Appeal No 4 of 1960
Appeal by special leave from the Judgment and Order dated January 28 1959 of the Punjab High Court in Letters Patent Appeal No 52 of 1958 arising out of the Judgment and Order dated February 17 1958 of the said High Court in Civil Writ Application No 124 of 1957
C B Aggarwala Daya Swarup Mehra and R section Gheba for the appellants
section M Sikri Advocate General for the State of Punjab NS Bindra and D Gupta for respondent No 1
CK Daphtary Solicitor General of India and section N Andley for Respondent No 2
CK Daphtary Solicitor General of India and TM Sen for the Attorney General for India Intervener 1960
November 16
The Judgment of the Court was delivered by SINHA C J
This appeal by special leave granted on May 29 1959 is directed against the decision of the Letters Patent Bench G D Khosla C J and Dulat J dated January 28 1959 affirming that of the learned single Judge Bishan Narain J dated February 17 1958 whereby he dismissed the 461 appellants  Writ Petition under article 226 of the Constitution
It appears that the appellants are the owners of what is said to be agricultural land measuring about 86 bighas odd in village Munda Majra Tehsil Jagadhari in the district of Ambala
On October 27 1954 the Additional District Magistrate of Ambala ordered the land aforesaid to be requisitioned under the Punjab Requisitioning  Acquisition of Immoveable Property Act XI of 1953 for the construction of houses by members of the Thapar Industries Co operative Housing Society Ltd Yamuna Nagar
Possession of the land was taken on November 5 1954
The appellants at once instituted a suit on November 14 1954 in the Court of the Subordinate Judge Jagadhari challenging the requisition proceedings
The suit was ultimately decreed by the Court on June 21 1955 and the possession of the property in question was restored to the petitioners
On May 27 1955 the first respondent i e the State of Punjab through the Secretary Labour Department issued a notification under section 4 of the Land Acquisition Act 1 of 1894 which hereinafter will be referred to as the Act
The notification under section 4 is in these terms
No 4850 S LP 5514144
Whereas it appears to the Governor of Punjab that land in the locality hereunder specified is likely to be needed by the Government for a public purpose namely for the construction of a Labour Colony under the Government sponsored Housing Scheme for the Industrial Workers of the Thapar Industrial Workers  Co operative Housing Society Limited Jamna Nagar District Ambala it is hereby notified that the land described in the specifi cations below is likely to be required for the above purpose
This notification is made under the provisions of Section 4 read with section 17 of the Land Acquisition Act 1894 as amended by the Land Acquisition Punjab Amendment Act 1953 to all to whom it may concern and the Collector shall cause public notice of the substance of this notification to be given at convenient places in the said locality 462 In exercise of the powers conferred by the aforesaid sections the Governor of the Punjab is pleased to authorise the President of the above said Society with the members and servants to enter upon and survey any land in the locality and do all other acts required or permitted by that section
Further in exercise of the powers conferred by sub section 4 of Section 17 of the said Act the Governor of Punjab is pleased to direct that on the grounds of urgency the provisions of Section 5a of the said Act shall not apply in regard to this Acquisition
Later the same day another notification under section 6 of the Act was issued
This notification under section 6 states that it appeared to the Governor of Punjab that the land is required to be taken by Government for a public purpose namely for the construction of a Labour Colony under the Government sponsored Housing Scheme for the  Industrial Workers of the Thapar Industrial Workers  Co operative Housing Society Limited which is the second respondent in this case
It also says that under the provisions of section 7 of the Act the Collector Ambala is directed to take order for the acquisition of the land
The Patwari effected delivery of possession of the lands in question to the second respondent on August 21 1955
Even before the delivery of possession had been effected the appellants promptly instituted their suit on August 20 1955 in the Court of the Subordinate Judge Class 1 Jagadhari for a perpetual injunction restraining the second respondent from entering upon or taking possession of the land in question or making any construction thereon
The trial Court dismissed the suit on June 25 1956 on the preliminary ground that the suit was not competent in the absence of a previous notice under section 59 of the Punjab Co operative Societies Act 1955 XIV of 1955
The appellants appealed to the Senior Sub Judge Ambala who dismissed their appeal upholding the decision of the trial Court that the notice was a condition precedent to the institution of the suit
Their second appeal was dismissed by the Punjab High Court on February 61957
During the pendency of the civil litigation aforesaid in spite of the fact that the second respondent had 463 obtained delivery of possession through Government agency by an Order of Injunction issued by the Court construction had been stayed
As soon as the High Court decided the suit in favour of the respondents the second respondent started making huge constructions on the land in dispute in a very speedy manner as alleged by the appellants in their petition under article 226 of the Constitution which they filed on February 13 1957
