ON Civil Appeal No 340 of 1957
Appeal from the judgment and order dated November 29 1954 of the Hyderabad High Court in Reference No 2345 of 1953 54
K N Rajagopala Sastri B H Dhebar and D Gupta for the appellant
48 378 A V Viswanatha Sastri P Rama Reddy and R Mahalinga Iyer for the respondents
March 20
The Judgment of Bhagwati and Sinha JJ was delivered by Bbagwati J Kapur J delivered a separate Judgment
BHAGWATI J
This appeal with a certificate from the High Court of Judicature at Hyderabad raises the question whether the sum of Rs 219343 received by the assessee in the year of account relevant for the assessment year 1951 52 was a revenue receipt or a capital receipt
The facts leading up to this appeal may be shortly stated  The assessee is a registered firm consisting of five brothers and the wife of a deceased brother having equal shares in the profit and loss of the partnership
The firm was appointed the sole selling agents and sole distributors for the Hyderabad State for the cigarettes manufactured by Ms Vazir Sultan Tobacco Co Ltd under the terms of a resolution of the Board of Directors dated January 6 1931
 Mr Baker reported that an arrangement had been come to for the time being whereby the firm of Vazir Sultan  Sons were given the distributorship of  Charminar  Cigarettes within the H E H the Nizam s Dominions and that they were allowed a discount of 2 on the gross selling price No written agreement was entered into between the Company and the assessee in respect of the above mentioned arrangement nor was there any correspondence exchanged between them in this behalf
In 1939 another arrangement was arrived at between the assessee and the company whereby the assessee was given a discount of 2 not only on the goods sold in the Hyderabad State but on all the goods sold in the Hyderabad State and outside Hyderabad State
It does not appear that the Board of Directors passed any resolution in support of this new arrangement nor was any agreement drawn up between the parties incorporating the said new ar rangement
379 On June 16 1950 the Board of Directors passed the following resolution reverting to the old arrangement embodied in the resolution dated January 61931  The Chairman having referred to resolution No 24 passed at the board meeting held on 6 1 31 and having reported that Vazir Sultan  Sons had agreed to revert to the arrangement outlined in that resolution with effect from 1 6 50 it was on the proposition of Mr section N Bilgrami seconded by Mr N B Chenoy resolved that payment of the sum of O section Rs 226263 be made to Vazir Sultan  Sons by way of compensa tion Vazir Sultan  Sons to pay D B Akki  Co out of that amount the sum of O section Rs 6920 also by way of compensation
Mr Mohd Sultan  Mr Hameed Sultan stated that as partners in the firm of Vazir Sultan  Sons they did not take part in this resolution although they had accepted on behalf of Vazir Sultan  Sons the terms thereof
 The sum of Rs 219343 was accordingly received by the assessee in the year of account 1359 F
The Income tax Officer included this sum in the assessee s total income and taxed it as a revenue receipt
On appeal the Appellate Assistant Commissioner held that the sum of Rs 219343 was not a revenue receipt but a capital receipt being compensation for the loss of the agency and as such not liable to tax
The Income tax Officer C Ward Hyderabad thereupon preferred an appeal to the Income tax Appellate Tribunal Bombay which held that the said sum received by the assessee was a revenue receipt and liable to tax
The assessee then applied to the Appellate Tribunal for a reference to the High Court under sec
661 of the Income tax Act and the Tribunal accordingly referred the following question of law to the High Court  Whether the sum of O section Rs 219343 received by the assessee Firm from Vazir Sultan Tobacco Co Ltd is a revenue receipt or a capital receipt  The High Court answered the question in favour of the assessee stating the question in a different form viz 380  Whether the sum of O section Rs 219343 received by the assessee firm from Vazir Sultan Tobacco Co Ltd is liable to be taxed under the Indian Incometax Act The appellant thereafter applied to the High Court for a certificate of fitness which was granted by the High Court on February 21 1955 and hence this appeal
The question that falls to be determined is whether the sum which was in express terms of the resolution mentioned by way of  compensation  for the loss of the agency was a revenue receipt trading receipt or an income receipt as contended by the Revenue or a capital receipt as contended by the assessee
It was urged on behalf of the appellant that the sole selling agency which was granted by the Company to the assessee in the year 1931 was merely expanded as regards territory in 1939 and what was done in 1951 was to revert to the old arrangement and the structure or the profit making apparatus of the assessee s business was not affected thereby
The expansion as well as the restriction of the assessee s territory were in the ordinary course of the assessee s business and were mere accidents of the business which the assessee carried on and the sum of Rs 219343 received by the assessee as and by way of compensation for the restriction of the territory was a trading or an income receipt and was therefore liable to tax
