# CHHOTABHAI JETHABAI PATEL AND CO. Dec. 2i. • v. THE STATE OF MADHYA PRADESH

- **Citation:** [1953] 1 S.C.R. 476
- **Court:** Supreme Court of India
- **Decided:** 1953
- **Bench:** Mehr Chand .Mahajan, 0Handrasekhara Aiyar, Bhagwati
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chhotabhai-jethabai-patel-and-co-dec-2i-v-the-state-of-madhya-pradesh-37
- **Pages:** 11

## Headnote

]fadhya Pradesh Abolition of Proprietary Bights (Estates,
Mahals and Alienated Lands) Act, 1950, ss. 3, 4-Bights t<nder contracts with proprietors for plucking tendu leaves, collecting lac,
cutting ti1nber etc. - Whether vest in State-Nature of such contracts
:-Indian Sale of Goods Act (III of 1930) s. 4 (3)-"Ft<ti.re goods",
meaning of.
The Madhya Pradesh Abolition of Proprietary Rights
(Estates, Mahals, Alienated Lands) Act of 1950 put an end to all
proprietary rights ln estates, mahals and alienated villages situated in the State and vested them in the State for the purposes of
the State, free from all encumbrances.
The petitioners, who had
entered into various contracts and agreements \Vith the proprietors of the estates before the date on v-rhicb tl1e estates vested in
the State under the Act (and some of them even before the 16th
?lfarch, 1950) under which they were entitled to pluck, collect and
carry away tendu leaves, to cultivate, culture and acquire lac,
and to cut and carry awa.y teak and titnber and other species of
trees, applied for writs under art. 32 of the Constitution prohibit·
ing the State from interfering with the rights they had acquired
under the contracts with the proprietors:
Held, (i) On a construction of the contracts in question, that
the contracts '°vere in essence and effect licenses granted to the
petitioners to cut, gather and carry away produce in the shape of
tendu leaves, lac, timber, or wood and the petitioners 'vere neither
proprietors nor persons having any interest in the proprieta~y
rights through the proprietors, within the meaning of the Act;
(ii) The rights of the petitioners were not encumbrances
within the meaning of the expression "free from encumbrances''
in s. 3 (1) of the Act and the petitioners were entitled to a writ
against .\he State prohibiting the State from interfering with· the
rights of the petitioners under· the contracts which they had entered into with the proprietors.
Mohanlal Hargovind v. Commissioner of Incmne-tax, 0. P. tf
Berar (I.L .R. [1949] Nag. 892) referred td.
Held also, thats. 4 (3l of the Indian Sale of Goods Act which
lays clown that ·in the case of sale of future goods the contract
;
_.., .
S.C.R.
SUPREME COURT REPORTS
477
l952
amounts only to an. agreement. to sell did not apply to the contracts in the present case as "future goods" are defined in the Act
as meaning goods to be manufactured or produced or acquired by Firm Chhotabhao
the seller after making the contract of sale.
•
lethabai Patel
ORIGINAL JuRISDICTION: Petitions Nos. 232, 233,
286, 309, 320, 351, 319, 350, 354 and 490 of 1951.
Applications under article 32 of the Constitution for
writs to enforce the fundamental rights of the petitioners .
. C. K. Daphtary (R. M. Bajarnavis, with him) for the
petitioner in Petition No. ~3;3.
M. C. Setalvad (G. N. Joshi and R. M. Hajarnavis,
with him) for the petitioner in Petition No. 233.
R. M. Hajarnavis for the petitioners in Petitions
Nos. 286, 309 and 320.
V. N. Swami for the petitioners in Petitions
Nos. 350 and 351.
N. S. Bindra (R. S. Narula, with him) for the petitioners in Petitions Nos. 319, 354 and 490.
T. L. Shivde, Advocate-General of Madhya Pradesh,
for the respondent in all the petitions, the State of .
Madhya Pradesh.
