, make and promulgate ordinances . and any ordinance so made shall, for the space of not more than six months from its promulgation, have the like force of law as an Act passed by the Indian Legislature . " ; section I (3) of the India and Burma (Emergency Provisions) Act, 1940, provided that section 72 Of the Government of India Act, 1935, shall as respects Ordinances made during the period beginning with June 27, 1940, the date of the passing of that Act, and ending with such date as His Majesty may by Order in Council declare to be the end of the emergency, have effect as if 635 the words " for the space of not more than six months from its promulgation " were omitted.
The appellant was prosecuted for having on July 11, 1953, contravened the provisions of section 4 of the High Denomination Bank Notes (Demonetisation) Ordinance, 1946.
The Ordinance was promulgated by the Governor General of India on January 12, 1946, but on April 1, 1946, an Order in Council was published in the Gazette of India Extraordinary whereby the period of emergency referred to in the India and Burma (Emergency Provisions) Act, 1940, was declared to have ended on April 1, 1946.
It was contended for the appellant that the Ordinance in question was not in operation on the date when the offence was alleged to have been committed and that therefore the prosecution was not maintainable, because (1) the Ordinance had been promulgated in exercise of the emergency powers and that it lapsed ipso facto on April 1, 1946, when the declaration was made that the emergency was at an end; and (2) section 72 of the 9th Sch.
of the Government of India Act, 1935, having been restored with effect from April 1, 1946, one must look to its terms as they originally stood, to justify the continuance of the Ordinance after April I, 1946.
Held, that the deletion of the words " for the space of not more than six months from its promulgation " from section 72 of the 9th Sch.
of the Government of India Act, 1935, by section 1 (3) of the India and Burma (Emergency Provisions) Act, 1940, had the effect of equating Ordinances which were promulgated between June 27, 1940, and April I, 1946, with Acts passed by the Indian Legislature without any limitation of time as regards their duration, and therefore continuing in force until they were repealed.
Though after April I, 1946, section 72 Of the 9th Sch.
of the Government of India Act, 1935, was restored in its original form, the continuance of the Ordinance in question after that date had to be determined having regard to the terms of the section as they stood on the date of such promulgation, as there was nothing to justify retrospective operation of the section so restored.
J. K. Gas Plant Manufacturing Co. (Rampur) Ltd. and others vs King Emperor, , relied on.


Input:
Special Leave Petition (Civil) No. 7914 of 1989.
From the Judgment and Order dated 26.5.1989 of Delhi High Court in S.A.O. No. 296 of 1984.
V.M. Tarkunde and S.K. Gupta for the petitioner.
Dr. Y.S. Chitale, Ramji Srinivasan, P.K. Jain and Ra vinder Nath for the respondents.
The Judgment of the Court was delivered by R.M. SAHAI, J.
Tenant inducted in 1979, for three years, 2by the landlord under a written agreement, in C 4/33, Saf darjang Development Area, New Delhi, with permission of Controller under Section 21 of Delhi Rent Control Act (for brevity the 'Act ') seeks leave of this Court on limited question of law if proceedings for recovery of possession under Section 21 of the Act could be initiated and continued by legal representatives of the landlord who had obtained permission but who died before expiry of period of tenancy.
Answer of it shall depend, primarily, on construction of word 'landlord ' used in Section 21, a provision held to be self contained code in Shiv Chand Kapoor vs Amar Bose, ; and also the purpose and objective of its enactment as provision of short duration tenancy or periodi cal tenancy in Rent Control Act of Delhi right from 1952, is unique amongst such legislations and is probably non exist ent in any other State.
It reads as under: 28 21.
"Recovery of possession in case of tenancies for limited period: (1) Where a landlord does not require the whole or any part of any premises for a particular period, and the landlord, after obtaining the permission of the Controller in the prescribed manner, lets the whole of the premises or part thereof as a residence for such period as may be agreed to in writing between the landlord and the tenant and the tenant does not, on the expiry of the said period, vacate such premises, then, notwithstanding anything contained in Section 14 or in any other law, the Controller may, or an application made to him in this behalf by the landlord within such time as may be prescribed, place the landlord in vacant possession of the premises or part thereof by evict ing the tenant and every other person who may be in occupa tion of such premises.
(2) while making an order under sub section (1), the Con troller may award to the landlord such damages for the use or occupation of the premises at such rates as he considers proper in the circumstances of the case for the period from the date of such order till the date of actual vacation by the tenant.
" What it, undoubtedly, projects is the legislative aware ness of acute crisis of houses in the State.
To resolve the paucity of accommodation, on one hand, due to enormous influx of office personnel and business class as a result of rapid growth of social, economic and political activity and apprehension of house owners, on other, bulk of whom hail from middle class or service class, of loosing their houses if not for good then for substantial period due to develop ment of strange phenomenon in big cities that allotted or rented houses are more economical than, even, own the legis lature which is the best judge of need of its people carved out an exception to usual rent control provisions of pro tecting tenants from eviction What was unique of it was not short duration tenancy but a fresh look on eviction.
Vacant possession was ensured, statutorily, without any notice, or termination of tenancy or the hazard of establishing bona fide need and comparative hardship etc.
Since sec.
21 is an exception to Section 14 and it mandates restoration of possession, "notwithstanding any other law" it has to be construed strictly and against any attempt to frustrate it.
Intensity of it can be appreciated better if its language, is compared 29 with other provisions of recovery of possession even though those provisions, namely, secs.
14A, 14B, 14C and 14D, were introduced later.
They also provide speedy remedy to recover possession.
But the landlord cannot succeed unless he is able to prove circumstances mentioned in it.
More than this the tenant has been given right to contest under Section 25B. Import of Section 21 on the other hand is altogether different.
It enjoins Controller to place landlord in vacant possession after expiry of time without any right to tenant to contest it except to the limited extent that permission was vitiated by fraud as held in S.B. Noronah vs Prem Kumari Khanna, ; or misuse of the provision by land lord taking advantage of helpless situation of the tenant as held in V.S. Rahe vs Smt.
Rem Chambeh, ; or the permission really did not create genuine tenancy as held in Shiv Chand Kapoor vs Amar Bose, supra.
Recovery of pos session under Section 21 is not hedged, by any inquiry or opportunity, if permission is not challenged on any of those exceptions which have been carved out by courts, obviously, to uphold fairness and honesty the core of our jurispru dence.
Right to get vacant possession is, thus absolute.
Purpose and objective of the Section having been ascer tained, it may now be examined if the word "landlord" used in the second part of the Section which empowers landlord to make an application for recovery of possession is to be understood as the same landlord who made the application or his legal representatives as well.
In other words, is there any justification for construing the word "landlord" in a narrow sense so as to restrict it, only, to the person who made the application and obtained permission.