It was on the other hand contended on behalf of the assessee that it did not carry on business of acquiring and working agencies that the agency acquired in 1931 was a capital asset of the assessee s business of distributing Charminar cigarettes in the Hyderabad State that the expansion of territory outside the Hyderabad State in 1939 was an accretion to the capital asset already acquired by the assessee that the resolution of 1950 was in substance a termination or cancellation of the agency qua territory outside the Hyderabad State and resulted in the sterilisation of the capital asset qua that territory that the sum of 381 Rs 219343 received by the assessee in the year of account was by way of compensation for the termination or cancellation of the agency outside Hyderabad State and being therefore compensation for the sterilisation pro tanto of a capital asset of the assessee s business was a capital receipt and was therefore not liable to tax
The question whether a particular receipt is a revenue receipt or a capital receipt or a particular expenditure is a capital expenditure or a revenue expenditure is beset with considerable difficulty and one finds the Revenue and the assessee ranged on different sides taking up alternate contentions as it suits their purposes
As was observed by Lord Macmillan in Van Den Berghs Limited vs Clark1   The reported cases fall into two categories those in which the subject is found claiming that an item of receipt ought not to be included in computing his profits and those in which the subject is found claiming that an item of disbursement ought to be included among the admissible deductions in computing his profits
In the former case the Crown is found maintaining that the item is an item of income in the latter that it is a capital item
Consequently the argumentative position alternates according as it is an item of receipt or an item of disbursement that is in question and the taxpayer and the Crown are found alternately arguing for the restriction or the expansion of the conception of income
 The question has therefore to be dealt with irrespective of the one stand or the other which is taken by the Revenue or the assessee and the Court has got to determine what is the true character of the receipt or the expenditure
In the case of the Commissioner of Income tax and Excess Profits Tax Madras vs The South India Pictures Ltd Karaikudi 2 this Court endorsed the following statement of Lord Macmillan in Ven Den Berghs Ltd vs Clark 1  That though in general the distinction between an income and a capital receipt was well recognised 1   429
2   228
382 and easily applied cases did arise where the item lay on the border line and the problem had to be solved on the particular facts of each case
No infallible criterion or test can be or has been laid down and the decided cases are only helpful in that they indicate the kind of consideration which may relevantly be borne in mind in approaching the problem
The character of the payment received may vary according to the circumstances
Thus the amount received as consideration for the sale of a plot of land may ordinarily be a capital receipt but if the business of the recipient is to buy and sell lands it may well be his income
 While considering the case law it is necessary to bear in mind that the Indian Income tax Act is not in pari materia with the British Income Tax statutes it is less elaborate in many ways subject to fewer refinements and in arrangement and language it differs greatly from the provisions with which the courts in England have had to deal
Little help can therefore be gained by attempting to construe the Indian Income tax Act in the light of decisions bearing upon the meaning of the Income tax legislation in England
But on analogous provisions fundamental concepts and general principles unaffected by the specialities of the English Income tax statutes English authorities may be useful guides
Vide the observations of the Privy Council in the Commissioner of Income tax vs Shaw Wallace  Co 1 Gopal Saran Narain Singh vs Commissioner of Income tax 2 Commissioner of Income tax Bombay Presideney and Aden vs Chunnilal B Mehta 3  and Raja Bahadur Kamakshya Narain Singh of Ramgarh vs C I T Bihar  Orissa 4
Before embarking upon a discussion of the principles emerging from the various decisions bearing upon this question it is necessary to advert to an argument which was addressed to us by the learned counsel for the appellant in connection with the Privy Council decision in the Commissioner of Income tax vs Shaw Wallace  Co 1
That case was relied upon by the 1 1932 LR 59 IA 206 212
2 1935 LR 62 IA 207 214
3 1938 LR 65 I A 332 349
4 1943 LR 70 IA 180 188
383 Appellate Assistant Commissioner and the High Court as determinative of the question in favour of the assessee and it was strenuously urged before us on behalf of the Revenue that the authority of that decision was considerably shaken not only by the later privy Council decision in Raja Bahadur Kamakshya Narain Singh vs C I T Bihar and Orissa 1 but also by a decision of this Court in Raghuvansi Mills Ltd vs Commissioner of Income tax Bombay City 2
