# [1957] 1 S.C.R. 1141

- **Citation:** [1957] 1 S.C.R. 1141
- **Court:** Supreme Court of India
- **Decided:** 1957
- **Case number:** Civil Appeal No. 179 of 1954
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1957-1-s-c-r-1141-1324
- **Pages:** 11

## Headnote

..
S.C.R.
SUPREME COURT REPORTS
COMMISSIONER OF INCOME-TAX,
BOMBAY
ti.
•
THE PROVIDENT INVESTMENT CO., LTD.
'[BHAGWATI, S. K. DAs and J. L. KAPUR JJ.J
1141
Income Tax-Capital gains-Managing
agent
of
company
holding shares therein-Agreement of sale of shares and Managing
Agency-Sale of shares-Relinquishment of Managing Agency by
"'•')' of resignation-If amounts to a sale or transfer of Managing
Agency-Agreed Statement of Case for reference to High Court--
Whether binding on the parties-Indian Income-tax Act, 1922 (XI of
1922), s. 128.
The respondent company was the managing agent ot two
other companies holding certain
shares therein.
D wrote two
letters to
the
responJ~nt on September
14,
1946, offering to
purchase some of those shares together with the managing agency
and agreeing to pay certain sums as earnest money on the acceptance of the offer and to pay the balance after the transfer of the
managing agency was sanctioned by the general body of shareholders.
By a letter dated September 30, 1946, the respondent
accepted the offer on condition of a sum of Rs. I crore being paid
out of the consideration as compensation for the loss of the managing agency, and on receipt of the letter, D paid the earnest money.
Subsequently, D wrote a letter on October 7, .1946, whereby, in
modification of the arrangement previously made, it was agreed
that instead of the managing agency
being
transferred by the
respondent, the latter would resign the office of managing agents
and certain indi\'iduals would be appointed Directors of the two
companies.
Accordingly, the respondent relinquished the managing agency and thereupon the balance of consideration money was
paid to it. The Income-tax Officer consi<lered that s. 12B of the
Indian Inrnme-tax Act, 1922, was applicable
to
the transaction
and on the footing that the managing agency, which was valued
at Rs. I crore, was a capital asset, he computed the capital gains
at Rs. 81,81,900. The Income-tax Appellate Tribunal held that the
respondent, as the owner of the shares and the managing agency,
sold the shares to D anJ handed back the managing agency to the
managed companies, and
that this handing back constituted a
tr<msfer. On a reference to the High Court by the Tribunal, the
agreed
statement of the case proceeded on the basis that
the
dispute between the parties was whether the
transaction
with
regard to the managing agency resulted in capital gains and the
I iigh Court held that there was neither a sale nor a transfer of the
manlging agency within the meaning of s. 12B of the Act.
On
appeal to the Supreme Court by the Commissioner of Income-tax,
it was contended for him (I) that there was a concluded contract
,',/"
1957
M11115
1957
T hr Commissioner of
Jncom~-tax,
Bombqy
, ..
Thr Provident
lnriutnunt Co., Ltd.
S. K. Das].
1142
SUPREME COURT REPORTS
[1957]
of sale as a result of the letters
of
September 14, 1946, and
September 30, 1946, and a sale having taken place, the letter of
October 7, 1946, merely changed the mode of performance of the
contract and did ~ot affect the true legal character of the trans..
action which was a sale of the managing agency, and (2) that as
there was one indivisible consideration for
the whole transaction,
including the sale of the shares an<l of the mal-iaging agency, the
sale of the shares having taken place and the entire consideration
having been paid, there was a sale within the ineaning of s. 12B
of the Act and the transaction reSulte<l in capital gains.
Held ( l} that on a true construction of the letters there was
originally only an agreement to sell the shares together with the
managing agency and before the sale could take place the letter
of October
7, ] 946,
substituted a new
contract, a contract
of
relinquishment rather than a contract of sale, so far as. the managing ag~ncy was concerned, and ( 2) that it was not open to the
appellant to go behind the agreed statc1nent of the case and raise
a question of law based on different facts and circumsta

## Text

..