"Landlord" has been defined in Section 2(e) as under: "2(e). 'landlord ' means a person who, for the time being is receiving, or is entitled to receive, the rent of any prem ises, whether on his own account or on account of or on behalf of, or for the benefit of, any other person or who would so receive the rent or be entitled to receive the rent, if the premises were let to a tenant.
" Expression, "for the time being" makes it clear, that land lord has to be understood in praesentii.
That is anyone entitled to receive rent is the landlord.
It does not visua lise, past or future landlord.
Therefore, the word "land lord".
on plain reading of Section 21 does not warrant construction of the word in any other manner.
Basis for submission, however, that landlord in second part of Section 21 entitling him to 30 claim vacant possession should be confined to the person who obtained permission was rounded on use of expression, "who does not require the whole or any part of the premises for a particular period.
" Attempt was made to personalise eviction proceedings by linking it with the person, due to whose non requirement the permission was granted resulting in automatic exclusion of legal representatives.
To put it interpretationally the word "landlord", in second part was urged to be understood in a manner different than it is defined in Section 2(e).
Can it be said that context or setting of Section 21 is such that the word "landlord" in second part of it should be understood in a different sense than that in definition clause? Not on prima facie reading of it which has already been adverted to.
Neither on close analysis.
What is visualised is occasion for short duration tenancy due to non requirement of whole or part of premises by landlord for time being; method of its creation by writ ten agreement entered with tenant, statutory status to it by permission obtained from Controller and execution by resto ration of vacant possession if the tenant does not vacate after expiry of period.
All condensed in one.
Construction ally it is in two parts one creation of short term tenancy and other its execution after expiry of time.
Both stand on their own and operate independently.
Non requirement of premises for time being furnishes basis for entering into agreement for periodical tenancy.
Truth of it on its genu ineness are relevant considerations for granting permission.
But it exhausts thereafter except to the limited extent pointed out in decisions referred earlier.
And the permis sion granted continues unabated, unaffected irrespective of variation in requirement.
Necessity of landlord, again, does not entitle him to seek its revocation.
Even his death cannot shorten the period.
Similarly once period expires the agreement, the permission all cease to operate by operation of law.
Nothing further is required.
Vacation is not linked with landlord but with time.
Expiry of it obliges tenant to vacate.
If he does not then the landlord may approach Con troller for putting him in vacant possession.
Which land lord? Obviously whosoever is the landlord at the time of afflux of tenancy.
Death of landlord does not either shorten or enlarge period nor the consequences envisaged are altered or affected.
Use of expression notwithstanding any other law render it obligatory on tenant to vacate without questioning au thority of landlord.
Any other construction, may, as rightly observed by the High Court lead to disastrous consequences.
Even on principles of civil law the provision for recovery of possession being in nature of execution it could not be successfully resisted on the death of landlord due to whose non requirement the permission was granted.
Such narrow and 31 unreaIistic construction of the word 'landlord ' shall frus trate entire purpose of Section 21.
Maxim of actio personalies mortiur cum personna cannot apply, either, on principle or on facts.
In Supreme Bank vs
P.A. Tendulkar; , this Court while dis cussing applicability of the maxim held "whatever view one may take of the justice of the principle it was clear that it would not be applicable to actions based on contract or where tort feasers ' Estate had benefitted from a wrong done.
Its applicability was generally confined to actions for damages for defamation, seduction inducing a spouse to remain apart from the other and adultery." In Phool Rani vs Naubat Rai, ; a decision which was relied by petitioner in support of submission that an application filed for eviction of a tenant on bona fide need lapses on the death of landlord and it could not be continued by his legal representatives overruled in Shanti Lal Thakur Das and Ors.
vs Chaman Lal Maganlal Telwala, it was observed that doctrine of actio personalis moritur cum personna, did not apply to Rent Control Acts.
Even otherwise an action for eviction abates only if the cause of action does not survive.
What is the cause of action for an application for vacant possession in Section 21 death of landlord or expiry of time for which tenancy was created.
Obviously the latter, the failure ' of tenant to honour his commitment to vacate the premises after expiry of time for which he was inducted with permission of Control ler.
The death of the person who obtained the permission has nothing to do with it.
Permission was obtained because the landlord did not require the premises on the date when it was let out to tenant.
That does not continue on the date when the tenant does not vacate the premises.
The necessity of not requiring the premises, for some time, or for the duration the tenant was inducted was confined to the date when the permission was granted.
It could not be taken further to the time when the question of vacation arose.
The cause of action for granting permission was the non require ment by the landlord of the premises for the time mentioned in the agreement whereas cause of action for eviction is non vacation by the tenant after the expiry of period.
Therefore, it is immaterial who is the landlord at the time when the action for vacation arose.
Even on facts permission was applied for by the landlord as, premises was surplus to his need for a limited period of 3 years due to the reason that his son had gone abroad and he was expected to return 32 after three years.
Permission was granted for this reason on statement of parties.
Such necessity to let out or non requirement by the landlord could not be brought into those exceptions which invalidate permission.
Therefore death of the landlord was immaterial as even the reason for letting out did not die with death of landlord.
In the result this petition for special leave fails and is dismissed.
In the circumstances of the case the tenant is directed to suffer costs which we quantify at Rs.5,000.
R.S.S. Petition dismissed.

Output:
The petitioner tenant was let out the demised premises by the landlord for a period of three years, with permission of Controller under section 21 of the Delhi Rent Control Act, the landlord died before the expiry of period of tenan cy.
After the expiry of the period, his legal representa tives made an application for recovery of possession.
This application was resisted by the tenant on the ground that proceedings for recovery of possession under section 21 could not be initiated and continued by legal representa tives of the landlord who had obtained permission.
Having failed before the High Court, the petitioner has filed petition for special leave.
It was contended on his behalf that 'landlord ' in second part of section 21, enti tling him to claim vacant possession, should be confined to the person who had obtained permission on the premise that he "does not require the whole or any part of the premises for a particular period.
" Dismissing the special leave petition, this Court, HELD: (1) Section 21 is a self contained code.
The purpose and objective of its enactment as provision of short duration tenancy or periodical tenancy in Rent Control Act of Delhi is unique amongst such legislations.
What was unique of it was not short duration tenancy but a fresh look on eviction.
[27G; 28G] Shiv Chand Kapoor vs Amar Bose, ; , referred to.
(2) Since section 21 is an exception to section 14 and it mandates restoration of possession, "notwithstanding any other law" it has to be construed strictly and against any attempt to frustrate it.
[28G] 26 (3) Recovery of possession under section 21 is not hedged, by any inquiry or opportunity, if permission is not challenged on any of the exceptions which have been carved out by courts, obviously to uphold fairness and honesty the core of our jurisprudence.
Right to get vacant possession is thus absolute.
[29D] S.B. Noronah vs Prem Kumari Khanna, ; ; V.S. Rahe vs Smt.