It may be remembered that the term  income was understood by their Lordships of the Privy Council in Shaw Wallace s Case3 to connote a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources
The source may not necessarily be one which is expected to be continuously productive but it must be one whose object is the production of a definite return excluding anything in the nature of a mere windfall
Income was thus likened pictorially to the fruit of a tree or the crop of a field lbid p 212
This concept of  income  was adopted and in substance repeated by the Privy Council in Gopal Saran Narain Singh s Case 4 at p 213 though Lord Russell of Killowen pronouncing the opinion of the Privy Council pithily remarked that anything which can properly be described as income is taxable under the Act unless properly exempted
The case of Raja Bahadur Kama kshya Narain Singh 1struck a discordant note and Lord Wright delivering the opinion of the Board observed at p 192 that it was not in their Lordships  opinion correct to regard as an essential element in any of these or like definitions a reference to the analogy of fruit or increase or sowing or reaping or periodical harvests and that such picturesque similes cannot be used to limit the true character of income in general
Lord Wright further observed at p 194  Its applicability may in particular cases differ because the circumstances though similar in some respects may be different in others
Thus the profit realised on a sale of shares may be capital if the seller 1 1943 LR 70 IA 180 188
2 1953 SCR 177
3 1932 LR 59 I A 206 212
4 1935 LR 62 IA 207 2I4
384 is an ordinary investor changing his securities but in some instances at any rate it may be income if the seller of the shares is an investment or an insurance company
Income is not necessarily the recurrent return from a definite source though it is generally of that character
Income again may consist of a series of separate receipts as it generally does in the case of professional earnings
The multiplicity of forms which  income  may assume is beyond enumeration
Generally however the mere fact that the income flows from some capital assets of which the simplest illustration is the purchase of an annuity for a lump sum does not prevent it from being income though in some analogous cases the true view may be that the payments though spread over a period are not income but instalments payable at specified future dates of a purchase price
Vide Secretary of State for India vs Scoble 1
This Court in Raghuvansi Mill s Case 2 also observed that the definition of  income  in Shaw Wallaces Case 3 as a periodical monetary return coming in with some sort of regularity or expected regularity from definite sources must be read with reference to the particular facts of that case
It was therefore urged on behalf of the Revenue that periodicity or recurring nature of the receipt was not a necessary ingredient of  income  nor was the existence of a material external source capable of producing a recurrent return necessary before a receipt could be treated as income chargeable to tax
We are not unmindful of this criticism of the definition of  income  adopted by the Privy Council in Shaw Wallace  Co s Case 3 and the concept of  income  may have to be thus revised
But even granting the proposition that is contended for by the Revenue the result is no different in the present case because the head of income under which the assessee before us has been assessed to Income tax is  business  a definite source from which the income in question sought to be assessed is alleged to have been 1  2  3 1932 LR 59 IA 206 212
385 derived and whether it is of a recurring or non recurring nature therefore does not enter into the picture
The exemption from liability in regard to that income is claimed by the assessee not on the ground of the applicability of section 43vii of the Income tax Act but on the ground that it is not a revenue receipt but a capital receipt being compensation paid by the Company to the assessee for the termination or cancellation of the agency qua territory outside Hyderabad State a capital asset of the assessee s business
What then are the considerations which have to be borne in mind in determining these vexed questions  The distinction between a capital expenditure and a revenue expenditure came up for consideration before this Court in Assam Bengal Cement Co Ltd vs The Commissioner of Income tax West Bengal 1 and this Court laid down certain criteria for the determination as to whether a particular expenditure incurred by the assessee was a capital expenditure or a revenue expenditure
We need not therefore discuss that problem any further
As to whether a particular receipt in the hands of an assessee is a capital receipt or a revenue receipt we had occasion to consider the same in the Commissioner of Income tax and Excess Profits Tax Madras vs The South India Pictures Ltd Karaikudi 2
The assessee there carried on the business of distribution of films
In some instances the assessee used to produce or purchase films and then distribute the same for exhibition in different cinema halls and in other cases used to advance monies to producers of films produced with the help of monies so advanced
In the course of such business it advanced monies to the Jupiter Pictures for the production of these films and acquired the rights of distribution of the three films under three agreements in writing dated September 1941 July 1942 and May 1943