1952. December 22. The Judgment of the Court
was delivered by
OHANDRASEKHARA AIYAR J.-These are petitions
under article 32 of the Constitution of India for
directions or orders or writs to enforce the fundamental rights of the petitioners to property by prohibiting the respondent,
the State of Madhya
Pradesh, from enforcing their alleged rights under
the Madhya Pradesh Abolition of Proprietary Rights
Act, 1950.
The several petitioners entered into contracts and
agreements with the previous proprietors of certain
estates and mahals in the State under which it is said
they acquired the rights to pluck, collect and carry
away tendu leaves, to cultivate, culture :.nd acquire
lac, and to cut and carry away teak and timber and

## Text

476
SUPREME COURT REPORTS
[1953]
1952
CHHOTABHAI JETHABAI PATEL AND CO.
Dec. 2i.
•
v.
THE STATE OF MADHYA PRADESH
(and other cases)
(MEHR CHAND .MAHAJAN, 0HANDRASEKHARA AIYAR
and BHAGWATI JJ.]
]fadhya Pradesh Abolition of Proprietary Bights (Estates,
Mahals and Alienated Lands) Act, 1950, ss. 3, 4-Bights t<nder contracts with proprietors for plucking tendu leaves, collecting lac,
cutting ti1nber etc. - Whether vest in State-Nature of such contracts
:-Indian Sale of Goods Act (III of 1930) s. 4 (3)-"Ft<ti.re goods",
meaning of.
The Madhya Pradesh Abolition of Proprietary Rights
(Estates, Mahals, Alienated Lands) Act of 1950 put an end to all
proprietary rights ln estates, mahals and alienated villages situated in the State and vested them in the State for the purposes of
the State, free from all encumbrances.
The petitioners, who had
entered into various contracts and agreements \Vith the proprietors of the estates before the date on v-rhicb tl1e estates vested in
the State under the Act (and some of them even before the 16th
?lfarch, 1950) under which they were entitled to pluck, collect and
carry away tendu leaves, to cultivate, culture and acquire lac,
and to cut and carry awa.y teak and titnber and other species of
trees, applied for writs under art. 32 of the Constitution prohibit·
ing the State from interfering with the rights they had acquired
under the contracts with the proprietors:
Held, (i) On a construction of the contracts in question, that
the contracts '°vere in essence and effect licenses granted to the
petitioners to cut, gather and carry away produce in the shape of
tendu leaves, lac, timber, or wood and the petitioners 'vere neither
proprietors nor persons having any interest in the proprieta~y
rights through the proprietors, within the meaning of the Act;
(ii) The rights of the petitioners were not encumbrances
within the meaning of the expression "free from encumbrances''
in s. 3 (1) of the Act and the petitioners were entitled to a writ
against .\he State prohibiting the State from interfering with· the
rights of the petitioners under· the contracts which they had entered into with the proprietors.
Mohanlal Hargovind v. Commissioner of Incmne-tax, 0. P. tf
Berar (I.L .R. [1949] Nag. 892) referred td.
Held also, thats. 4 (3l of the Indian Sale of Goods Act which
lays clown that ·in the case of sale of future goods the contract
;
_.., .
S.C.R.
SUPREME COURT REPORTS
477
l952
amounts only to an. agreement. to sell did not apply to the contracts in the present case as "future goods" are defined in the Act
as meaning goods to be manufactured or produced or acquired by Firm Chhotabhao
the seller after making the contract of sale.
•
lethabai Patel
ORIGINAL JuRISDICTION: Petitions Nos. 232, 233,
286, 309, 320, 351, 319, 350, 354 and 490 of 1951.
Applications under article 32 of the Constitution for
writs to enforce the fundamental rights of the petitioners .
. C. K. Daphtary (R. M. Bajarnavis, with him) for the
petitioner in Petition No. ~3;3.
M. C. Setalvad (G. N. Joshi and R. M. Hajarnavis,
with him) for the petitioner in Petition No. 233.
R. M. Hajarnavis for the petitioners in Petitions
Nos. 286, 309 and 320.