Rem Chamben, ; Shiv Chand Kapoor vs Amar Bose, ; , referred to.
(4) The expression "for the time being" in section 2(e) makes it clear that landlord has to be understood in presen ti.
That is anyone entitled to receive rent is the landlord.
It does not visualise, past or future landlord.
Therefore, the word "landlord" on plain reading of Section 21 does not warrant construction of the word in any other manner.
[29G] (5) Constructionally, Section 21 is in two parts: one creation of short term tenancy and other its execution after expiry of time.
Both stand on their own and operate inde pendently.
Non requirement of premises for time being fur nishes basis for entering into agreement for periodical tenancy.
Truth of it or its genuineness are relevant consid erations for granting permission.
And the permission granted continues unabated, unaffected irrespective of variation in requirement.
[30D E] (6) Vacation is not linked with landlord but with time.
Expiry of it obliges tenant to vacate.
If he does not then whosoever is the landlord at the time of afflux of tenancy may approach Controller for putting him in vacant posses sion.
Death of landlord does not either shorten or enlarge period nor the consequences envisaged are altered or affect ed.
[30F] (7) The doctrine of actio personalies moritur cum per sonna does not apply to Rent Control Acts.
Its applicability was generally confined to actions for damages for defama tion, seduction, inducing a spouse to remain apart from the other and adultery.
[31D C] Supreme Bank vs
P.A. Tindulcar; , ; Shanti Lal Thakur Das & Ors.
vs Chaman Lal Magan Lal Lala, Phool Rani vs Naubat Rai, , referred to.
(8) An action for eviction abates only if the cause of action does 27 not survive.
The cause of action for granting permission was the nonrequirement by the landlord of the premises for the time mentioned in the agreement whereas cause of action for eviction is non vacation by the tenant after the expiry of period.
Therefore, it is immaterial who is the landlord at the time when the action for vacation arose.
[31F G] (9) Permission in the instant case was granted on state ment of parties in regard to their necessity or non require ment of the premises.
Such necessity to let out or non requirement by the landlord could not be brought into those exceptions which invalidated permission.
Therefore, death of the landlord was immaterial as even the reason for letting out did not die with death of landlord.
[32A B]


Input:
eview Petition No. 16 of 1960.
519 Petition for Review of this court 's Judgment and order dated April 26, 1960, in Civil Appeal No. 64 of 1956.
A. V. Viswanatha Sastri, R. Ganapathy Iyer and Gopalkrishnan, for the petitioners.
K. N. Rajagopala Sastri, and P. D. Menon, for respondent.
November 23.
Das, J., delivered his own Judgment.
The Judgment of Kapur and Hidayatullah, JJ. was delivered by Hidayatullah, J. section K. DAS, J. I had taken a view different from that of my learned brethren when this appeal was heard along with Pringle Industries Ltd., Secunderabad vs The Commissioner of Income tax, Hyderabad (1), and that view was expressed in a very short judgment dated April 26, 1960.
Now, we have had the advantage of hearing a very full argument with regard to the facts of the appeal, and I for myself have had the further advantage and privilege of reading the judgment which my learned brother Hidayatullah, J., is proposing to deliver in this appeal.
I have very carefully considered the question again with reference to the facts relating thereto and, much to my regret, have come to the conclusion that I must adhere to the opinion which I expressed earlier.
My view is that the facts of this case are indistinguishable from the facts on which the decision of the Privy Council in Mohanlal Hargovind vs Commissioner of Income tax, C.P. and Berar(2) was rendered, and on the principles laid down by this court in Assam Bengal cement Co., Ltd. vs The Commissioner of Income tax, West Bengal (3), it must be held that the expenditure of Rs. 6111/ in this case was on revenue account and the respondent firm was entitled to the allowance which it claimed.
520 The short facts are these.
The respondent firm carried on a business in the purchase and sale of conch shells (called chanks).
It used to acquire the stock of conch shells (1)by purchase from the Fisheries purchase from the Fisheries Department of the Government of Madras and (3) by fishing for and gathering such shells from the sea.
It disposed of the stock so acquired at Calcutta, the different between the cost price and selling price less expenses being its profit made in business.
On November 9 1945 it took on lease from the Director of Industries and Commerce, Madras, the exclusive right.
liberty and authority to fish for, take and carry away "chank" shells in the sea off the coast line of the South Arcot District including the French Kuppama of Pondicherry.
The boundary of the area within which the right could be exercised was given in a schedule to the lease.
The lease was for a period of three years from July 1, 1944 to June 30 1947 on a consideration of an yearly rent of section 6111/ to be paid in advance.
Clause 3 of the lease contained the material terms there of and may be set out in full.
The lesser hereby convenants with the lesson as follows: (i) To pay the rent on the day and in manner aforesaid.
(ii) To deliver to the Assistant Director of Pearl and Chank Fisheries, Tuticorn all Velampuri shells that may be obtained by the lessee upon payment of their value as determined by the Assistant Director.
(iii) To collect chanks caught in nets and by means of diving as well.
In the process of such collection of shells not to fish chank shells less than 2/1/4 inches in diameter and if any chank shells less than 2/1/4 inches in 521 diameter be brought inadvertently to shore, to return at once alive to the sea all such undersized shells.
(iv) Not at any time hereafter to transfer or underlet or part with possession of this grant or the rights and privileges hereby granted or any part thereof without the written consent of the lessor.
(v) At the end or sooner determination of the term hereby created peaceably and quietly to yield to the lesson the rights and privileges hereby granted, and (vi) To report to the Assistant Director of Pearl and Chank Fisheries (South), Tuticorn the actual number of shells kept unsold in different stations after the expiry of the lease period.
For the assessment year 1946 47, the respondent firm submitted a return of its income to the Income tax Officer, Karaikudi Circle, showing its income from sale of chanks purchased from divers at Rs. 7194/ by sale of chanks purchased from Government Department at Rs. 23, 588/ and Rs. 2819/ by sale of chanks gathered by themselves (through divers) after deducting Rs. 6111/ being the rent paid to Government under the contract referred to above.
It sought to deduct Rs. 6111/ from its profits from business on the ground that this was an expenditure not of a capital nature but wholly and exclusively laid out for the purpose of business under section 10(2)(xv) of the Income tax Act.
This claim was disallowed by the Income tax Officer and on appeal by the Appellate Assistant Commissioner.
On further appeal to the Appellate Tribunal the respondent firm contended that the 522 decision of the Privy Council in Mohanlal Hargovind vs Commissioner of Income tax(1)applied to this case inasmuch as the payment was to secure the stockin trade for its business.
The Appellate Tribunal was of the opinion that the Privy Council decision covered the case, but felt itself bound by the decision of the Full Bench of the Madras High Court in K. T. M. T. M. Abdul Kayum Hussain Sahib vs Commissioner of Income tax, Madras (2).
