Appeal No 425 of 1958
Appeal by special leave from the Decision dated October 9 1956 of the Labour Appellate Tribunal of India Bombay in Appeal Bom No 111 of 1956
M C Setalvad Attorney General of India section N Andley J B Dadachanji Rameshwar Nath and P L Vohra for the appellants
M section K Sastri for the respondent
March 15
The Judgment of the Court was delivered by GAJENDRAGADKAR J
This appeal by special leave raises a short question about the construction of the notification No 1131 46 issued by the Government of Bombay on October 4 1952 under section 24 of the Bombay Industrial Relations Act 1946 Bom
11 of 1947 hereinafter called the Act
The respondent 306 who was a stenographer employed by the appellant the Godavari Sugar Mills Ltd at its head office in Bombay was dismissed by the appellant on April 22 1955
He had been working as a stenographer for some years past on a salary of Rs 135 plus Rs 27 as dearness allowance
He was charged with having committed acts of disobedience and insubordination and after a proper enquiry where he was given an opportunity to defend himself he was found guilty of the alleged misconduct that is why his services were terminated  that is the appellant s case
The respondent challenged the legality and propriety of his dismissal by an application before the Labour Court at Bombay he purported to make this application under section 424 read with section 78 1 a i and iii of the Act
The appellant in reply challenged the competence of the application on the ground that the Act did not apply to the respondent s case and so the Labour Court had no jurisdiction to entertain it
Both the parties agreed that the question of jurisdiction thus raised by the appellant should be tried as a preliminary issue and so the Labour Court considered the said objection and upheld it
It held that the notification in question on which the respondent relied did not apply to the head office of the appellant at Bombay accordingly the Labour Court dismissed the respondent s application
The respondent challenged the correctness of this decision by preferring an appeal before the Industrial Court
His appeal however failed since the Industrial Court agreed with the Labour
Court in holding that the notification did not apply to the head office of the appellant
The matter was then taken by the respondent before the Labour Appellate Tribunal and this time the respondent succeeded the Labour Appellate Tribunal having held that the notification applied to the head office and that the respondent was entitled to claim the benefit of the provisions of the Act
On this finding the Labour Appellate Tribunal set aside the order passed by the courts below and remanded the case to the Labour Court for disposal on the merits in accordance with law
It is this order which has given rise to the present appeal and the only question which it 307 raises for our decision is whether the notification in question applies to the head office of the appellant at Bombay
The Act has been passed by the Bombay Legislature in order to regulate relations of employers and employees to make provision for settlement of indus trial disputes and to provide for certain other purposes
It has made elaborate provisions in order to carry out its object and has conferred some benefits on the employees in addition to those which have been conferred on them by the Central Industrial Disputes Act XIV of 1947
Under section 424 of the Act for instance an employee desiring a change in respect of any order passed by the employer under standing orders can make an application to the Labour Court in that behalf subject to the proviso which it is unnecessary to set out
Section 781aiii requires the Labour Court to decide whether any change made by an employer or desired by an employee should be made
An order of dismissal passed by an employer can therefore be challenged by the employee directly by an application before the Labour Court under the Act whereas under the Central Act a complaint against wrongful dismissal can become an industrial dispute only if it is sponsored by the relevant union or taken up by a group of employees and is referred to the industrial tribunal for adjudication under section 10 of the Act Since the respondent claims a special benefit under the Act he contends that his case falls under the notification
It is common ground that if the notification applies to the case of the respondent the application made by him to the Labour Court would be competent and would have to be considered on the merits on the other hand if the said notification does not apply then the application is incompetent and must be dismissed in limine on that ground
Let us now read the notification
It has been issued by the Government of Bombay in exercise of the powers conferred on it by section 2 sub section
4 of the Act and in supersession of an earlier notification and it provides that  the Government of Bombay is pleased to direct that all the provisions of the said Act shall 308 apply to the following industry viz the manufacture of sugar and its by products Including 1 the growing of sugarcane on farms belonging to or attached to concerns engaged in the said manufacture and 2 all agricultural and industrial operations connected with the growing of sugarcane or the said manufacture engaged in such concerns
Note For the purposes of this notification all service or employment connected with the conduct of the above industry shall be deemed to be part of the industry when engaged in or by an employer engaged in that industry 
It is significant that the notification applies not to sugar industry as such but to the manufacture of sugar and its by products
If the expression  sugar industry  had been used it would have been possible to construe that expression in a broader sense having regard to the wide definition of the word  industry  prescribed in section 219 of the Act but the notification has deliberately adopted a different phraseology and has brought within its purview not the sugar industry as such but the manufacture of sugar and its by products
Unfortunately the Labour Appellate Tribunal has read the notification as though it referred to the sugar industry as such
That is a serious infirmity in the decision of the Labour Appellate Tribunal
Besides the inclusion of the two items specified in cls
1 and 2 is also significant