S.C.R.
SUPREME COURT REPORTS
COMMISSIONER OF INCOME-TAX,
BOMBAY
ti.
•
THE PROVIDENT INVESTMENT CO., LTD.
'[BHAGWATI, S. K. DAs and J. L. KAPUR JJ.J
1141
Income Tax-Capital gains-Managing
agent
of
company
holding shares therein-Agreement of sale of shares and Managing
Agency-Sale of shares-Relinquishment of Managing Agency by
"'•')' of resignation-If amounts to a sale or transfer of Managing
Agency-Agreed Statement of Case for reference to High Court--
Whether binding on the parties-Indian Income-tax Act, 1922 (XI of
1922), s. 128.
The respondent company was the managing agent ot two
other companies holding certain
shares therein.
D wrote two
letters to
the
responJ~nt on September
14,
1946, offering to
purchase some of those shares together with the managing agency
and agreeing to pay certain sums as earnest money on the acceptance of the offer and to pay the balance after the transfer of the
managing agency was sanctioned by the general body of shareholders.
By a letter dated September 30, 1946, the respondent
accepted the offer on condition of a sum of Rs. I crore being paid
out of the consideration as compensation for the loss of the managing agency, and on receipt of the letter, D paid the earnest money.
Subsequently, D wrote a letter on October 7, .1946, whereby, in
modification of the arrangement previously made, it was agreed
that instead of the managing agency
being
transferred by the
respondent, the latter would resign the office of managing agents
and certain indi\'iduals would be appointed Directors of the two
companies.
Accordingly, the respondent relinquished the managing agency and thereupon the balance of consideration money was
paid to it. The Income-tax Officer consi<lered that s. 12B of the
Indian Inrnme-tax Act, 1922, was applicable
to
the transaction
and on the footing that the managing agency, which was valued
at Rs. I crore, was a capital asset, he computed the capital gains
at Rs. 81,81,900. The Income-tax Appellate Tribunal held that the
respondent, as the owner of the shares and the managing agency,
sold the shares to D anJ handed back the managing agency to the
managed companies, and
that this handing back constituted a
tr<msfer. On a reference to the High Court by the Tribunal, the
agreed
statement of the case proceeded on the basis that
the
dispute between the parties was whether the
transaction
with
regard to the managing agency resulted in capital gains and the
I iigh Court held that there was neither a sale nor a transfer of the
manlging agency within the meaning of s. 12B of the Act.
On
appeal to the Supreme Court by the Commissioner of Income-tax,
it was contended for him (I) that there was a concluded contract
,',/"
1957
M11115
1957
T hr Commissioner of
Jncom~-tax,
Bombqy
, ..
Thr Provident
lnriutnunt Co., Ltd.
S. K. Das].
1142
SUPREME COURT REPORTS
[1957]
of sale as a result of the letters
of
September 14, 1946, and
September 30, 1946, and a sale having taken place, the letter of
October 7, 1946, merely changed the mode of performance of the
contract and did ~ot affect the true legal character of the trans..
action which was a sale of the managing agency, and (2) that as
there was one indivisible consideration for
the whole transaction,
including the sale of the shares an<l of the mal-iaging agency, the
sale of the shares having taken place and the entire consideration
having been paid, there was a sale within the ineaning of s. 12B
of the Act and the transaction reSulte<l in capital gains.
Held ( l} that on a true construction of the letters there was
originally only an agreement to sell the shares together with the
managing agency and before the sale could take place the letter
of October
7, ] 946,
substituted a new
contract, a contract
of
relinquishment rather than a contract of sale, so far as. the managing ag~ncy was concerned, and ( 2) that it was not open to the
appellant to go behind the agreed statc1nent of the case and raise
a question of law based on different facts and circumstances.
Accordingly, the transaction in question was a relinquishment
of the 1nanaging agency and was neither a sale nor a transfer
within the meaning of s. 128 of the Indian Inco1nc-tax Act.