From the High Court also they obtained similar Stay Orders whereby building operations were stopped
In their Writ Petition the appellants as petitioners in the High Court challenged the acquisition proceedings on a number of grounds of which it is only necessary to notice the one which has formed the subject matter of decision in the High Court namely that the proceedings were void for want of compliance with the procedure laid down in Chapter VII mistake for Part VII of the Act
It is not necessary to refer to the other contentions raised in the Writ Petition because it is common ground before us that the whole controversy must be determined by the answer to the question whether or not the proceedings were vitiated by reason of the admitted fact that no proceedings under Part VII of the Act had been taken in making the acquisition 
The matter was heard in the first instance by Bishan Narain J
The learned Judge dismissed the petition holding that the acquisition was by the Government for a public purpose namely of construction of tenements for industrial workers under a schempeal against the order to the Collector of the district or such other officer as may by notification be authorised in this behalf by the State Government
629 Section 6 imposes a restriction on the transport of agricultural cattle for slaughter and reads section 6
No person shall transport or offer for trans port or cause to be transported any agricultural cattle from any place within the State to any place outside the State for the purpose of its slaughter in contra
vention of the provisions of this Act or with the knowledge that it will be or is likely to be so slaugh tered
 Section 7 prohibits the sale purchase or disposal otherwise of certain kinds of animals
It reads 
section 7
No person shall purchase sell or otherwise dispose of or offer to purchase sell or otherwise dis pose of or cause to be purchased sold or otherwise disposed of cows calves of cows or calves of she buffaloes for slaughter or knowing or having reason to believe that such cattle shall be slaughtered
 Section 8 relates to possession of flesh of agricultu ral cattle and is in these terms section 8
Notwithstanding anything contained in any other law for the time being in force no person shall have in his possession flesh of any agricultural cattle slaughtered in contravention of the provisions of this Act
 Section 10 imposes apenalty for a contravention of section 4la and section 11 imposes penalty for a contraven tion of any of the other provisions of the Act
On behalf of the petitioners it has been pointed out and rightly in our opinion that cl
a of sub section
2 of section 4 of the Act imposes an unreasonable restriction on the right of the petitioners
That clause in its first part lays down that the cattle other than cows and calves must be over 20 years of age and must also be unfit for work or breeding and in the second part it says or has become permanently incapacitated from work or breeding due to age injury deformity or an incurable disease
 It is a little difficult to understand why the two parts are juxtaposed in the section
In any view the restriction that the animal must be over 20 years of age and also unfit for work or breeding is an excessive or unreasonable restriction as we have 80 630 pointed out with regard to a similar provision in the Uttar Pradesh Act
The second part of the clause would not be open to any objection if it stood by it self
If however it has to be combined with the age limit mentioned in the first part of the clause it will again be open to the same objection if the animal is to be over 20 years of age and also permanently in capacitated from work or breeding etc
then the age limit is really meaningless
Then the expression due to age  in the second part of the clause also loses its meaning
It seems to us that cl
a of sub section
2 of section 4 of the Act as drafted is bad because it imposes a dis proportionate restriction on the slaughter of bulls bullocks and buffaloes it is a restriction excessive in nature and not in the interests of the general public
The test laid down is not merely permanent incapa city or unfitness for work or breeding but the test is something more than that a combination of age and unfitness  Learned Counsel for the petitioners has plac ed before us an observation contained in a reply made by the Deputy Minister in the course of the debate on the Bill in the Madhya Pradesh Assembly see Madhya Pradesh Assembly Proceedings Vol
5 Serial No 34 dated April 14 1959 page 3201
He said that the age fixed was very much higher than the one to which any animal survived
This observation has been placed before us not with a view to an interpre tation of the section but to show what opinion was held by the Deputy Minister as to the proper age limit
On behalf of the respondent State our atten tion has been drawn to a book called The Miracle of Life Home Library Club in which there is a state ment that oxen given good conditions live about 40 years
Our attention has also been drawn to certain extracts from a Hindi book called Godhan by Girish Chandra Chakravarti in which there are statements to the effect that cows and bullocks may live up to 20 or 25 years
This is an aspect of the case with which we have already dealt
The question before us is not the maximum age upto which bulls bullocks and buffaloes may live in rare cases