V. N. Swami for the petitioners in Petitions
Nos. 350 and 351.
N. S. Bindra (R. S. Narula, with him) for the petitioners in Petitions Nos. 319, 354 and 490.
T. L. Shivde, Advocate-General of Madhya Pradesh,
for the respondent in all the petitions, the State of .
Madhya Pradesh.
1952. December 22. The Judgment of the Court
was delivered by
OHANDRASEKHARA AIYAR J.-These are petitions
under article 32 of the Constitution of India for
directions or orders or writs to enforce the fundamental rights of the petitioners to property by prohibiting the respondent,
the State of Madhya
Pradesh, from enforcing their alleged rights under
the Madhya Pradesh Abolition of Proprietary Rights
Act, 1950.
The several petitioners entered into contracts and
agreements with the previous proprietors of certain
estates and mahals in the State under which it is said
they acquired the rights to pluck, collect and carry
away tendu leaves, to cultivate, culture :.nd acquire
lac, and to cut and carry away teak and timber and
miscellaneous species of trees called hardwood and
and Co.
v.
The State of
M:adhy!l
Prade&h.
478
SUPREME OOUR'i' REPoli'i'S
(1953j
1952
bamboos.
The
contracts . and agreements are in
.
~ . writing; some of them are registered.
There is no
FirmOhhotobh"'disnnte about their genuineness and it has not been
Jethabai Patel
..,
.
'
and 00 .
alleged that they are collusive or fraudulent transv.
actions.
Their dates and the several sums of money
Th• State of paid as consideration are set out in the petitions.
Madhya
The petitioners allege that they have spent large
Pradesh.
sums of money in the exercise of their rights, and
Ohandrasekhara this fact too is not cont_roverted:
Aiyar J.
Petitions Nos. 232, 233, 286, 309 and 320 of 1951
relate to tendu leaves which grow in shrub jungles
and which are used in the manufacture of beedis or
country made cigarettes, a very extensive and competitive business carried on by some of the petitioners
involving an outlay of one to two lakhs of rupees in
some cases.
For instance, 406 contracts are involved
in Petition No. 232 of 1951 ;'the consideration paid
comes to Rs. 1,65,385 and the expenses are alleged
to be in the region of Rs. 1,90,000. In Petition No.
233 of 1951 there are 785 contracts; the purchase
money is Rs. 1,10,605 and the ontlay by way of ex-
·penses is said to be Rs. 50,000.
Petition No. 319 of 1951 relates to the culture and
cultivation of lac, and there are several lease deeds of
different dates enuring for different periods; two of
them go np to the years 1966 and 1967.
Teak, timber and hardwood form the subject-matter
of the rights involved in Petition No. 350 of 1951,
and the registered lease deed is dated 8th October,
1949, and it is for a teni:t of ten years.
Petition No. 351 of 1952 involves tendu leaves
and miscellaneous forest produce and timber.
Petition No. 354 of 1951 relates to bamboo forests,
and Petition No. 490 of 1951 to hardwood and
bamboo.
The contentions of the petitioners are mainly three
in number.. They say that the rights acquired by
them under these contracts and agreements were got
before the passing of the Madhya Pradesh Abolition
-
l
. ., '
s.c.n.
SUPREME COtJR11 11EPORTS
479
of Proprietary Rights Act, 1950, and that the legisla1952
ti on therefore does not affect them. It is urged next B".
0-,, bl .
.
'th'
th
.
f irm
'iota ia•
that they are not prop net ors w1
Ill
e mean mg o
Jethabai Patel
the Act and consequently the Act does not apply to
and co.
them. Lastly, the question is raised that the A.ct
v.
itself is ultra vires, as many·of its material provisions
The State of
offend their fundamental rights guaranteed under
Madhya
Pradesh.
the Constitution.
The full title of the Act is the "Madhya Pradesh Ohandrasekhara
Abolition of Proprietary l{ights (Estateg, Mahals,
Aiyar J.