CIVIL
APPELLATE
JURISDICTION : Civil Appeal No.
179 of 1954.
Appeal from the judgment and order dated March
12, 1953, of the Bombay High Court in Income-tax
Reference No. 43 of 1952.
C. K. Daphtary, Solicitor-General of India, G. N.
Joshi and R. H. Dhebar, for the appellant.
N. A. Palkhivala, D. H. Dwarkadas, /. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the
respondent.
1957. May 15. The Judgment of the Court was
delivered by
S. K.
DAs J.-This is an appeal on a certificate
granted by the High Court of Judicature at Bombay
under sub-s. (2) of s. 66A of the Indian Income-tax Act
(hereinafter referred to as the Act). The appellant is
the
Commissioner of Income-tax, Bombay, and
the
respondent
is
the
Provident
Investment
Co.,
Ltd.,
Bombay,
hereinafter
referred
to
as
the
assessee
company.
The short question which falls for consideration in
this appeal is whether a particular transaction, details
.,
S.C.R.
SUPREME COURT REPORTS
1143
whereof we shall presently state, entered into by· the
assessee .company in 1946
resulted
in capital gains
within the meaning of s. 12B of the Act. The question
which was referred to the High Court under s. 66(1) of
the Act was this : "Whether the assessee
company
made a ·capital gain amounting to Rs. 81,81,900 within
the meaning of s. 12B of the Indian Income-tax Act?"
The High Court answered the question in the negative.
The appellant being dissatisfied with the judgment and
order of the High Court asked for and obtained a certificate from the said High Court that the case is a fit
one for appeal to the Supreme Court.
The material facts may be very shortly stated. The
assessee company is a private limited company, the
shares of which
were held
by
the then
Maharaja
Scindia of Gwalior and his nominees. At the material
time, the assessee company was the managing agent of
Madhowji Dharamsi
Manufacturing Co., Ltd., hereinafter briefly referred to as the Dharamsi Company, and
Sir Shapurji Broacha Mills Ltd., briefly referred to as
;•
the Shapurji Broacha Company. The assessee company
held all the "conversion"
shares
of
the
Dharamsi
Company and a substantial majority • of the "conversion" shares of the Shapurji Broacha .Company. The
Dalmia Investment Company
Limited,
which will
hereinafter be briefly referred to as the Dalmia Company, wrote two letters to the assessee company on
September 14, 1946.
In these two letters, the Dalmia
Companyoffered
to
purchase
28,328
"conversion"
shares of the Dharamsi Company at Rs. 500 per share
together with the managing agency, and also 75,212
"conversion" shares
of the Shapurji Broacha Company, together with the managing agency. We are not
concerned with the other details mentioned in the two
letters, except this that the Dalmia Company made it
clear that it would purchase both the mills or neither,
and a time limit till September 23, 1946, 3 p. m. was
imposed during which the offer would remain open.
This time limit was, however, extended later up to
September 30, 1946. The letter further stated :
1957
T ht Commissioner qf
Income·tax,
Bomba;1
v.
The Provident
lnvestment Co., Ltd.
S. K. Das J.
1957
The Ccmmissioner of
Income-tax,
Bombay
v.
The Provide t
lnuestment Co., Ltd.
S. K. Das
•
1144
SUPREME COURT REPORTS
[19571
"On your accepting the offer, we will pay to you
Rs. 20 lakhs in the case of the Dharamsi Company'-,--,--
Rs. 30 lakhs in the case of the
Shapurji
Broacha 7\
Company
as and by way of earnest money. You shall have to
arrange to get the transfer of the managing agency
sanctioned by the general body of the shareholders
within a period of 40 days from the date of acceptance.
As soon as the transfer is sanctioned, we will pay the
balance of the purchase price."