In the accounting year ending March 31 1946 and in the previous years the assessee had exploited its rights of distribution of the three pictures
On October 31 1945 the 1 2   228 49 386 assessee and the Jupiter Pictures entered into an agreement cancelling the three agreements relating to the distribution rights in respect of the three films and in consideration of such cancellation the assessee was paid Rs 26000 in all by the Jupiter Pictures as compensation
It was held by the Majority of this Court that the sum received by the assessee was a revenue receipt and not a capital receipt assessable under the Indian Income tax Act inasmuch as 1 the sum paid to the assessee was not truly compensation for not carrying on its business but was a sum paid in the ordinary course of business
to adjust the relation between the assessee and the producers of the films 2the agreements which were cancelled were by no means agreements on which the whole trade of the assessee had for all practical purposes been built and the payment received by the assessee was not for the loss of such a fundamental asset as was the ship managership of the assessee in Barr Crombie  Co Ltd vs Commissioners of Inland Revenue 1 and 3one could not say that the cancelled agreements constituted the framework or whole structure of the assessee s profit making apparatus in the same sense as the agreement between the two margarine dealers in Van Den Berghs Ltd vs Clark 2 was
The criteria laid down by the majority judgment for determining whether the particular payment received by the assessee was income or was to be regarded as a capital receipt were iwhether the agreements in question were entered into by the assessee in the course of carrying on its business of distribution of films and ii whether the termination of the agreements in question could be said to have been brought about in the ordinary course of business so that money received by the assessee as a result of or in connection with such termination of agreements could be regarded as having been received in the ordinary course of its business and therefore a trading receipt
1 2   429
387 A similar question arose in Commissioner of Incometax Nagpur vs Rai Bahadur Jairam Valji1 where this Court followed the same line of reasoning
The question there related to a sum of Rs 250000 received by the assessee as damages or compensation for the premature termination of a contract dated May 9 1940
The High Court on a reference under section 661 of the Income tax Act had held that the sum was a capital receipt in the hands of the assessee and as such not liable to be taxed
It was contended on behalf of the Revenue that the contract dated May 9 1940 was one entered into by the assessee in the ordinary course of his business that the sum of Rs 250000 was paid admittedly as solatium for the cancellation of that contract and that it was therefore a revenue receipt
The assessee on the other hand contended that the contract dated May 9 1940 was for a period of 25 years of which more than 23 years had still to run at the time of the settlement and it was therefore capital in character
Moreover the true character of the agreement was that it brought into existence an arrangement which would enable him to carry on a business and was not itself any business and any payment made for the termination of such an agreement was a capital receipt
This Court on the facts and circumstances of the case came to the conclusion that the contract in question was entered into by the assessee in the ordinary course of business and was one entered into in the carrying on of that business
The arrangement ultimately entered into between the parties in regard to the payment of the said sum of Rs 250000 was accordingly treated as an adjustment made in the ordinary course of business and the receipt was therefore held to be an amount paid as solatium for the cancellation of a contract entered into by a person in the ordinary course of business
In the course of the discussion reference was made to agency agreements and this Court observed In an agency contract the actual business consists in the dealings between the principal and his 1 1959 Supp 1 SCR 110  163
388 customers and the work of the agent is only to bring about that business
In other words what he does is not the business itself but something which is intimately and directly linked up with it
It is therefore possible to view the agency as the apparatus which leads to business rather than as the business itself on the analogy of the agreements in Van Den Berghs Ltd vs Clark 1
Considered in this light the agency right can be held to be of the nature of a capital asset invested in business
But this cannot be said of a contract entered into in the ordinary course of business
Such a contract is part of the business itself not anything outside it as is the agency and any receipt on account of such a contract can only be a trading receipt
 This Court further emphasised the distinction between an agency agreement and a contract made in the usual course of business and pointed out that the agreement could in any event be regarded as a capital asset of the agent which would be saleable