The Tribunal acceded to the demand for a reference to the High Court, and accordingly referred the following question to the High Court for its decision. "Whether on the facts and circumstances of the case the payment of the sum of Rs. 6111/ made by the assessee under the terms of the agreement entered into with the Director of Industries and Commerce, Madras on 9th November, 1945 was not an item of revenue expenditure incurred in the course of carrying on the business of the assessee and, therefore, allowable under the provisions of section 10 of the Indian Income tax Act?" The reference first came before a Division Bench and was then referred to a Full Bench.
By its judgment dated April 2, 1953 the Full Bench answered the question in favour of the respondent firm.
On a certificate of fitness granted by the High Court the Commissioner of Income tax, Madras, brought the present appeal to this Court.
In Assam Bengal Cement Co., Ltd. vs The Commissioner of Income tax (3), this Court referred to the decision in Benarsidas Jagannath.
In re.(4) and accepted the following broad principles for the purpose of discriminating between a capital and a revenue expenditure.
523 (1) The outlay is deemed to be capital when it is made for the initiation of a business, for extension of a business, or for a substantial replacement of equipment [See Commissioners of Inland Revenue vs Granite City Steamship Company Ltd.(1)].
Such expenditure is regarded as on capital account, for it is incurred not in earning profits but in setting the profit earning machinery in motion.
In my opinion this test does not apply in the present case where no profit earning machinery was set in motion.
(2) Expenditure may be treated as properly attributable to capital when it 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.
[See Atherton vs British Insulated and Helsby Cables Ltd. (2)].
In elucidation of this principle it has been laid down in several decisions that by "enduring" is meant "enduring in the way that fixed capital endures" and it does not connote a benefit that endures in the sense that for a good number of years it relieves the assessee of a revenue payment.
In Robert Addie & Sons Collieries Ltd. vs Commissioners of Inland Revenue (3) Lord Clyde formulated the same test in these words: "What is 'money wholly and exclusively laid out for the purposes of the trade ' in a question which must be determined upon the principles of ordinary commercial trading.
It is necessary accordingly to attend to the true nature of the expenditure, and to ask one 's self the question, is it a part of the Company 's working expenses? is it expenditure laid out as part of the process of profit earning? or, on the other hand, is it a capital outlay? is it expenditure necessary for the acquisition of property or of rights of a permanent character, 524 the possession of which is a condition of carryin on its trade at all?" This test was adverted to by the Privy Council in Tata Hydro Electric Agencies Ltd. vs Commissioner of Income tax(1).In my opinion the application of this test makes it at once clear that the sum of Rs. 6111/ which the respondent firm spent was expenditure laid out as part of the process of profit earning; it was not a capital outlay, that is, expenditure necessary for the acquisition of property or of rights of a permanent character, the possession of which was a condition of carrying on its trade.
Under the contract in question the respondent firm did not acquire any right to immovable property.
It acquired no right in the bed of the sea or in the sea.
The only right conferred on the respondent firm was the right to fish for, gather and carry away conch shells (in motion under the surface of the sea) of a specified type and size.
The respondent firm was under an obligation to return to the sea conch shells less than 2 1/2 inches in diameter.
The business of the respondent firm consisted in buying and selling conch shells.
No manufacturing process was involved in it.
Therefore, the stock in trade of the respondent firm was conch shells.
It secured this stock in trade in many different ways, by purchase from divers, by purchase from Government and private parties, and also by gathering conch shells under the contract in question.
In my opinion, the contract into which the respondent firm entered was merely for securing its stock in trade.
It is indeed true that in considering whether an item of expenditure is of a capital or a revenue nature, one must consider the nature of the concern, the ordinary course of business usually adopted in that concern, and the object with which the expense is incurred.
The true nature of the transaction must be collected from the entire 525 document with reference to all the relevant facts and circumstances.
Having regard to the nature of the respondent firm 's business and the course adopted by it for carrying it on, it appears to me to be rather far fetched to hold that by the contract in question the respondent firm acquired property or right of a permanent character, the possession of which was a condition of carrying on its trade.
To me it seems that the better view, in a business sense, is that the respondent firm merely acquired by means of the contract its stock in trade, rather than a source or enduring asset for producing the stock in trade.
It was argued before us, as it was argued in the High Court, that what was acquired in the present case was the means of obtaining the stock in trade for the business rather than the stock in trade itself.
I am unable to accept this argument as correct.
The contract entered into by the respondent firm was wholly and exclusively for the purpose of obtaining conch shells, which were its stock in trade.
As I have stated earlier, the contract granted no interest in the sea, sea bed, or sea water etc.
It was simply a contract giving the grantee the right to pick and carry away conch shells of a specified type and size which of course implied the right to appropriate them as its own property.
In my opinion, in a case of this nature no distinction can be drawn in a business sense between the right of picking and carrying away conch shells and the actual buying of them.
It is not unusual for businessmen to secure, by means of a contract, a supply of raw materials or of goods which form their stock in trade, extending over several years for the payment of a lump sum down.
Even if the conch shells were stored in a godown and the respondent firm was given a right to go and fetch them and so reduce them into its ownership, it could scarcely have been 526 suggested that the price paid was capital expenditure.
I may explain what I have in mind by giving a simple illustration.
Take the case of a fisher may who sells fish.
Fish is his stock in trade.
He man buy the fish he requires from other persons; or he may obtain the supply of fish he requires by catching the fish of a specified size and type in particular water over a short period under a contract entered into by him and take them away.
I do not think that in a business sense any distinction can be made between the two means of obtaining the stock in trade.
Both really amount to securing the stock in trade rather than acquiring an enduring asset or a permanent right for producing the stock in trade.
And a business man, like the fisher man in the illustration given above, would indeed be surprised to learn that buying of fish for his business is revenue expenditure whereas catching fish in particular water under a contract entered into by him for the purpose of obtaining his stock in trade on payment of a lump sum down, is capital expenditure.
(3) The test whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business does not arise in the present case and need not be considered.
No different principles were laid down by my learned brethren in their decision in Pringle Industries Ltd. vs Commissioner of Income tax(1) and so far as that case is concerned, their decision must hold the field.
The difficulty and difference of opinion that arise now relate to the application of those principles to the facts of the present case.
One is reminded in this case of what Lord Macmillan said in Tata Hydro Electric Agencies Ltd. vs Commissioner of Income tax(2) at page 209: 527 "Their Lordships recognise and the decided cases show how difficult it is to discriminate between expenditure which is and expenditure which is not, incurred solely for the purpose of earning profits or gains.
" Lord Greene (Master of the Rolls) expressed himself more strongly and adverting to the distinction between capital and income, said: "There have been many cases where this matter of capital or income has been debated.
