vil Appeal Nos
1467 69 of 1976
295 Appeals by Certificate from the Judgment and Order dated 75
1965 of the Calcutta High Court in Income Tax Reference No 28 of 1954
B Sen NB Singh Sanjay J Khaitan Darshan Singh BN Dhar and Ms Suman Khaitan for the Appellant
SC Manchanda section Rajappa and Ms A Subhashini for the Respondent
The Judgment of the Court was delivered by THOMMEN J
These appeals by the assessee arise from the judgment dated 751965 of the Calcutta High Court
The question relates to the assessment for the years 1945 46 1946 47 and 1947 48 under the Indian Income Tax Act 1922 hereinafter referred to as the Act
The assessee was a company resident in British India during the relevant years
It had a cotton mill in British India
The cloth manufac tured by the mill was sold in British India as well as in the native States
In the assessment for 1944 45 it had been held that for the sales effected in the native States 13rd of the profit was in terms of section 423 of the Act deemed to have accrued to the assessee in British India
This profit was considered as the profit attributed to the manufacturing part of the business carried out in British India although the sales were effected in the native States
On the same basis assessment in terms of section 423 was made in respect of the assessment years 1945 46 1946 47 and 1947 48
In addition to the deemed income in British India the assessee was assessed under section 142c of the Act in respect of certain sums remitted to British India from the native States
The assessee s contention that 13rd of the income having been assessed under section 423 of the Act as income deemed to have accrued in British India no further assessment should be made under section 142c of the Act with respect to profits brought into British India was rejected by the Income Tax Officer as well as the Appellate Assistant Commissioner
On further appeal the Income Tax Appellate Tribunal also held that there was no substance in that contention
The Tribunal stated    the assessment of profits brought into British India from a Native State under Section 142c is on a distinct and separate footing from the assessment of Native States 296 profits which are deemed to have accrued in British India under Section 42   The assessee raised an additional contention for the first time before the Tribunal
That contention was that the remittances made to British India had to be taken as having first come out of profits deemed to have accrued in British India and brought to tax under section 423 and only the excess remittances if any could be taken as having come out of the remainder profits exempted from tax under section 42
The assessee pointed out that I3rd of the profits having been already charged under section 423 by reason of the legal fiction contained in that sub section any amount brought into British India upto the extent of 13rd should be presumed to be that which was attributable to that 13rd which had already suffered tax and the balance remit tance if any alone should be taxed under section 142c of the Act
In other words according to the assessee if the remittances made to British India in any accounting year exceeded the amount taxed under section 423 of the Act then it was only so much of that excess which could be taxed under section 142 of the Act
The Tribunal did not accept this contention
However it stated    it appears to us that the common sense point of view would be that the remittances to British India include both the assessed as well as the exempt profits in the same proportion in which those existed in the Native State  
It therefore appears to us that the correct view would be to apportion the remittances over the assessed and the exempt parts in the same proportion as these existed in the total profits made in the Native State
As such proportion was one third and two thirds the remittances would be similarly split up
Thus 13rd of the remittances has come out of profits assessed under Section 42
On this basis these additions made by the Income Tax Officer and confirmed by the Appellate Assistant Commissioner will have to be reduced by one third of such remittances
 On a reference under section 661 of the Act the High Court by its judgment dated 2271957 found that the facts stated were insufficient and that there was an error appar ent on the face of the question as framed
The High Court accordingly called for a supplementary statement of the case
In its supplementary statement the Tribunal referred the following question 297 Whether on the facts and in the circumstances of the case the sums of Rs50195 for 1945 46 Rs76155 for 1946 47 and Rs600909 for 1947 48 assessments have been rightly in cluded in the assessable income of the applicant under Section 142c of the Indian Income tax Act as profits brought into British India from Indian States The High Court by its judgment dated 751965 rejected the assessee s contention that where there was a mixed fund composed of taxed and non taxed items and a neutral payment was made ie without specifying the exact source of the payment the taxing authorities in the absence of any evidence to the contrary had to proceed on the basis that the payment was made out of that part of the mixed fund which had already borne tax