Such a concept would certainly be out of place with reference to a contract entered into in the course of business and any payment made for the non performance or cancellation of such a contract could only be damages or Compensation and could not in law or fact be regarded as an assignment of the rights under the contract
Once it was found that the contract was entered into in the ordinary course of business any compensation received for its termination would be a revenue receipt irrespective of whether its performance was to consist of a single act or a series of acts spread over a period
While thus indicating that an agency could be treated as a capital asset of the business this Court guarded itself against its being understood as deciding that the compensation paid for cancellation of an agency contract must always and as a matter of law be held to be a capital receipt and it made the following pertinent observations   Such a conclusion will be directly opposed to the decision in Kelsall s case 2 and the Commissioner 1  429
2  389 of Income tax and Excess Profits Tax Madras vs The South India Pictures Ltd Karaikudi 1
The fact is that an agency contract which has the character of a capital asset in the hands of one person may assume the character of a trading receipt in the hands of another as for example when the agent is found to make a trade of acquiring agencies and dealing with them
The principle was thus stated by Romer L J in Golden Horse Shoe New Ltd vs Thurgood 2  The determining factor must be the nature of the trade in which the asset is employed
The land upon which a manufacturer carries on his business is part of his fixed capital
The land with which a dealer in real estate carries on his business is part of his circulating capital
The machinery with which a manufacturer makes the articles that he sells is part of his fixed capital
The machinery that a dealer in machinery buys and sells is part of his circulating capital as is the coal that a coal merchant buys and sells in the course of his trade
So too is the coal that a manufacturer of gas buys and from which he extracts his gas
Therefore when a question arises whether a payment of compensation for termination of an agency is a capital or a revenue receipt it would have to be considered whether the agency was in the nature of capital asset in the hands of the assessee or whether it was only part of his stock in trade
Thus in Barr Crombie  Sons Ltd vs Commissioners of Inland Revenue 3 the agency was found to be practically the sole business of the assessee and the receipt of compensation on account of it was accordingly held to be a capital receipt while in Kelsall s case the agency which was terminated was one of several agencies held by the assessee and the compensation amount received therefor was held to be a revenue receipt and that was also the case in the Commissioner of Income tax and Excess Profits Tax Madras vs The South India Pictures Ltd Karaikudi 1
 We may in this context also note the further observations made by this Court 1  228 2  300
3 390 But apart from these and similar instances it might in general be stated that payments made in settlement of rights under a trading contract are trading receipts and are assessable to revenue
But where a person who is carrying on business is prevented from doing so by an external authority in the exercise of a paramount power and is awarded compensation therefor whether that receipt is a capital receipt or a revenue receipt will depend upon whether it is compensation for injury inflicted on a capital asset or on a stock in trade
The decision in the Glenboig Union Fireclay Co Ltd vs The Commissioners of Inland Revenue 1 applies to this category of cases
There the assessee was carrying on business in the manufacture of fire clay goods and had for the performance of that business acquired a fire clay field on lease
The Caledonian Railway which passed over the field prohibited the assessee from excavating the field within a certain distance of the rails and paid compensation therefor in accordance with the provisions of a statute
It was held by the House of Lords that this was a capital receipt and was not taxable on the ground that the compensation was really the price paid  for sterilising the asset from which otherwise profit might have been obtained
 That is to say the fire clay field was a capital asset which was to be utilised for the carrying on of the business of manufacturing fire clay goods and when the assessee was prohibited from exploiting the field it was an injury inflicted on his capital asset
Where however the compensation is referable to injury inflicted on the stock in trade it would be a revenue receipt
Vide the Commissioners of Inland Revenue vs Newcastle Breweries Ltd 2
 It is no doubt true that this Court was not concerned with any agency agreement in the last mentioned case and the observations made by this Court there were by way of obiter dicta
The obiter dicta of this Court however are entitled to considerable weight and we on our part fully endorse the same