On September 26, 1946, there was a meeting of the
Board of Directors of the assessee company. At that
meeting, the Board considered the offers made by the
Dalmia Company and resolved to accept the offers. ~
The Board further stated in its minutes that out of the
total amount received from the sale of the shares, a
sum of Rs. 1 crore should be paid to the assessee company as compensation for the loss of the managing
agency of the two mills. On September 30, 1946, the
assessee
company
wrote
to
the
Dalmia
Company
accepting the offers made, subject to a condition which
is not material for our purpose. On the same date, the
Dalmia Company received the acceptance of the offers
made by it and sent two drafts, one for Rs. 20 lakhs
and the other for Rs. 30 lakhs. On October 7, 1946,
the Dalmia Company wrote a very important letter to
the assessee company. This letter said inter alia :
r-,
"With reference to
the interview our
Solicitor
Mr. Tanubhai had with your Mr. Wadia, we beg to
record that it is now being agreed upon as follows in
modification
of
the
arrangement
previously
made
between yourselves and ourselves :
(1) In
our
letters
of offer
which
have
been
accepted by you, it was arranged that the managing
agency will he transferred either to us or to our
nominees. Now, instead of doing so by you, you as
the present managing agents will give their (sic) resig- -4
nation, so that at the time of delivery of the shares and
\
payment of moneys, your managing agency will have
come to an end. In view of the above, it is not necessary to obtain any sanction of general meeting.
•
•
.I
S.C.R.
SUPREME COURT REPORTS
1145
(2) 1. Mr. Sriyans Prasad Jain
2. Mr. Jaidayal Dalmia
3. Mr. Shanti Prasad Jain and
4. Mr. Vishnu Hari Dalmia
will be appointed Directors of both the Mills Companies and thereafter all the present directors will tender
their resignation.
(3) Qualification shares in the names of the above
proposed Directors will be transferred by you and the
balance of the shares will be delivered to us along with
the transfer deeds duly signed against payment.
(4) You may communicate by a circular to the
shareholders that you
have resigned
the managing
agency. You may further mention in the circular that
in accordance with the offer we are prepared to take
up_ the deferred shares held by the shareholders which
may be offered to us at the rate of Rs. 25 and Rs. 7-8-0
of Madhowji Dharamsi Manufacturing Co. Ltd. and
Sir Shapurji Broacha Mills Ltd.
Mills
respectively
within two months of the date of letter of offer which
we would also send."
The assessee company accepted the modified arrangement suggested by
the Dalmia Company, and
on
October 19, 1946, the assessee company wrote to the
Dharamsi Company and the Shapurji Broacha Company that it had decided to resign the office of the
managing agency and accordingly tendered its resignation on that date. The balance of the consideration
money was then paid to the assessee company, and it
was not disputed that the value of the managing
agency was computed at Rs. 1 crore, nor was there
any dispute t'hat the managing agency was a capital
asset. Out' of · the said sum of Rs. 1 crore, the Incometax Officer computed the capital gains at Rs. 81,81,900
and asked the assessee company to pay tax thereon.
The- Appellate Assistant Commissioner held that the
assessee company had sold the managing agency and
therefore the profits or gains arising from that sale
were capital gains within the meaning of s. 12B of the
Act.
The Income-tax
Appellate
Tribun~l, Bombay
Bench 'A', held, however, that there was no sale of the
managing agency, because
the
original contract of
7-8! S. C. India/59
1957
The Commissionn
of Income-to:r,
Bomb41
v.
Thi Provid•nl
Inv1Stment Co., Lid.
S.K.DasJ.
1957
Thi Commissioner of
lru:omt.frix,
Bombay
v.
TM Pr(lvident
I.vestment Co., Lid.
S. K. Das].
1146
SUPREME COURT REPORTS
[1957]
purchase was varied by the new contract embodied in
the letter of October 7, 1946. The Tribunal, however,
held as follows :
"The assessee company
was
the owner of the
shares and the managing agencies. It sold the shares
to the Dalmia Co. and handed back the managing
agencies
to the
managed
companies. This handing
back, in our opinion, constitutes a transfer of the
managing agencies."