There have been many cases which fall upon the borderline: indeed, in many cases it is almost true to say that the spin of a coin would decide the matter almost as satisfactorily as an attempt to find reasons." [Vide Commissioners of Inland Revenue vs British Salmson Aero Engines Ltd.(1)].
Perhaps, the case before us is not as bad as the cases which the Master of the Rolls had in mind when he made the above observations.
It is, however, a truism that each case must turn upon its own facts.
Nevertheless the decisions are useful as illustrations of some relevant general principles.
The nearest illustration that we can get is the decision of the Privy Council in Mohanlal Hargovind vs Commissioner of Income tax(2).
That decision was binding on the Indian Courts at the time when it was given and as I think that it is still good law and is indistinguishable from the present case, I offer no apology for referring to it in great detail.
The facts of that case were these.
The assessees there carried on a business at several places as manufacturers and vendors of country made cigarettes known as bidis.
These cigarettes were composed of tobacoo rolled in leaves of a tree known as tendu leaves, which were obtained by the assessees by entering into a number of 528 short term contracts with the Government and other owners of forests.
Under the contracts, in consideration of a certain sum payable by instalments, the assessees were granted the exclusive right to pick and carry away the tendu leaves from the forest area described.
The assesees were allowed to coppice small tendu plants a few months in advance to obtain good leaves and to pollard tendu trees a few months in advance to obtain better and bigger leaves.
The picking of the leaves however had to start at once or practically at once and to proceed continuously.
On these essential facts, the Privy Council held that the contracts were entered into by the assessees wholly and exclusively for the purpose of supplying themselves with one of the raw materials of their business, that they granted no interest in land, or in the trees or plants, that under them it was the tendu leaves and nothing but the tendu leaves that were acquired, that the right to pick the leaves or to go on to the land for the purpose was merely ancillary to the real purpose of the contracts and if not expressed would be implied by law in the sale of a growing crop, and that therefore the expenditure incurred in acquiring the raw material was in a business sense an expenditure on revenue account and not on capital, just as much as if the tendu leaves had been bought in a shop.
I can find no distinction which would make any difference between the facts of that case and the facts of the present case.
Let me compare the essential facts of these two cases and see whether there is any difference.
(1) Two of the contracts were taken as typical of the rest by the Privy Council.
One contract was for the period from September 5, 1939 to June 30, 1941 and the other was for the period from October 1, 1938 to June 30, 1941.
Thus one of the contracts was for a period of about two years and the other contract for a period of about three years.
529 In the case under our consideration the period of the contract is three years.
Indeed, there is no vital difference between the periods in the two cases.
(2) In the case before us the contract area is described in a schedule.
In the two contracts which were under consideration by the Privy Council the contract area was also indicated in a schedule.
The boundaries of the forests in which tendu leaves could be plucked were delimited by the schedule.
Same is the case with the contract before us.
The contract area in which conch shells of a specified type and size can be picked and gathered is described in a schedule.
Such description does not mean that the assessee gets any right other than the right to gather conch shells.
In the Privy Council case the assessees were granted no interest in land or in the trees or plants; it was the tendu leaves and nothing but the tendu leaves that were acquired.
In the case before us no interest was given in the sea bed or in the sea water or in any of the products thereof.
Conch shells of a specified type and size and nothing but such conch shells were acquired by the contract.
I do not think that the reference to the coast line off the South Arcot District makes any difference between the present case and the case on which the decision in Mohanlal Hargovind vs Commissioner of Income tax (1) was rendered.
If in the matter of plucking of tendu leaves the expenditure under the contract was, in a business sense, expenditure on revenue account, I fail to see why a similar expenditure for gathering conch shells in motion under the surface of the sea near the coast line should not, in a business sense, be considered as expenditure on revenue account.
This aspect of the case was emphasised by their Lordships in the following paragraph: 530 "It appears to their Lordships that there has been some misapprehension as to the true nature of these agreements and they wish to state at once what in their opinion is and what is not the effect of them.
They are merely examples of many similar contracts entered into by the appellants wholly and exclusively for the purpose of their business, that purpose being to supply themselves with one of the raw materials of that business.
The contracts grant no interest in land and no interest in the trees or plants themselves.
They are simply and solely contracts giving to the grantees the right to pick and carry away leaves, which of course, implies the right to a appropriate them as their own property.
" In the case under our consideration the only right granted to the respondent firm was to take and carry away conch shells of a specified type and size, which of course, implies the right to appropriate them as the respondent firm 's own property.
The right to go into the sea and cast nets etc.
was merely ancillary to the real purpose of the contract.
Nor do I think that the circumstance that the contracts conferred an exclusive privilege or right is a matter of any significance.
In Mohanlal Hargovind vs Commissioner of Income tax (1) the contracts were exclusive and their Lordships stated: "It is true that the rights under the contracts are exclusive but in such a case as this that is a matter which appears to their Lordships to be of no significance.
These observations are as apt in their application to the present case as they were in the case before their Lordships of the Privy Council.
(3) The Privy Council draw a distinction between cases relating to the purchase or leasing of 531 mines, quarries, deposits of brick earth, land with standing timber etc.
On one side and the case under its consideration on the other.
It referred to the decision in Alianza Co. vs Bell(1) and said: ". the present case resembles much more closely the case described and distinguished by Channell, J. at page 673 of the report in Alianza Co. vs Bell of the cost of material worked up in a manufactory.
That side the learned Judge, is a current expenditure and does not become `a capital expenditure merely because the material is provided by something like a forward contract, under which a person for the payment of a lump sum down secures a supply of the raw material for a period extending over several years '.
" In Kauri Timber Co. Ltd. vs Commissioner of Taxes(2) the company 's business consisted in cutting and disposing of timber.
It acquired in some cases timber bearing lands, in other cases it purchased the standing timber.
The leases were for 99 years.
So far as the cases where the land was acquired were concerned there could have been no doubt that the expenditure made in acquiring it was capital expenditure.
In the case of the purchase of the standing timber what was acquired was an interest in land.
The purchasers bought the trees which they could allow to remain standing as long as they liked.
It was pointed out that so long as the timber at the option of the company remained upon the soil, it derived its sustenance and nutriment from it.
The additional growths became ipso jure the property of the company.
In these circumstances it was held that the expenditure was capital expenditure.
In the case before us some reliance was placed by the appellant on the term that shells less than 2 1/4 inches in diameter brought inadvertently to shore had to be returned at once alive to the sea.
532 The argument was that such shells might later grow in size by receiving sustenance and nutriment from sea water and could be later gathered by the respondent firm when they reached the size of 2 1/4 inches in diameter or more.
This, it was argued, brought the present case nearer the decision in Kauri Timber case (1).
I am unable to agree.
It is to be remembered that live shells move under the surface of the sea and they do not remain at the same place, as trees do.