The earlier case of Commissioner of Income tax and Excess Profits Tax 1 2 391 Madras vs The South India Pictures Ltd 1 was indeed a case where the assessee had entered into agency agreements for the exploitation of the three films in question but in that case the conclusion was reached that entering into such agency agreements for acquiring the films was a part of the assessee s business and the agreements in question having been entered into by the assessee in the ordinary course of business the cancellation of those agreements was also a part of the assessee s business and was resorted to in order to adjust the relation between the assessee and the producer of those films
It would not be profitable to review the various English decisions bearing on this question as they have been exhaustively reviewed in the above decisions of this Court
The position as it emerges on a consideration of these authorities may now be summarised
The first question to consider would be whether the agency agreement in question for cancellation of which the payment was received by the assessee was a capital asset of the assessee s business constituted its profit making apparatus and was in the nature of its fixed capital or was a trading asset or circulating capital or stock in trade of his business
If it was the former the payment received would be undoubtedly a capital receipt if however the same was entered into by the assessee in the ordinary course of business and for the purpose of carrying on that business it would fall into the latter category and the compensation or payment received for its cancellation would merely be an adjustment made in the ordinary course of business of the relation between the parties and would constitute a trading or a revenue receipt and not a capital receipt
We may perhaps appropriately refer at this stage to an aspect of this question which was canvassed before us with some force and it was that there was no enforceable agreement as between the assessee and the Company which could be made the subject matter of a legal claim for damages or compensation at his instance in the event of its termination or cancellation by the Company
The agency agreement was 1   228
392 terminable at the will of the Company and if the Company chose to do so the assessee had no remedy at law in regard to the same
It is however to be remembered that in all these cases one has really got to look to the nature of the receipt in the hands of the assessee irrespective of any consideration as to what was actuating the mind of the other party
As Rowlatt J observed in the case of Chibbett vs Joseph Robinson  Sons 1 As Sir Richard Henn Collins said you must not look at the point of view of the person who pays and see whether he is compellable to pay or not you have to look at the point of view of the person who receives to see whether he receives it in respect of his services if it is a question of an office and in respect of his trade if it is a question of trade and so on
You have to look at his point of view to see whether he receives it in respect of those considerations
This is perfectly true
But when you look at that question from what is described as the point of view of the recipient that sends you back again looking for that purpose to the point of view of the payer not from the point of view of compellability or liability but from the point of view of a person inquiring what is this payment for and you have to see whether the maker of the payment makes it for the services and the receiver receives it for the services
 The learned Judge further observed at p 61  But at any rate it does seem to me that compensation for loss of an employment which need not continue but which was likely to continue is not an annual profit within the scope of the Income tax at all See also W A Guff vs Commissioner of Incometax Bombay City 2 where the question whether the amount paid was compensation for which the employer was liable or was a payment made ex gratia was considered immaterial for the purpose of the decision in that case
It was also urged that the agency in question before us was not an enduring asset of the assessee s business as in its very nature it was terminable at will 1  60
2 393 there being no agreement or arrangement for a fixed term between the assessee and the Company
On the analogy of the test laid down by this Court in Assam Bengal Cement Co Ltd vs The Commissioner of Income tax West Bengal 1 while considering the distinction between a capital expenditure and a revenue expenditure it was argued that the agency agreement in question could not be a capital asset of the assessee s business in so far as it was not of an enduring character and the compensation paid for its termination could not therefore be a capital receipt in the hands of the assessee
Whatever be the position however in the case of the acquisition of an asset by the assessee by making a disbursement for the purchase of the same similar considerations would not necessarily operate when the amount is received by the assessee for the termination or cancellation of an asset of his business
The character of such a receipt would indeed have to be determined having regard to the fact whether the asset in question was a capital asset of the business or a trading asset thereof
For this purpose it will be immaterial whether that asset was of an enduring character or was one which was terminable at will
We have therefore got to determine whether the agency in question before us was a capital asset of the assessee s business