The question before us is what is their average longevity and at what age 631 they become useless
On this question we think that the opinion is almost unanimous and the opinion which the Deputy Minister expressed was not wrong
Section 5 in so far as it imposes a restriction as to the time for slaughter is again open to the same ob jection as has been discussed by us with regard to a similar provision in the Uttar Pradesh Act
A right of appeal is given to any person aggrieved by the order
In other words a member of the public if he feels aggrieved by the order granting a certificate for slaughter may prefer an appeal and hold up for a long time the slaughter of the animal
We have pointed out that for all practical purposes such a restriction will really put an end to the trade of the petitioners and we are unable to accept a restriction of this kind as a reasonable restriction within the meaning of cl
6 of article 19 of the Constitution
Section 6 standing by itself we think is not open to any serious objection
It is ancillary in nature and tries to give effect to the provision of the Act prohibiting slaughter of cattle in contravention of the Act
Section 7 relates to the prohibition of sale purchase etc of cows and calves and inasmuch as a total ban on the slaughter of cows and calves is valid no ob jection can be taken to section 7 of the Act
It merely seeks to effectuate the total ban on the slaughter of cows and calves both of cows and she buffaloes
Sec tion 8 is also ancillary in character and if the other provisions are valid no objection can be taken to the provisions of section 8
Sections 10 and 11 impose penal e subsidised by the Government out of public funds that Part VII of the Act had no application to the present proceedings and that therefore the noti fication under section 6 was not invalid
The appellants preferred an appeal under the Letters Patent
The Letters Patent Bench dismissed the appeal but for different reasons
After an examination of the precedents of the different High Courts bearing on the controversy in this case the Bench came to the conclusion which may better be expressed in its own words There is thus considerable authority for the 464 view advanced by the learned counsel for the appellants that compliance with the provisions of Part VII is obligatory in the case of all acquisitions for a company
In the present case the acquisition was undoubtedly for the benefit of a company
I have given this matter my most anxious consideration and with great respect to the learned Judges whose decisions have been noted above I find myself unable to subscribe to the views expressed by them
It seems to me that their views were coloured by the background of the provisions of the Constitution
Article 31 of the Constitution prohibits compulsory acquisition of property for anything except a public purpose
Therefore acquisition for anything which is not a public purpose cannot now be done compulsorily but it has never been disputed that before the Constitution came into force land could have been acquired compulsorily by Government for a purpose which was not public
There is nothing in the Land Acquisition Act to warrant the assumption that the embargo placed by Article 31 of the Constitution found place in the Act
It seems to me that the Land Acquisition Act contem plates two categories of acquisitions
After an examination of the provisions of the Act the High Court observed that the Land Acquisition Act came into force when there was no bar to compulsory acquisition for private purposes
Such a bar was only imposed for the first time by article 31 of the Constitution
After the Constitution came into force Part VII of the Act became redundant or null and void
But in its view the present acquisition proceedings were saved from all attack based on non compliance with the provisions of Part VII of the Act
The reason for this conclusion according to the High Court was that as the land was acquired for a public purpose there was no need to comply with the provisions of Part VII even though the Company is to bear all the expenses for the acquisition
It is manifest that the main point for determination in this appeal is Whether or not the acquisition proceedings had been vitiated by reason of the admitted fact that there was no attempt made by the 465 Government to comply with the requirements of Part VII of the Act
It is equally clear that the Letters Patent Bench of the High Court was misled in its conclusions because all the provisions of article 31 of the Constitution had not been brought to their notice
It is not correct to say that Part VII of the Act had become redundant or null and void as suggested by the High Court because that Part provided for acquisition for a private purpose
As held by this Court in a recent decision in the case of Babu Barkaya Thakur vs The State of Bombay 1 the Act deals with two kinds of acquisitions 1 for a public purpose at the cost of the Government and 2 for a purpose akin to such a purpose at the cost of a Company and to the latter class of acquisition the provisions of Part VII are attracted
It was further held in that case that acquisition of a site for building residential houses for industrial labour was a public purpose and that the Land Acquisition Act was immune from attack based on the provisions of article 312 of the Constitution in view of the provisions of cl
5a of that Article which saved an existing law of the nature of the Act in question