A shell less than 2 1/4 inches in diameter returned alive to the sea may move away from the contract area and may never be gathered by the respondent firm.
In these circumstances the appellant is not entitled to call to his aid the test of "further vegetation" or "sustenance and nutriment" referred to in the Kauri Timber case (1).
From whatever point of view we may look at the case, it seems to me that the facts of the present case are indistinguishable from those of the case in Mohanlal Hargovind vs Commissioner of Income tax(2) In Mohanlal Hargovind 's case (2) the right was to pluck tendu leaves; in our case the right was to gather conch shells of specified type and size.
This distinction, it is obvious, makes no difference.
In the High Court it was contended on behalf of the appellant that Mohanlal Hargovind 's case (2) related to the acquisition of raw materials whereas the present case relates to the acquisition of "chanks" by a dealer who sells them without subjecting them to any manufacturing process, and this distinction, it was contended, made the decision in Mohanlal Hargovind 's case (2) inapplicable to the present case.
The High Court rejected this contention and in my opinion rightly.
I agree with the High Court that on principle and in a business sense, there is no distinction between acquiring raw materials for a manufacturing business and acquiring or purchasing goods by a dealer for the purpose of sale, particularly when there is no question of any excavation 533 etc., in order to win the goods and make such goods parts of the stock in trade, a point which weighed with the Court of Appeal in Stow Bardolph Cravel Co. Ltd. vs Poole (1) and with my learned brethren in Pingle Industries Ltd. V. Commissioner of Income tax (2).
No such point is present in this case.
I have been unable to find any other distinction between the two cases which would make a difference in the application of the principles for discriminating between capital expenditure and revenue expenditure.
To adopt again the language of Lord Green, I see no ground in principle or reason for differentiating the present case from the case in Mohanlal Hargovind vs Commissioner of Income tax (3).
On behalf of the respondent firm a further question was agitated, namely, whether an allowance for the cost of gathering the conch shells by nets etc., should not be given, even though the rent paid under the contract was not allowable, under section 10 (2) (xv) of the Income tax Act and a reference was made in this connection to the decision in Hood Barrs vs Commissioners of Inland Revenue (4).
I do not think that we are concerned with that matter in the present appeal.
The only question which arises for decision is the one referred to the High Court.
I have held that the High Court correctly answered the question which related to the payment of the sum of Rs. 6111/ only.
The question having been correctly answered by the High Court, the appeal fails and must be dismissed with cost.
HIDAYATULLAH, J.
This appeal was heard with Pingle Industries, Ltd., Secunderabad vs The Commissioner of Income tax (5), in which judgment was delivered by us on April 26 1960.
In accordance with the decision in Pingle Industries case (1), 534 this appeal was allowed.
Later, a review petition of (No. 16 of 1960) was filed on the ground that this appeal was not governed by the decision in Pingle Industries case (1), and that as it was not fully argued, it should be reheard.
It is unnecessary to go into the reasons why the rehearing was granted, except to say that there was perhaps a misunderstanding about the concessions made by counsel.
We were, therefore, satisfied that we should grant the rehearing, and have since heard full arguments in this appeal.
K. T. M. T. M. Abdul Kayoom and Hussain Sahib (respondent) is a registered firm, and carries on business in conch shells locally known as "chanks", which are found on the bed of the sea all along the coast line abutting on the South Arcot District.
The respondent took on lease from the Director of Industries and Commerce, Madras "the exclusive right, liberty and authority to take and carry away all chanks founnd in the sea" for a period of three years ending on June 30, 1947.
The consideration was Rs. 6, 111/ per year payable in advance.
For the year of assessment, 1946 47 (the year of account ending June 30, 1945) the respondent in showing its profits from business sought to deduct Rs. 6,111/ on the ground that this was an expenditure not of a capital nature but wholly and exclusively laid out for the purpose of business under section 10 (2) (XV) of the Income tax Act.
This claim was disallowed by the Income tax Officer, and on appeal, by the Appellate Assistant Commissioner.
On further appeal to the Appellate Tribunal, the respondent contended that the ruling of the Privy Council in Mohanlal Hargovind 's case (2) applied to the case, inasmuch as the payment was to secure the stock in trade for its business.
The Appellate Tribunal, though it was of opinion that the Privy Council case applied, felt itself bound by the earlier Full Bench decision of the Madras High 535 Court in K.T.M.T.M. Abdul Kayoom Hussain Sahib vs Commissioner of Income tax, Madras (1) relating to this respondent, and dismissed the appeal.
The Tribunal, however, acceded to a demand for a case, and referred the following question to the High Court for its decision : "Whether on the facts and circumstances of the case the payment of the sum of Rs. 6,111 made by the assessee under the terms of the agreement entered into with the Director of Industries and Commerce, Madras, on 9th November 1945 was not an item of revenue expenditure incurred in the course of carrying on the business of the assessee and, "therefore, allowable under the provisions of section 10 of the Indian Income tax Act".
The reference went before a Divisional Bench, which referred the case for decision of a Full Bench.
The Full Bench held that the case was covered by the Privy Council case above referred to, observing: "In our opinion, the facts in the case before the Judicial Committee are indistinguishable from the facts of the present case.
In one case, the leaves had to be picked from trees by going upon the land, while in the other case the chanks had to be collected and gathered by dividing into the sea.
It is impossible to construe the documents in the present case as conferring any interest in that portion of the sea from which the exclusive right of winning the chanks was conferred upon the assessee.
" The High Court also did not see any difference between raw materials acquired for a manufacturing business and the acquisition of chanks in the present case, and held that the chanks were acquired as the stock in trade of the respondent and the transaction was tantamount to purchase of goods, 536 The High Court, however, certified the case as fit for appeal, and the Commissioner of Income tax has filed this appeal.
The material terms of the agreement in the case are as follows : "1.
The lessor hereby grants unto the lessees the full free and exclusive right, liberty and authority to fish or take and carry away all chank shells in the sea off the coast line of the South Arcot District including the French Kuppams of Pondicherry more particularly described in the schedule hereto to hold the premises to the lessees from the first day of July 1944 for a period of three years ending 30th June 1947 paying therefor the yearly rent of Rs. 6, 111 (rupees six thousand one hundred and eleven only) to be paid yearly in advance, the first payment to be made within fifteen days from the date of intimation of acceptance and the second and third payments to be made on or before the 15th June 1945 and 1946, respectively at the Government Treasury at Tuticorin or Madras.
x x x 3.
The lossee hereby covenants with the lessor as follows : x x x (ii) To deliver to the Assistant Director of Pearl and Chank Fisheries, Tuticorin all Velampuri shells that may be obtained by the lessees upon payment of their value as determined by the Assistant Director.
(iii) To collect Chanks in nets and by means of diving as well.
In the process of such collection of shell not to fish chank shells less than 2 1/4 inches in diameter if any chank shells less than 2 1/4 inches in diameter 537 be brought inadvertently to shore, to return at once alive to the sea all such undersized shells.