On that footing the Tribunal held that s. 12B of the
Act applied. On an application by the assessee company, the Tribunal on being satisfied that a question
of law did arise out of its order, referred the question
which we have already set out in an earlier paragraph
of this judgment, to the High Court of Bombay. The
High Court answered the question in the negative on
the ground that there was neither a sale nor a transfer
of the managing agency within the meaning of s. 12B
of the Act.
The point for our consideration is whether the High
Court has correctly answered the question.
We must
first read sub-s. (I) of s. 12B of the Act as it stood at
the material time.
The sub-section,
so far as it is
relevant for our purpose, was in these terms :
"The tax shall be payable by an assessee
under
the head 'Capital gains' in respect of any profits or
gains arising from the sale, exchange or transfer of a
capital asset effected . after the 31st day of March 1946;
and such profits and gains shall be deemed to be income
of the previous year in which the sale, exchange or
transfer took place."
· ,
It is worthy of note that 'capital gains' were charged
for the first time by the Income-tax and Excess Profits
Tax (Amendment) Act, 1947, which inserted s. 12B in
the Act.
It taxed 'capital gains' arising after March
31. 1946, and the levy was virtually abolished by the
Indian Finance Act, 1949, which confined the operation
of the section to 'capital gains' arising before April I,
1948. The Finance (No. 3) Act, 1956 (Act 77 of 1956)
re-introduced the section in wider terms so as to bring
within 'capital gains' 'any profits or gains :irising from
the sale, exchange, relinquishment or transfer of a
,.
S.C.R.
SUPREME COURT REPORTS
1147
I
capital asset effected after March 31, 1956, etc. We
are not, however, concerned with the question whether
the transaction under our consideration, which took
place in 1946, resulted in capital gains within the
meaning of s. 12B as it stands after the enactment of
the Finance (No. 3) Act, 1956 (Act 77 of 1956). The
question before us is whether the transaction
under
consideration resulted
in
capital
gains
within
the
meaning of s. 12B as it originally stood.
Two other points must be stated at the outset in
order to clear the ground for a consideration of the
relevant arguments
advanced
before
us.
The first
point is that there is no question here of the assessee
company trying to circumvent the provisions of s. 12B
of the Act by deliberately modifying the original agreement (by its letter dated October 7, 1946) so as to put
the transaction outside the scope of that section. The
agreement was modified in
October, 1946, before even
the
insertion of
s. 12B in the
Act.
Therefore, no
question of deliberate or · fraudulent evasion arises in
this case. The second point is that in construing fiscal
statutes and in determining the liability of a subject
to tax, one must have regard to the strict letter of the
Jaw and the true legal position arising out of the
transaction in question. The Bombay High Court has
referred to a large number of English decisions on this
point.
We consider it unnecessary to examine
those
decisions in the present case. The point was considered
very recently by this Court in A. V. Fernandez v. The
State of Kerala ( 1 ), where the following observations
made are very pertinent :
"If the Revenue satisfies the Court that the case
falls strictly within the provisions of the law, the subject can , be taxed. If, on the other hand, the case is
not covered within the four corners of the provisions
of the
taxing statute, no
tax can be imposed
by
inference or by analogy or by trying to probe into the
intentions of the legislature and by considering what
was the substance of the matter. We must of necessity,
therefore, have regard to the actual provisions of the
Act and the rules made thereunder before we can come
(1) [1957] S.C.R. 837.
1957
The Commissioner
of /ncom1-tax1
B~mbl!JI
Y.
Tht ProvidenJ
Investment Co., Ltd.
S. K. D<U].
1957
The Commiulonn
of lncomt--taJt,
Bomb41
Y.
The Prouidttd
lnwstment Co., Ltd.