One of the relevant considerations in the matter of such determination has been whether the asset was in the nature of fixed capital or constituted the circulating capital or stock in trade of the assessee s business
This question was thus dealt with by Viscount Haldane in John Smith  Sons vs Moore 2   But what was the nature of what the Appellant here had to deal with  He had bought as part of the capital of the business his father s contracts
These enabled him to purchase coal from the colliery owners at what we were told was a very advantageous price about fourteen shillings per ton
He was able to buy at this price because the right to do so was part of the 1 2  282
50 394 assets of the business
Was it circulating capital  My Lords it is not necessary to draw an exact line of demarcation between fixed and circulating capital
Since Adam Smith drew the distinction in the Second Book of his  Wealth of Nations  which appears in the chapter on the Division of Stock a distinction which has since become classical economists have never been able to define much more precisely what the line of demarcation is
Adam Smith described fixed capital as what the owner turns to profit by keeping it in his own possession circulating capital as what he makes profit of by parting with it and letting it change masters
The latter capital circulates in this sense
My Lords in the case before us the Appellant of course made profit with circulating capital by buying coal under the contracts he had acquired from his father s estate at the stipulated price of fourteen shillings and reselling it for more but he was able to do this simply because he had acquired among other assets of his business including the goodwill the contracts in question
It was not by selling these contracts of limited duration though they were it was not by parting with them to other masters but by retaining them that he was able to employ his cir culating capital in buying under them
I am accordingly of opinion that though they may have been of short duration they were none the less part of his fixed capital 
In the case before us the agency agreement in respect of territory outside the Hyderabad State was as much an asset of the assessee s business as the agency agreement within the Hyderabad State and though expansion of the territory of the agency in 1939 and the restriction thereof in 1950 could very well be treated as grant of additional territory in 1939 and the withdrawal thereof in 1950 both these agency agreements constituted but one employment of the assessee as the sole selling agents of the Company
There is nothing on the record to show that the acquisition of such agencies constituted the assessee s business or that these agency agreements were entered into by the assessee in the carrying on of any such business
395 The agency agreements in fact formed a capital asset of the assessee s business worked or exploited by the assessee by entering into contracts for the sale of the  charminar  cigarettes manufactured by the Company to the various customers and dealers in the respective territories
This asset really formed part of the fixed capital of the assessee s business It did not constitute the business of the assessee but was the means by which the assessee entered into the business transactions by way of distributing those cigarettes within the respective territories
It really formed the profit making apparatus of the assessee s business of distribution of the cigarettes manufactured by the Company
If it was thus neither circulating capital nor stock in trade of the business carried on by the assessee it could certainly not be anything but a capital asset of its business and any payment made by the Company as and by way of compensation for terminating or cancelling the same would only be a capital receipt in the hands of the assessee
It would not make the slightest difference for this purpose whether either one or both of the agency agreements were terminated or cancelled by the Company
The position would be the same in either event
As was observed by Lord Wrenbury in the Glenboig Union Fire Clay Co Ltd vs The Commissioners of Inland Revenne 1 at p 465  The matter may be regarded from another point Of view  the right to work the area in which the working was to be abandoned was part of the capital asset consisting of the right to work the whole area demised
Had the abandonment extended to the whole area all subsequent profit by working would of course have been impossible but it would be impossible to contend that the compensation would be other than capital
It was the price paid for sterilising the asset from which otherwise profit might have been obtained
What is true of the whole must be equally true of part
 If both the agency agreements viz one for the territory within the Hyderabad State and the other for the territory outside Hyderabad State had been 1 396 terminated or cancelled on payment of compensation the whole profit making structure of the assessee s business would have been destroyed
Even if one of these agency agreements was thus terminated it would result in the destruction of the profit making apparatus or sterilisation of the capital asset pro tanto and if in the former case the receipt in the hands of the assessee would only be a capital receipt equally would it be a capital receipt if compensation was obtained by the assessee for the termination or cancellation of one of these agency agreements which formed a capital asset of the assessee s business