(iv) Not at any time hereafter to transfer or underlet or part with possession of this grant or the rights and privileges hereby granted or any part thereof without the written consent of the lessor.
x x x (vi) To report to the Assistant Director of Pearl and Chank Fisheries (South), Tuticorin the actual number of shells kept unsold in different stations after the expiry of the lease period.
" An analysis of the agreement shows that the respondent obtained an exclusive right to fish for "chanks" by the method of diving and nets and to appropriate them except those below 2 inches in diameter, which had to be returned alive to the sea and Velampuri shells which had to be sold compulsorily to Government.
The respondent had also to report to its lessors at the end of the term, the number of shells not sold.
The right was exclusive, but was not capable of being transferred or underlet, and it was for a fairly long period.
The coast line involved was also fairly long.
There is no doubt that the payment of Rs. 6,111/ was an expenditure wholly and exclusively for the purpose of the business of selling shells, just as the payment to the divers and other sundry expenses were.
But an expenditure for the purpose of the business may be of a capital nature, and if it is so, it cannot be claimed as a deduction.
The question is whether this payment was of a capital nature.
What is attributable to capital and what, to revenue has led to a long string of cases here and 538 in the English Courts.
The decisions of this Court reported in Assam Bengal Cement Co., Ltd. vs Commissioner of Income tax and Pingle Industries case (1) have considered all the leading cases, and have also indicated the tests, which are usually applied in such cases.
It is not necessary for us to cover the same ground again.
Further, none of the tests is either exhaustive or universal.
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.
In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo * by matching the colour of one case against the colour of another.
To decide, therefore, on which side of the line a case falls, its broad resemblance to another case is not at all decisive.
What is decisive is the nature of the business, the nature of the expenditure, the nature of the light 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.
A trader may spend money to acquire his raw materials, or his stock in trade, and the payment may often be on revenue account but not necessarily.
A person selling goods by retail may be said to be acquiring his stock in trade when he buys such goods from a wholesaler.
But the same cannot be said of another retailer who buys a monopoly right over a long period from a producer of those goods.
The amount, he pays to secure the monopoly, through a part of the expenditure to secure his stock in trade is not of the same character as the price he pays in the first illustration.
By that payment, he secures an enduring advantage and an asset which is a capital asset of his business.
In the same way, if a manufacturer buys his raw materials he makes a revenue expenditure, but when he acquires a source from which he would derive his 539 raw materials for the enduring benefit of his business, he spends on the capital side.
Thus, a manufacturer of wollen goods buys his wool buys his raw materials, but when he buys a sheep farm, he buys a capital asset.
There is then no difference between purchase of a factory and the purchase of the sheep farm, because both are capital asset of enduring nature.
The respondent in this case has tried to distinguish Pingle Industries case (1) and to bring its case within the ruling of the Privy Council in Mohanlal Hargovind 's case (2).
When the former case was argued, the attempt was to bring it also within the rule of the Privy Council, but now, the differences between the two cases are recognised and Pingle Industries case (1) is said to be entirely different.
In deciding the present appeal, it is hardly necessary to do more than analyses once again the facts and circumstances of these two cases to show why those two cases were differently decided, and the present case will then be easily disposed of, not on its similarity to another but on its own facts.
We shall begin with the Privy Council.
Mohanlal Hargovind and Co., was a firm of bidi manufacturers, which needs tendu leaves in which tobacco is wrapped to make bidis.
Tendu leaves were thus the raw material of the business.
Tendu leaves can be bought from dealers who sell tendu leaves in a large way.
Now, what did the firm do ? It took leaves of forests with a right to pick the leaves.
This right carried with it the right to coppice small tendu plants and to pollard the tendu trees.
There was, however, no right in the trees or the land and the right to go over the land was merely ancillary.
Looked at from the point of view of business, there was no more than a purchase of the leaves, and the leaves were needed as raw materials of the business.
In deciding the case, the Judicial Committee discounted the right to 540 coppice small tendu plants and to pollard the tendu trees as a very insignificant right of cultivation necessary to improve the quality of the leaves, but which right ranked no higher than the right to spray a fruit tree.
The right of entry upon the land was also considered ancillary to the main purpose of the contract, which was acquisition of tendu leaves and tendu leaves alone, and it was observed that even if this right of going on the land and plucking the leaves was not expressed in the contract, it would have been implied by law.
Their Lordships then observed that the High Court diverted its view from these points, and attached too much importance to cases decided upon quite different facts.
They then observed that "cases relating to the purchase or leasing of mines, quarries, deposits of brick earth, land with standing timber. " were of no assistance, and concluded: "If the tendu leaves had been stored in a merchant 's godown and the appellants had bought the right to go and fetch them and so reduce them into their possession and ownership it could scarcely have been suggested that the purchase price was capital expenditure.
Their Lordships see no ground in principle or reason for differentiating the present case from that supposed." (p. 478) That case thus involved no right in land or trees; the licence to be on the land was merely an accessory right; the right of cultivation was insignificant.
The term was short, and the collection of leaves was seasonal.
Leaves once collected, the operation pro tempore was over till the fresh crop came.
There was thus no acquisition of an enduring asset in the way capital endures; it was more a purchase of crops of two or three successive years shewered on an agreement to ensure the supply of raw materials, 541 Contrast this with the facts of Pingle Industries case (1).
The business of the assessee there, was selling stone slabe called flag stones.
These stones were first won from the quarries and then dressed and shaped and then sold.
Now, what did the assessee do ? It took leases of stone quarries in a large number of villages for twelve years.
Primarily, this was done to obtain stones for its business.
It could have been a contract by which it would have been entitled to so many cubic feet of stones to be extracted in a particular period.
It took long term leases of vast areas in several villages to ensure supplies for a considerable time.
The leases were not limited by quantity, nor did they refer to any stones in particular.
It could take all or it could take none; but it could not have carried away all the stones, if the supply outran its efforts.
The stones were embedded in earth, layer upon layer, and had to be systematically extracted.
Till the stones at the top were removed, it could not remove those at the bottom, and there were still more layers further below.
In there circumstances, no specific quantity having been bought or sold either expressly or impliedly, the stones being immovable property or a part thereof and the contract being long teem contracts, Mohahlal Rargovind 's case (2) was held inapplicable, and it was held that the assessee in Pingle Industries case (1) had acquired an enduring asset and the expenditure was on capital account.
These cases between them show adequately the dividing line, which exists between capital expenditure and revenue expenditure.