S. K. Das].
1148
SUPREME COURT REPORTS
[1957]
to the conclusion that
assessment as contended
Those observations were
sales tax but are equally
our consideration.
the
appellant was liable
to
by the Sales Tax authorities."
made in a case dealing with
applicable to the case under
Two conditions must be fulfilled before the transaction under our consideration can come within the
purview of s. 12B of the Act. The first condition is
that the profits or gains must arise from the sale,
exchange or transfer of a capital asset ; and the second
condition is that the sale, exchange or transfer must
be effected after March 31, 1946. There is no doubt
that the transaction before us was effected after March
31, 1946. There is also no dispute that the managing
agency of the two mills which the assessee company
held · was a capital asset. Therefore, the question bails
down to this-did the profits or gains, namely, the
sum of Rs. 1 crore which was computed as the value
of the managing agency, arise from the sale or transfer
of the managing agency? The Income-tax
authorities
held that there was a sale of the managing
agency ;
but the Appellate Tribunal held that there was no sale
in the strict sense but only a transfer of the managing
agency
to
the managed
companies,
that is, the
Dharamsi Company and the Shapurji Broacha Company. The High Court held that there was neither a
sale nor a transfer, because the letter of October 7,
1946, substituted a different contract for the original
contract entered into by the parties, and the true legal
position with regard to the substituted contract was
that
the
assessee
company
resigned the managing
agency, or, in other words, the managing agency was
relinquished by the assessee company.
The learned Solicitor-General, who has appeared for
the appellant, has contested the correctness of the view
of the Bombay High Court and has submitted a twofold argument before us. His first argument is that
there was a concluded contract of sale as a result of
the letters, dated September .14, 1946, and September
30, 1946, exchanged between the parties, and the sale
having taken place, the letter of October 7, 1946, which
merely changed the mode of petformance of the
'(
'
...
-
S.C.R.
SUPREME COURT REPORTS
1149
contract, did not affect the true legal character of the
transaction which was a sale of the managing agency.
We are unable to accept this argument. The true legal
effect of the letters dated September 14, 1946, and
September 30, 1946, which contained an offer and
an
acceptance, was merely this : the Dalmia
Company
offered to purchase ( 1) certain shares in the two mills
and (2) the managing agency, on payment of a certain
consideration, and the assessee company accepted that
offer.
In law,
this was merely an agreement to sell
and purchase the shares together with the managing
agency on payment of the consideration, etc. The two
letters did not by themselves amount to a sale of the
shares or the managing agency, in the sense of a
transfer of the property in them. Before any such
sale could take place, the agreement was modified by
the letter of October 7, 1946, and instead of "selling"
the managing agency the assessee company agreed
to
resign or relinquish the managing agency.
We
are
unable to agree with the
learned
Solicitor-General
that the ·letter of October 7, 1946, merely changed the
mode of performance, and did not constitute a
new
contract.
In our opinion, the Bombay High
Court
correctly held that whereas under the original contract
the Dalmia_ Company wanted the managing agency to
be transferred, which meant that it wanted the benefit
of that contract to be vested in it and was also prepared
to accept the burden of the obligations that went with
that contract, under the
substituted
contract,
the
Dalmia Company did not want the managing
agency
to be assigned to it; on
the contrary, it wanted
the
assessee company to relinquish
its
rights
in the
managing agency of the two mills by resigning. On a
true interpretation,
the
letter of October 7,
1946,
substituted a new contract, a contract of relinquishment rather
than a contract of sale, so far as
the
managing agency was concerned.
· The second argument of the learned Solicitor-General
is that there was one indivisible consideration for the
whole transaction, including the sale of the shares and
of the managing agencv.
So far as the shares were
concerned, the sale did take place and the
entire
1957
TM Commissionw
of ln&0"'4-t0Jt,
Bomb41
v.
Thi Provident
Investment Co., Ltd.
S.K. Das].
1957
The Commiuitmer
of Income-tax,
Bombay
v.
Tht Prouident
lnV1stm~11t Co., Lt1.
S. Ir. Das].
1150
SUPREME COURT REPORTS
[1957]
consideration was paid; there was therefore a sale
within the meaning of s. 12B of the Act, and
the
consideration being· one and indivisible,
the transaction did result in capital gains within the meaning of
that section. At the first blush, the argument has an
apparent merit of plausibility, though it was not urged
before the Bombay High Court in the manner in which
it has been urged before us.