Alienated Lands) Act, 1950 ", and it is Madhya
Pradesh Act I of 1951. It came into force on 26th
January, 1951.
On the very next day, there was a
notification under section 3 of the Act putting an end
to all proprietary rights in estates, mahals and
alienated villages and vesting the same in the State
for the purposes of the State free of all encumbrances
with effect from 31st March, 1952.
The validity of the Act was questioned by the
affected proprietors in Visheshwar Rao v. The State of
Madhya Pradesh (1)
before this
Court, and the
Act was held to be valid.
The petitioners are
concluded.
We have to consider only the other two points
raised on behalf of the petitioners. It is clear from
the provisions in the impugned Act that only those
rights of the proprietor vest in the State which the
proprietor had on the specified date.
Section 3
provides that on and from a date to be specified by a
notification by the State Government, all proprietary
rights in an estate or mahal ve8ting in .a proprietor
shall pass from him to and vest in the State. 'rhe
consequences of vesting are given in section 4 of the
Act, and it is provided that the vesting will take
place, notwithstanding anything contained in any
contract, grant or document or in any other law for
the time being in force and save as otherwise provided ~n this Act. But this again deals only with
the rights existing on the date of the notification;
the section is not retrospective.
(1) [19szJ s.c.R. 1029,
480
SUPREME COURT REPORTS
[1953)
1952
Clause (a,) speaks of all rights, title and interest
-
- vesting in the proprietor or any person having
Firm Ohhotabhai • t
·
h
· t
· ht th
h th
Jeth~bai Patel 1? ere.st
m
sue
propne ary ng
roug
e
and Co..
proprietor.
v.
Clause (b) is to this effect:
The State of
"all grants and confirmation of title of or to land
Madhya •
·
h
· h
Pradesh·
m t e property so vesting or of or to any ng t or
privilege in respect of such property or land revenue
I.
oi.andrasekhara in respect thereof shall, whether liable to resumption
Aiyar J.
or not, determine;".
;,
· The right or privilege referred to is the right or
privilege of the proprietor qr any person having
interest in
the
proprietary right through the
proprietor.
Clause (c) is quite clear on the subject; it runs
thus:
" all rents and cesses, in respect of any holding in
the property so vesting for any period after the date
of vesting and which, but for the vesting, woulil be
payable to the proprietor, shall vest iu and be payable to tbe State Government .......... "
'l'he words " after the date of vesting" are important.
Sub-section (3) of section 4 says:
"Nothing contained in sub-section (I) shall operate
as a bar to the recovery by the outgoing proprietor
of any sum which becomes due to him before the date
of vesting by virtue of his proprietary rights and any
such sum shall be recoverable by him by any process
of law which but for this Act would be available
to him."
If the outgoing proprietor is entitled to recover
any sums as quid pro quo for what he has parted with
under the transfer, it can only be on the basis that
the transfer is a good and valid transaction unaffected by the Act.
Section 6 is very material, and it is
in these terms :
"(1) Except as provided in sub-section (2), the
transfer of any right in the property which is liable
'
S.O.R.
SUPREME COURT REPORTS
481
to vest in the State under this Act made by the pro1959
prietor at any time after the 16th .March, 1950, shall, Firm Ghhotabhai
as from the date of vesting, be v01d.
Jethabai Patel
(2) Where on the application of the transferor
and Go.
or the transferee, the Deputy Commissioner is satisv.
/
f
d t ·
b
The State o
fied that any transfer of property ~e er~e
o m si: -
Madhya
section (1) was made by a proprietor m good faith
Pradesh.
and in the ordinary course of village management,
-
he may declare that the transfer shall not be void Gha"d:asekha1·a
after the date of vesting."
A•yar J.
The date, 16th March, 1950, is prob.ably the date
when legislation on these lines was actively thought
of, and sub-section (1) hits at transfers made after
this date. This means that transfers before that date
are not to be regarded as void. Even in the case of
transfers after the said date, sub-section (2) provides
that the Deputy Commissioner may declare that they
are not void after the date of vesting, provided they
were made in good faith and in the ordinary course
of management.