To determine on which side of the line the particular expenditure falls, one may often put himself the question posed by Lord Clyde in Robert Addie and Sons Collieries Ltd. vs Commissioners Inland Revenue (3) 542 "It it part of the Company 's working expenses, is it expenditure laid out as part of the process of profit earning ? or, on the other hand, is it capital outlay, is it expenditure necessary for the acquisition of property or of rights of a permanent character, the possession of which is a condition of carrying on its trade at all?" The same question was again posed by the Judicial Committee in Tata Hydro Electric Agencies, Ltd. vs Commissioner of Income tax (1).
The answer to this question in each of the two case of Mohanlal Hargovind (2) and Pingle Industries (3) is entirely different.
The difference can be noticed easily, if we were to read here what Channell, J. said in Alianza Co. Ltd. vs Bell (4): "In the ordinary case, the cost of the material worked up in a manufactory is not a capital expenditure, it is a current expenditure and does not become a capital expenditure merely because the material is provided by something like a forward contract, under which a person for the payment of a lump sum secures a supply of the raw material for a period extending over several years. .If it is merely a manufacturing business, then the procuring of the raw material would not be a capital expenditure.
But if it is like the working of a particular mine, or bed of brick earth and converting the stuff into a marketable commodity, then, the money paid for the prime cost of the stuff so dealt with is just as much capital the money sunk in machinery or buildings.
" The first part of the observation is applicable to Mohanlal Hargovind 's case (2) and the latter part, to Pingle Industries case (3).
What is said of a manufacturing concern is equally applicable to a non manufacturing business.
It is the quality of the payment taken with what is obtained, that is decisive of the character of the payment.
543 We may now pass on to the facts of the case before us.
The respondent carried on the business of selling chanks.
It obtained its supplies from divers, from whom it purchased the chanks, and having got them, perhaps cheap, it resold them at a profit.
This is one mode in which it carried on its business.
In this business, it was directly buying its stock in trade for resale.
The other method was to acquire exclusive right to fish for chanks by employing divers and nets.
The business then changed to something different.
The sale was now of the product of another business, in which divers and equipment were first employed to get the shells.
It thus took leases of extensive coastline with all the right to fish for chanks for some years.
The shells were not the subject of the bargain at all, as were the tendu leaves; but the bargain was about the right to fisht.
There can be no doubt that what it paid the divers when it bought chanks from them with the view of reselling them was expenditure laid out wholly and exclusively for the purpose of its business, which was not of a capital nature.
That business was buying goods and reselling them at a profit.
But a different kind of business was involved when it went in for fishing for chanks.
To be able to fish for chanks in reserved waters it had to obtain the right first.
It, therefore took lease of that right.
To Mohanlal Hargovind, the leaves were raw materials, and that firm preferred to buy a number of crops over years rather than buy them as it went along.
Hence the remark that the leaves were bought, as if they were in a shop.
Under the lease which the respondent obtained, it had a right to take only chanks of particular dimensions and shape, but it had to fish for them and obtain them first.
The rest of the chanks were not its property.
The smaller chanks had to be returned alive to the sea, and Velampuri chanks had to be compulsorily sold to the state.
Of Course, the smaller chanks put back into the sea 544 would grow, and if fished later, be its property to take, but till they grow, it had not claim.
The chanks were on the bed of the sea.
Their exact existence was not known, till the divers found them, or they got netted.
Chanks which were there one day might have been washed back into the deep sea, and might never be washed back into a place where they would be within reach.
Similarly, other chanks not there one day might come within reach on another day.
All these matters make the case entirely different from the case of a purchase from the divers.
In obtaining the lease, the respondent obtained a speculative right to fish for chanks which it hoped to obtain and which might be in large quantities or small, according to its luck.
The respondent changed the nature of its business to fishing for chanks instead of buying them.
To be able to fish, it had to arrange for an area to fish, and that arrangement had to be of some duration to be effective.
This is not a case of so much clay or so much salt petre or a dump of tailings or leaves on the trees in a forest.
The two modes in which the respondent did the business furnish adequate distinguishing characteristics.
Here is an agreement to reserve a source, where the respondent hoped to find shells which, when found, became its stock in trade but which, insitu, were no more the firm 's than a shell in the deepest part of the ocean beyond the reach of its divers and nets.
The expenses of fishing shells were its current expenses as also the expenses incurred over the purchase of shells from the divers.
But to say that the payment of lease money for reserving an exclusive right to fish for chanks was on a par with payments of the other character is to err.
It was possible to say of the former, as it was possible to say of the tendu leaves in Mohanlal Hargovind 's case (1), that the chanks were bought because the money paid was the price of the chanks.
But it would be a straining of the imagination to say that the amount paid 545 for reserving the coastline for future fishing was the price of chanks, with which the respondent did its business.
That amount was paid to obtain an enduring asset in the shape of an exclusive right to fish, and the payment was not related to the chanks, which it might or might not have brought to the surface in this speculative business.
The rights were not trasferable, but if they were and the firm had sold them, the gain, if any, would have been on the capital side and not a realising of the chanks as stock in trade, because none had been bought by the firm, and none would have been sold by it.
In our opinion, the decision of the High Court, with all due respect, was, therefore, erroneous, and the earlier decision of the Full Bench of the same High Court was right in the circumstances of the case.
In the result, the appeal is allowed; but there will be no order about cost.
BY COURT.
In accordance with the majority judgment of the Court, the appeal is allowed, but there will be no order about costs.

Output:
The assessee firm carried on the business in purchase and sale of conch shells.
It obtained a lease for 3 years for gathering specified types of shells from the sea along the coastline abutting on the South Arcot District.
It sought to deduct the amount paid as lease money from its profits from business on the ground that this was an expenditure not of a capital nature but wholly and exclusively laid out for the purpose of business.
under section 10(2)(xy) of the Income Tax Act.
^ Held, (per kapur and Hidayatullah, JJ., Das, J. dissenting) that the expenditure was capital expenditure and could not be deducted from the profits.
The business of the assessee was buying and selling shells but when it took the lease it went in for a new speculative business of fishing for shells.
The amount paid for reserving the vast coastline for future fishing was not price paid for obtaining the stock in trade i.e. shells with which assessee did his business.
The amount was paid to obtain an enduring asset in the shape of an exclusive right to fish and the payment was not related to the shells.
Mohanlal Hargovind vs Commissioner of Income tax, C. P. & Berar, , distinguished Pringle Industries Ltd., Secunderabad vs Commissioner of Income tax, Hyderabad, [1960] 3 section C. R. 681, applied.
Per Das, J. The expenditure was not capital expenditure and was deductible from the profits.
It was not an expenditure for the acquisition of property or of rights of a permanent character, the possession of which was necessary for carrying on of the assessee 's trade By this lease the assessee acquired its stocks in trade rather than a source or enduring asset for producing the stock in trade.
Mohanlal Hargovind vs Commissioner of Income tax, C. P. & Berar , applied.
Pringle Industries Ltd., Secunderabad vs Commissioner of Income tax, Hyderabad, , distinguished.