As will presently appear the conclusion of the High Court is entirely correct but the process of reasoning by which it has reached that conclusion is erroneous
That process suffers from the initial error arising from the fact that the provisions of article 315 of the Constitution had not been brought to the notice of that Bench
If the Bench were cognizant of the true legal position that the Land Acquisition Act in its entirety including Part VII dealing with the acquisition of Land for Companies was not subject to any attack under article 312 of the Constitution it would not have based that conclusion on that ratio
Otherwise there would be no answer to the contention in which the appellants had persisted throughout the long course of litigation in which they have indulged in their vain effort to save the land from being used for the public purpose aforesaid
The Letters Patent Bench has also fallen 1 59 466 into another error in assuming that the compensation was paid in its entirety by the Company
It is better to clear the ground by showing that this assumption is not well founded in fact
In their Writ Petition as originally filed in the High Court it was not categorically stated by the appellants that the compensation in respect of the land in question was paid or was to be paid by the Company
It may be stated here by the way that it is common ground that the second respondent is a Company within the meaning of the Act being a registered society under the Co operative Societies Act
It is also common ground that the purpose for which the land was being acquired was for erecting residential quarters for industrial labour which had organised itself into the Co operative Housing Society the second respondent
It was only at a later stage of the proceedings in the High Court that is to say in the replication filed on behalf of the appellants to the Written Statement filed by the Government in answer to the appellant s Writ Petition that for the first time it was alleged by the appellants that the entire amount of compensation has been borne by the res pondent society
This allegation has not been either supported or countered by evidence on either side
But it has been pointed out by the learned single Judge that it was clear from the Government Housing Scheme that a substantial amount to be expended on this Scheme comes out of the Revenues in the form of subsidies and loans
It was stated at the Bar with reference to the terms and conditions of the Government Housing Scheme that 25 to 50 of the cost of land and structures to be built upon the land was to be advanced by Government out of public funds in the shape of subsidy and loan
It would thus appear that the High Court was not right in the assumption made as aforesaid
It is clear from the statement of facts on record that the respondent No 2 is a Company  within the meaning of the Act that the land is acquired for the
benefit of the Company and at its instance and that a large proportion of the compensation money was to 467 come out of public funds the other portion being supplied by the Company or its members
There is also no doubt that the structures to be made on the land would benefit the members of the Co operative Society
But the private benefit of a large number of industrial workers becomes public benefit within the meaning of the Land Acquisition Act
In this connection it may be mentioned that section 17 of the Act was amended by the Land Acquisition Punjab Amendment Act 11 of 1954 in these terms 172b
Whenever in the opinion of the Collector it becomes necessary to acquire the immediate possession of any land for the purpose of any library or educational institution or for the construction ex
tension or improvement of any building or other structure in any village for the common use of the inhabitants of such village or any godown for any society registered under the II of 1912 or any dwelling house for the poor or the construction of labour colonies under a Government sponsored Housing Scheme or any irrigation tank irrigation or drainage channel or any well or any public road the Collector may immediately after the publication of the notice mentioned in sub section 1 and with the previous sanction of the appropriate Government enter upon and take possession of such land which shall thereupon vest absolutely in the Government free from all encumbrances
It will appear from the amended section 172b quoted above that the construction of labour colonies under a Government sponsored Housing Scheme has been included in the category of works of public utility 
As already indicated even apart from the indication given by the amended section 17 quoted above this Court has held in the recent decision 1 that building of residential quarters for industrial labour is public purpose
Hence even apart from the amended provisions of section 17 it is clear on the authorities that the purpose for which the land was being acquired was a public purpose
1 468 Having cleared the ground it now remains to consider the terms of section 6 on which great reliance was placed on behalf of the appellants
There is no doubt that as pointed out in the recent decision of this Court 1 the Act contemplates acquisition for a public purpose and for a Company thus conveying the idea that acquisition for a Company is not for a public purpose
It has been held by this Court in that decision that the purposes of public utility referred to in sections 40 41 of the Act are akin to public purpose
Hence acquisition for a public purpose as also acquisitions for a Company are governed by considerations of public utility