The High Court however ob served   in this case the assessee did not have two funds but only one fund composed of taxed and non taxed amounts and as one third of the entire amount of profits made by the assessee in the Indian States had been subjected to tax the income tax authorities took a reasonable view in excluding one third of the remitence to British India from taxation in each year
There were sufficient profits in each year out of which remittance could be made even after deduction of the portion which had been taxed   
In the result the question referred was answered by the High Court against the assessee
Hence the present appeals
If there were two funds at the disposal of the assessee one upon which tax had been already levied and another which was liable to be brought to tax a presump tion in the absence of evidence to the contrary might arise that the remittance made by the assessee in the course of its business was made out of the fund that was already taxed and not out of the fund that remained to be taxed
See Meyyappa Chettiar vs The Commissioner of Income Tax  45
That was apparently not the case here for on the facts found the assessee did not have two funds but only one fund composed of taxed and non taxed amounts
As one third of this amount had already been taxed under sec tion 423 of the Act 13rd of the remittances to British India in a particular year was held to be exempted from levy
Relying on the principle referred to in Paton As Pen ton s Trustee vs CommissiOners of Inland Revenue 21 Tax Cases 626 Dr 298 B Sen on behalf of the assessee however submits that where there was a mixed fund as in the present case con sisting partly of taxed and partly of untaxed monies any remittance made should be deemed to have been paid out of that part of the money which had suffered tax
It is a right of the tax payer to attribute the payment to the taxed money so as to obtain the benefit allowed by the law
Lord Wright MR in Paton As Penton s Trustee vs Commissioners of Inland Revenue 21 Fax Cases 626 at 639 referring to the right of the tax payer to attribute payment to taxed monies stated    in the ordinary course a person paying interest does not generally appropriate the payment to income or to any particular piece of income or any specific asset he has the general body of available funds say his banking ac count if he has only one and he pays by drawings on that account
which may include income borrowed money capital and so forth
This is what is meant by payment out of a mixed fund or payments made out of the general till or payments made neutrally
The Revenue authorities have no right in such cases to appropriate those payments to non taxable rather than taxable moneys
Hence the taxpayer is given the right of attribution in the way most favourable to himself It is presumed in the absence of evidence to the contrary that payments are made out of income
This principle of attribution is no doubt applicable in certain circumstances such as those narrated by Lord Wright in Paton supra although in that case on the facts found the principle was not applied
Whether that principle is applicable in a particular case depends upon the facts of that case and the provisions of the statute
The abstract principle of attribution which is applicable in certain circumstances can be adopted only to the extent that it is consistent with the law and facts
It is well to recall    there is no room for any intendment there is no equity about a tax there is no presumption as to a tax you read nothing in you imply nothing but you look fairly at what is said and at what is said clearly and that is the tax
Per Rowlatt J The Cape Brandy Syndicate vs The Com 299 missioners of Inland Revenue 12 Tax Cases 359366
The view taken by the Tribunal with reference to the facts found and the provisions of the statute was in our opin ion reasonable
It was so found by the High Court
In the circumstances we hold that the Tribunal having excluded 13rd of the remittances to British India from taxation during a particular year the High Court was justi fied in refusing to grant any further relief to the asses see
Accordingly we see no merit in these appeals and they are dismissed with costs throughout
NPV Appeals dis missed


Summary:
A settlement was arrived at on 2221972 between the Rajasthan State Electricity Board and the Union representing its employees
In pursuance of this settlement notification dated 2231972 was issued revising the pay scales of var ious categories of posts effective from 1st April 1969
As per the settlement Meter ReaderMeter Checker was mentioned under scale No 3
On December 2 1972 a Second Settlement was entered into between the parties with a view to removing certain ambigui ties in the earlier settlement
In this second Settlement notified on 6121972 it was agreed to have two categories of Meter Readers that is Meter Reader IMeter Checker I and Meter Reader IIMeter Checker II
This settlement was made effective wef 141968
Some employees appointed before 6121972 challenged the notification dated 6121972