Section 219bi shows that  industry  includes agriculture and agricultural operations
Now if the manufacture of sugar and its by products had the same meaning as the expression sugar industry then the two items added by cls
1 and 2 would have been included in the said expression by virtue of the definition of  industry  itself and the addition of the two clauses would have been superfluous
The fact that the two items have been included specifically clearly indicates that the first part of the notification would not have applied to them and it is with a view to extend the scope of the said clause that the inclusive words introducing the two items have been used
This fact also shows the limited interpretation which must be put on the words  the manufacture of sugar and its by products 309 It is true that the note added to the notification purports to include within the scope of the notification some cases of service and employment by the deeming process
Unfortunately the last clause in the note is unhappily worded and it is difficult to understand what exactly it was intended to mean
Even so though by the first part of the note some  kinds of service or employment are deemed to be part of the industry in question by virtue of the fact that they are connected with the conduct of the said industry the latter part of the note requires that the said service or employment must be engaged in that industry
It is possible that the workers engaged in manuring or a clerk in the manure depot which is required to issue manure to the agricultural farm which grows sugarcane may for instance be included within the scope of the notification by virtue of the note but it is difficult to see how the respondent who is an employee in the head office at Bombay can claim the benefit of this note
The addition made by the deeming clause on the strength of the connection of certain services and employments with the conduct of the industry is also controlled by the requirement that the said services or employments must be engaged in that industry so that connection with the industry has nevertheless to be established before the note can be applied to the respondent
It has been urged before us by Mr Sastri for the respondent that at the head office there is accounts department the establishment section stores purchase section and legal department and he pointed out that the machinery which is purchased for the industry is landed at Bombay received by the head office and is then sent to the factories
In fact the factories and the offices attached to them are situated at Lakshmiwadi and Sakharwadi respectively and are separated by hundreds of miles from the head office at Bombay
The fact that the machinery required at the factories is received at the head office and has to be forwarded to the respective factories cannot in our opinion assist the respondent in contending that the head office itself and all the employees engaged in it fall within the note to the notification
The object of the 40 310 notification appears to be to confine its benefit to service or employment which is connected with the manufacture of sugar and its by products including the two items specified in cl
1 and cl
2 Subsidiary services such as those we have indicated are also included by virtue of the note but in our opinion it is difficult to extend the scope of the notification to the head office of the appellant
We must accordingly hold that the Labour Appellate Tribunal erred in law in holding that the case of the respondent was governed by the notification
Incidentally we would like to add that the registrar appointed under section 11 of the Act has consistently refused to recognise the staff of the head office as coming under the notification and it is common ground that the consistent practice in the matter so far is against the plea raised by the respondent
It is perfectly true that in construing the notification the prevailing practice can have no relevance but if after construing the notification we come to the con clusion that the head office is outside the purview of the notification it would not be irrelevant to refer to the prevailing practice which happens to be consistent with the construction we have placed on the notification
It appears that in the courts below reference was made to a similar notification issued in respect of textile industry under section 2 sub section
3 of the Act and the relevant decisions construing the said notification were cited
We do not think any useful purpose will be served by considering the said notification and the decisions thereunder
In the result the appeal is allowed the order passed by the Labour Appellate Tribunal is set aside and the respondent s application is dismissed
There will be no order as to costs
Appeal allowed


Summary:
The appellant was the administrator of the estate of one Henry Gannon a resident of British India who left for the United Kingdom in 1944 and died there in 1945
In the course of administration the appellant sold certain shares and securities belonging to the deceased for the purpose of distributing the assets amongst the legatees and thereby realised more than their cost prime
The excess of sale price over the cost price was treated by the Income tax Officer as capital gain under section 12 B 168 of the Income tax Act and the appellant was assessed to tax on such capital gain for the assessment years 1947 48 and 1948 49
The appellant contended that there had been a distribution of capital assets by him under the will of Henry Gannon and therefore he came under the protection of the third proviso to section 12B1 and was not liable to tax
Held that the appellant was not protected by the third proviso to section 12B1 as the expression  distribution of capital assets  in that proviso meant distribution in specie and not distribution of sale proceeds of the capital assets
So long as there was distribution of the capital assets in specie and there was no sale there was no transfer for the purposes of section 12B but as soon as there was a sale of the capital assets and profits or gains arose therefrom the liability to tax also arose whether the sale was by the administrator or by the legate
Sri Kannan Rice Mills Ltd vs Commissioner of Income tax Madras  Commissioner of Income tax Bombay North vs Walji Damji and Gowri Tile Works vs Commissioner of Income tax Madras  referred to