The scheme of the Act as can be gathered from the
provisions referred to above makes it reasonably clear
that whatever was done before 16th March, 1950, by
the proprietors by way of transfer of rights is not to
be disturbed or affected, and that what vests in the
State is what the proprietors had OU the vesting date.
If the proprietor had any rights after the date of
vesting which he could enforce against the transferee
such as a lessee or a licensee, those rights would no
doubt vest in the State. In all these petitions, the
several contracts and agreements were before the
date of vesting, and many of them were prior even to
the 16th March, 1950. The petitioners had taken
possession of the subject-matter of the contracts,
namely, tendu leaves, lac palsadies, teak, timber
and hardwood, bamboos and miscellaneous forest
produce.
Under the Indian Sale of Goods Act, "goods"
include growing crops, grass and things attached to
or forming part of the land, which are agreed to be
severed before sale or under the contract of sa.le
482
SUPREME COURT REPORTS
(1953]
w~a
·notwithstanding the definition of "immovable pro-
.
0-
"h . perty" in!seotion 3 (25) oI the General Clauses Act
Firm },hotao a'
Jethabai Patel of 1897 ·
,and Co,
• In Petition No. 232 of 1951 t;vo sample· agreev.
ments relating to tendu leaves are given as annexures
Th• Stat• of A and B to the petitions.
They may be quoted in
;:;::;,~:
extenso for a clear und~rstanding of the nature of the
right
cr~ated.
Exhibit A dated 16th November,
Ohandra,.khara 1950, is in these terms:
Aiyar J.
"Receipt wri-tten in favour- of Seth Chhotabhai
Jethbai Patel Company shop .Gondia and written by
Shri Madhavrao Gangadhar Rao Chitnavis shop Itan
receipt is written that we are owners of forests of
Tendri
leaves of
Mouza Sawarla 0-12-0 Manza
Khatkheda. 0-5-0 Mouza Nati Kheda 0-16-0 and.
Mouza Welwa 0-16-0.
We have given contract
(Theka) of cutting Tendu leaves from these four
villages for one .year that is till the end of June for
Rs. 2,500 out of this we had received Rs. 300 on 21st
September, 1950,· at Bhandara an(!. the balance
Rs. 2,200 was received from your .Bhandara shop
through Balubhai.
Nothing remains 'to'lle paid to
us.
Ypu have a right to coppice the trees."
The terms. of Exhibit B dated 12th July, 1948,
omitting unnecessary portions ar.e as follows:
"In the year 1948 A.D. theka patra is' executed
that in consideration of the amount received as
detailed above I had given the full tendu leaves
jungle for taking out teridu leaves for five years from
1949 A.D. to 1953 A.D.
I have immediately given
possession.
Now· you can take tendu leaves of the
tendu leaves forests described above every year for
five years till the end of June; 1953.
You may
coppice the plants and take leaves.
At the end of
June, 1953, you should returri my jungle without
damage or loss to me.
After tbe end of the period
it depends upon my will whether or not I give you
the forests on theka (again), If any one obstructs
you in coppicing or taking away leaves, I will be
responsible for the damages.
Hence I.have executed
,,
·.
·'
:(;iJ.R. . SUPREM1E COURT REPORTS
48.8
rrhis theka pathi for five years for consideration. after
1952
reading and understanding. I agree with it. Dated F"
Chh t bh .
.
'rrn
oa at
12th J~ly, 1948; by pen of Waman Sadesh1c Amtl) J"othabai Patol
Petition Writer Bhandara,."
andCo.
The contracts and 'agreements appear .-to be. in
v.
d
ff
1.
d t
h
f
.Tho Slatoo/
.essence an
e, ect we.uses grante
o .t e trans_ ereell
Madhya
to, cut, gather and -carry away the produce m the
Prade•hshape of tendu leaves, or lac, or timber, or wood.