The learned Single Judge of the High Court allowed the writ petitions and quashed the notification mainly on the ground that the Second Settlement could not have been made as no conciliation proceedings were pending before the second settlement
The Division Bench dismissed the appeal filed by the Board
Accordingly the Board implemented the Judgment of the High Court and issued orders to provide scale No 3 to all the Meter Readers appointed upto 6121972
Brijlal vs Rajasthan State Electricity Board 1979 WLN UC 221 referred to
During this period the State Electricity Board in exercise of the powers conferred by section 79 sub section c and k of the made regulations which are cared Rajasthan State 278 Electricity Board Employees Emoluments Regulations 1978
These Regulations were made applicable retrospectively from 1st April 1974
Under these regulations post of Meter Reader IIMeter Checker II was mentioned in scale No 2
In 1979 an arbitration award was given between the Board and the union under which two categories of Meter ReadersMeter Checkers were again made
Subsequently 35 employees appointed between the period 197279 filed the present writ petitions in the High Court
The stand taken by these employees was that the Notification dated 6121972 had already been quashed by the High Court and as such they were to be governed by the First Settlement dated February 22 1972 in which there was only one category of Meter ReaderMeter Checker to whom pay scale No 3 had been given and as such they were also entitled to pay scale No 3
The High Court allowed the writ petitions and granted pay scale No 3 to all the petitioners
The Division Bench dismissed the special appeal of the Board
The Board has now come before this Court against such employees who were appointed after 141974
The contentions of the Board before this Court were that i even if for arguments  sake the earlier decision given by the High Court may be considered as final that was in respect of the employees who were appointed before 6th December 1972 ii as regards the present employees no benefit could be granted in their case as the First Settle ment itself was to remain in force upto 31st March 1974 iii in any case in the appointment orders of the respond ents it was clearly mentioned that they were appointed as Meter ReaderMeter Checkers Gr
II in the pay scale No 2 and iv under the Rajasthan State Electricity Employees Emoluments Regulations 1978 which were made applicable from 1st April 1974 Meter Reader IIMeter Checker II have been placed in pay scale No 2 and Meter Reader IMeter Checker I have been placed in pay scale No 3
On behalf of the employees respondents it was connected that i though according to Clause IX of the First Settle ment dated 2221972 the settlement was to remain in force till 31st March 1974 yet the same would remain in operation until the expiry of two months from the date on which a notice in writing of an intention to terminate the settle ment was given by one of the parties to the other party or parties to the settlement as provided under sub section 2 of Section 19 of the  ii that an arbitration award was given in 1979 279 between the Board and the employees federation under which two categories of Meter ReadersMeter Checkers were again made and hence all the Meter Readers appointed upto 1979 before the arbitration award were entitled to scale No 3 and iii the contention with regard to the first settlement having come to an end on March 31 1974 as well as the contention raised on the basis of Regulations were rightly negatived by the Division Bench of the High Court as these points were not taken in the writ petitions and were not argued before the learned Single Judge
Allowing the appeals this Court HELD 1 The respondentsemployees in the present case want to take advantage of the First Settlement simply on the ground that it did not make any mention of Meter ReaderMeter Checker Gr
I or II and it simply made mention of Meter ReaderMeter Checker to whom pay scale No 3 was given
The above ambiguity was clarified by an agreement between the Board and the Union representing the employees as early as on 2121972 itself to the effect that Meter ReaderMeter Checker could be placed in two different grades
After this there was no restriction on the Board to make appointment of the Meter Reader Meter Checker in Grade II after 141974
290B C 2 There was clear mention in the appointment orders of the respondents that they were appointed as Meter ReadersMeter Checkers Gr
II in pay scales No 2
Learned Counsel for the respondentsemployees were unable to show that the Board had no power to make such appointments of the Meter ReaderMeter Checker in Gr
290D 3 The Board had already taken the stand that the first settlement was clarified by the second settlement and as such even if the High Court had quashed the second settle ment it was at least a sufficient notice within the meaning of section 192 of the that the Board had terminated the first settlement after 3131974
290E The Life Insurance Corporation of India vs DJ Bahadur 4 The Rajasthan State Electricity Board Emoluments Regulation 1978 made in exercise of the powers conferred by Sec
79 Subsections c and k of the