But the procedure for the two kinds of acquisitions is different in so far as Part VII has made substantive provisions for acquisitions of land for Companies
Where acquisition is made for a public purpose the cost of acquisition for payment of compensation has to be paid wholly or partly out of Public Revenues or some fund controlled or managed by a local authority
On the other hand in the case of an acquisition for a Company the compensation has to be paid by the Company
But in such a case there has to be an agreement under section 41 for the transfer of the land acquired by the Government to the Company on payment of the cost of acquisition as also other matters not material to our present purpose
The agreement contemplated by section 41 is to be entered into between the Company and the Appropriate Government only after the latter is satisfied about the purpose of the proposed acquisition and subject to the condition precedent that the previous consent of the Appropriate Government has been given to the acquisition
The  previous consent  itself of the Appropriate Government is made to depend upon the satisfaction of that Government that the purpose of the acquisition was as laid down in section 40
It is thus clear that the provisions of sections 39 41 lay down conditions precedent to the application of the machinery of the Land Acquisition Act if the acquisition is meant for a Company
Now section 6 itself contains the prohibition to the making of the necessary declaration under that section in these terms 1 1961 1 SCR 128
469 Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a Company or wholly or partly out of public revenues or some fund controlled or managed by a local authority
Section 6 is in terms made subject to the provisions of Part VII of the Act
The provisions of Part VII read with section 6 of the Act lead to this result that the declaration for the acquisition for a Company shall not be made unless the compensation to be awarded for the property is to be paid by a company
The declaration for the acquisition for a public purpose similarly cannot be made unless the compensation wholly or partly is to be paid out of public funds
Therefore in the case of an acquisition for a Company simpliciter the declaration cannot be made without satisfying the requirements of Part VII
But that does not necessarily mean that an acquisition for a Company for a public purpose cannot be made otherwise than under the provisions of Part VII if the cost or a portion of the cost of the acquisition is to come out of public funds
In other words the essential condition for acquisition for a public purpose is that the cost of the acquisition should be borne wholly or in part out of public funds
Hence an acquisition for a Company may also be made for a public purpose within the meaning of the Act if a part or the whole of the cost of acquisition is met by public funds
If on the other hand the acquisition for a Company is to be made at the cost entirely of the Company itself such an acquisition comes under the provisions of Part VII
As in the present instance it appears that part at any rate of the compensation to be awarded for the acquisition is to come eventually from out of public revenues it must be held that the acquisition is not for a Company simpliciter
It was not therefore necessary to go through the procedure prescribed by Part VII
We therefore agree with the conclusion of the High Court though not for the same reasons
The appeal accordingly is dismissed with costs
Appeal dismissed


Summary:
The respondent company purchased certain machinery for Rs 89000 and sold it for the same value but in the books of account the written down value of the machinery was shown in the year of account as Rs 73392
The Income Tax Officer in computing the assessable income of the company added the difference ie Rs 15608 between the actual value and the written down value to the profit of the company
The Income Tax Officer also passed an order under section 23A of the Income Tax Act and directed that the undistributed portion of the assessable income shall be deemed to have been distributed amongst the shareholders as dividend
Appeals against the order of the Income tax Officer proved unsuccessful and the Appellate Tribunal referred the following question to the High Court under section 661 Whether the sum of Rs 15608 should have been included in the assessee company s profit for the purpose of deter mining whether the payment of a larger dividend than that declared by it would be unreasonable
 The High Court answered the question in the negative
On appeal by special leave Held that the view taken by the High Court was correct
494 By the fiction in section 102Vii second proviso read with s26C what is really not income is for the purpose of computation of assessable income made taxable income but on that account it does not become commercial profit and if it is not commercial profit it is not liable to be taken into account in assessing whether in view of the smallness of profits a larger dividend would be unreasonable
Smallness of profit should not be equated with smallness of assessable income but should be determined in accordance with commercial principles
Sir Kasturchand Ltd vs Commissioner of Income tax Bombay City 1949 XVII ITR 493 Ezra Proprietary Estates Ltd vs Commissioner of Income tax West Bengal 1950 XVIII ITR 762 and Commissioner of Income tax Bombay City vs F L Smith  Co Bombay Ltd 1959 XXXV ITR 183 referred to