A simiiar-agrel)ment came up for consideration by Chandrase~hara
-the Judicial ,Gommittee of the Privy Council in
A•v•r ;r,
Mohanlal Hargovind of Jubbulpore v. Commissioner of
Incbme-taa;, Central Provinces and Berar; Nagpur(")
in ,connection witli a_ question arising cmt of the
Income-tax ActSome of the observations contained
in the judgment dealip.g .with the nature of such an
agreement are useful and may be quote,d here :
" The contract& grant no interest in land and no
interes't in the trees or plants ~hemselv'es. They are
simply' and solely. contracts giving· to the grantees
the right to pick and carry away leaves, which, of
co,n.rse,.impli'es the right to' appro11riate.-them as their
ow~ p"roperty.
•
_
T)le small right of culti"'?ation given in the first of
the, two contracts is merely ancillary and is of .no
more significance than woqld qe, e.g., a right to spray
a fruit·tree gtv~,n. 'to the person who has bought the
crop of apples. The contracts ar'e sh6iP-term' con-
·tracts.
The picirfog of·the leaves under·then'i has to
start at once or practically' at once and ·t'.o proceed
continuously."
·
Thli)'e is nothing iii. the Act to affect the validity
of the several contrac.ts. and agreements.
The petitioners are neither propri~tors·.within. the meaning of
the·,Act nor persons having.any interest in the proprietary fight through the proprietors.- There is no
pro:vision in the Act which extinguishes their rights
in fav'our of the State. What' exactly is meant by a
"proprietary .right." upder the revenue laws has· been
(r).I.L.R. (1949] Nag. 89>,
~· 6J
.
-
484
SUPREME COURT REPORTS
[1953]
ws2
pointed ont at page 217 of Volume I of BadenF'.
Ohh , bh . Powell's ·Land Systems of B1·itish India, where
1.rni
o~a ai
Jethabai Patel .be says;
·and Co.
" The first thing that will strike the student is the
v.
nse of the term' proprietary right' in these pages and
Th',,/!ate of in Indian Revenue Books generally. It does not
a hya
occur in text-books on English law or J"nrisprudence.
Pradesh.
I presume that the nse of such a phrase is due to the
Ohandrasekhara feeling that we rarely acknowledge anything like a
Aiya1· J.
complete unfettered right vested in any one person.
The interest in the· soil has come to be virtually
shared between two or even more grades, the cause of
which we just now discussed. It is true that, in many
cases, only one person is called 'landlo"rd ' or ' actual
proprietor' but his right is limited; the rest of the
right, so to speak, is in the hands of the other grades,
even though they are called 'tenants' or by some
vague title such as 'tenure-holders.' In many cases,
as we have seen, this division of right is accentuated
by the use of terms like' sub-proprietor' or ' proprietor
of his holdip.g'. The 'proprietary right' seems then
a natural expression for the interest held by a landlora, when that interest is not the entire 'bundle of
rights' (which in the aggregate make np an absolute
or complete estate) bnt only some of them, the remainder being enjoyed by other persons.''
The definitions given in the Act do not abrogate
or vary this meaning.
The respondent State cannot
invoke in its aid section 3, sub-clause (1) of the Act
which speaks of the vesting of proprietary rights free
of all encumbrances, because the rights of the petitioners either as buyers or lessees or licensees are
not encumbrances as ordinarily understood.
The
last part of clause (a) of section 4 ( L) indicates that
mortgage debts and charges on the proprietary rig.ht
are meant by encumbrances.
In this view, it becomes unnecessary to consider
the question as to when title in the property passes
to the transferee. Section 4, sub-section (3) of the
Indian Sale of Goods Act which lays down that in .
~h~ ca,se of saje of future g~ods the cop.tract 11/moun~s
• ·J
-
S.C.R.