On a closer scrutiny,
however, it appears to us that this argument is not
really available to the learned Solicitor-General.
The
parties and the Income-tax authorities, including
the
Appellate Tribunal, proceeded on the footing that part
of the consideration, namely, the sum of Rs.
1 crore,
was the consideration for the sale or relinquishment of
the managing agency, the Department contending that
the transaction was a sale or transfer and the assessee
company contending that it was neither a
sale nor a
transfer but a mere relinquishment.
In
the
agreed
statement of the case, it was stated :
"The value of the managing agencies was
computed ~y the assessee company at R;. 1 crore
and
there
1s
no dispute on this point. The Income-tax
Officer thereupon computed capital gain at Rs. 81,81,900
and again there is no dispute on this point.
The question which the Tribunal had to cletermine was whether
the transactions between the Dalmia Company and the
assessee
company
resulted
m
a
capital
gain of
Rs. 81,81,900."
It is obvious that the entire assessment proceedings
proceeded on the basis that the sum of Rs. 1 crore was
the consideration for the sale or relinquishment of the
managing
agencies,
and the
dispute
between
the
parties was whether the transaction with regard to the
managing agencies, in its true legal character, was
a
sale or transfer or relinquishment.
That
being
the
position, it is not now open to the learned SolicitorGeneral appearing for the Revenue to go behind the
agreed statement of the case and to ask us to give an
answer to the question of law raised in the case on
different assumptions
or in a different set of circumstances.
The answer must be given on the basis
of
.-
S.C.R.
SUPREME COURT REPORTS
1151
the facts and circumstances as
stated
in the
agreed
statement of the case.
We are of opinion that the
answer was correctly
given by the High Court of
Bombay. The transaction
in its· true legal character was a relinquishment of the
managing agency and was neither a sale nor a transfer
thereof. Therefore, the High Court correctly answered
the question in the negative.
In .the result, the appeal fails and is dismissed
with
costs.
Appeal dismissed.
F. N. ROY
'V.
COLLECTOR OF CUSTOMS, CALCUTT A.
(S. R.- DAS c. J., JAFER IMAM, s. K. DAS,
GovrNDA MENON and A. K. SARKAR JJ.)
·sea Customs-Import without licence-Confiscation of goodsValidity of Order-Discretion of Customs-authorities-Validity of
Enactment-Sea Customs Act, 1878 (Vlll of 1878), ss. 167(8), 183Imports and Exports (Control) Act .. 1947 (XVIII of 1947), s. 3(1)
(2)-Constitution of India, Art. 14.
Section 167, item 8, of the Sea Customs Act, 1878, provides
that if any goods the importation of which is for the time being
prohibited or restricted by or under Ch. IV of the Act, which
Chapter includes s. 19, be imported into India contrary to such
prohibition or restriction, such goods shall be liable to confiscation
and any person concerned in such importation shall be liable to a·
penalty not exceeding three times the value of the goods or not
exceeding one thousand
rupees.
By s. 183 of this Act . it is
provided:
"Whenever confiscation is authorised by this Act, the
officer adjudging it shall give the owner of the goods an option to
pay in lieu of confiscation such fines as the officer thinks fit". The
Imports and Exports (Control) Act, 1947, by s. 3(1) empowers the
Central Government by an order to make provision for prohibiting, restricting,
or . otherwise
controlling,
the
import,
export,
carriage coast-wise . or shipment as ships' stores of goods of any
specified description.
Sub-section (2) of that section provides that
all . goods to which any order under sub-s. ( 1) applies, shall be
deemed to be goods of which the import or export has
been
prohibited or restricted under s. 19 0£ the Sea Customs Act, 1878,
and all the provisions of that Act shall have effect accordingly,
1957
The Commissioner
of Income-tax,
Bombay
v.
The Provident
Investment Co., Ltd.
S. K,Das].
1957
May 16.