SUPREME COURT REPORTS
485
only to an agreement to sell does not seem to be
1952
applicable to the contracts and agreements here, asp·
0-,, t bl .
h
d
" f
d "
d fi
d ·
b
'""' ' '° a iai
t e goo s are not
uture goo s
as e ne m su .- Jethabai Patel
clause (6) of the Act which states that they mean
and Go.
goods to·be manufactured or produced or acquired by
v.
the seller after the making of the contract of sale.
The State of
BenJ·amin says in his treatise on Sale (8th Edition)
Madhya
P1'adesh.
at page 136:
"Things not yet existing which may be sold (that Ghandrasekhara
is to say, a right to which may be immediately grantAiya,. J.
ed) are those which are said to have a potential existence, that is, things which are the natural produce,
or expected increase of some thing already owned or
possessed by the seller. A man may sell the crop of
hay to be grown in his field, the wool to be clipped
from his sheep at a future time, the milk that his
cows will yield in the coming month, and similar
things. Of such things there could be, according to
the authorities, an immediate grant or. assignment,
whereas there could only be an agreement to sell
where the subject of the contract is something to be
afterwards acquired, as the wool of any sheep, or the
mil'k of any cows, which the seller might buy within
the year, or any goods to which he might obtain
title within the next six months."
The goods covered by the present petitions are
goods which have a potential existence, and according to the decisions discussed by the learned author,
there can be a sale of a present right to the goods as
soon as they come into existence.
Whether title
passes on the date of the contract itself or later is
really dependent on the intention of the parties, and
as already stated, in these petitions the stipulated
consideration has passed from the transferees to the
proprietors, and possession also has been taken.
We hold that the respondent has no right to interfere with the rights of the several petitioners under
the contracts a.nd agreements in their favour set out
in their petitions, and we hereby issue a writ prohibiting the State from interfering in any manner
whatsoever with the enjoyment of those rights by the
486
SUPREME COURT REPORTS
[1953]
!962
petitioners. In cases where the periods under the
F .
0-hh bli' . contracts have expired, or where the proprietors have
i.rm
ota
ai-
. )
h.
Jethabai Patel st1l
to recover anyt mg from the transferees after
and ca.
the date of vesting, the State will be at perfect liberty
v.
to assert and enforce its rights standing in the
The State of shoes of the proprietors.
The respondent will pay
Madhya
the petitioners their respective costs.
Pradesh.
Chandra!ekhara
Aiyar J.
1953
Deo. 22.
Petition allowed.
Agent for the .petitioners in Petitions Nos. 232,
233, 286, 309 and 320 : Rajinder Narain.
Agent for the petitioners in Petitions
Nos. 350 and 351: M. S. K. Sastri.
Agent for the petitioners in Petitions
Nos. 319, 354 and 490: Harbans Singh.
Agent for the respondents
in all petitions : G. H. R~jadhyaksha.
COMMISSIONER OF INCOME-TAX, MADRAS.
v.
K. SRINIVASAN AND K. GOI'ALAN.
[MEHR CHAND MAHAJAN, DAS and BHAGWATI JJ.]
Indian Income-tax Act (XI of 1922), ss. 2 (1), 25 (3) & (4),
26 (2)-Fir'ni charged under Act of 1918-Acc01inting year ending
.-l,
on 30th June each year-Transfer of bnsiness on 1st March, 1940
-Exemption from tax under s. 25 (4)-Period for which exemption
ca1' be granted-"End of previoZ<s year", meaning of-Interpretation
'
-Directions in Inoon~e -tax Manual, value of,
Two brothers who had been carrying on in partnership a
business, which ha.a been assessed to income-tax under the Indian
Income-tax Act oi 1918 and the accounting year of which was a
period of 12 months ending on the 30th June each year, transfer•
red the business to a limited company on the 1st March, 1940, and
claimed in the assessment Jar the year 1940-41 that under s. 25
(4) of the Income-tax Act, 1922, they were not liable to pay
income-tax on the income of their business from 1st July, 1938, up
to 29th February, 1940, a period of 20 months. The Income-tax
authorities were of the view that exemption could be claimed only