The facts of the present case are closely similar to those which obtained in the Commissioner of Incometax vs Shaw Wallace  Co 1
In that case also the assessees had for a number of years prior to 1928 acted as distributing agents in India of the Burma Oil Company and the Anglo Persian Oil Company but had no formal agreement with either Company
In or about the year 1927 the two companies combined and decided to make other arrangements for the distribution of their products
The assessee s agency of the Burma Company was accordingly terminated on December 31 1927 and that of the AngloPersian Company on June 30 following
Some time in the early part of 1928 the Burma Company paid to the assessee a sum of Rs 1200000  as full compensation for cessation of the agency  and in August of the same year the Anglo Persian Company paid them another sum of Rs 325000 as  compensation for the loss of your office as agents to the company  On the facts and circumstances of the case the Privy Council came to the conclusion that the sums could only be taxable if they were the produce or the result of carrying on the agencies of the oil companies in the year in which they were received by the assessees
But when once it was admitted that they were sums received not for carrying on that business but as some Sort of solatium for its compulsory cessation the answer seemed fairly plain
Whatever be the criticism in regard to the concept of income adopted in this case noted 1 1932 LR 59 I A 206212
397 earlier in this judgment the decision could just as well be supported on the grounds which we have hereinbefore discussed and was quite correct the payments having been received by the assessees as and by way of compensation for the termination Or cancellation of the agency agreements in question which were in fact the capital assets of the assessee s business
The Appellate Assistant Commissioner as well as the High Court were thus justified in the conclusion to which they came viz that the sum of Rs 219343 received by the assessee from the Company was a capital receipt
The result therefore is that the appeal fails and will stand dismissed with costs throughout
KAPUR J I have had the advantage of perusing the judgment prepared by my learned brother Bhagwati J but with great respect I am unable to agree and my reasons are these
The sole question for determination in this case is as to whether a sum of Rs 226263 received by the assessees from
Vazir Sultan Tobacoo Co Ltd as compensation for the termination of their agency for the distribution of charminar  cigarettes in areas of India other than Hyderabad State is or is not taxable in the hands of the assessees
The answer to this question depends on whether the amount has been received by the assessees as a capital or a revenue receipts
In 1931 the assessees were appointed distributing agents for Hyderabad State only and for the rest of India in 1939 the agency commission in each case being a discount of 2 on the gross selling price
The agency of 1939 was terminated by a resolution dated June 16 1950 on payment of the compensation amount already mentioned but the assessees continued to be distributors for Hyderabad State
It must here be mentioned that the agency in question was terminable at will and that any compensation paid for it would prima facie be revenue
During the accounting year the amount of income profits and gains of the assessees from the cigarette distribution business and from another source i e 398 Acid Factory within the State of Hyderabad was Rs 453159
The order of the Income tax Officer or the Appellate Tribunal does not show bow much of this sum was attributable to the Cigarette distribution business and how much to the other source
There is no finding as to how and to what extent if any the business of the assessees was affected by the cesser of distribution business outside that State
The question now arises did the assessees receive the compensation in lieu of the commission they otherwise might or would have earned if the agreement had continued or did they receive it as compensation for the destruction of a profit making asset
The answer to this question would again be dependent upon whether the receipt in question is attributable to a fixed capital asset or to circulating capital
These two terms have been used in a number of cases but as applied to agencies compensation will be a capital receipt if it is received as the value of the agency ie it is a price of the business as if it is brought to sale
On the other band it is revenue receipt if it is paid in lieu of profits or commission
In Van Den Berghs Ltd vs Clark 1 Lord Macmillan described circulating capital as  capital which is turned over and in the process of being turned over yields profit or loss
Fixed capital is not involved directly in that process and remains unaffected by it 
As was said by Lord Macmillan in the same case it is not possible to lay down any single test as infallible or any single criterion as decisive in the determination of the question
Ultimately it must depend upon the facts of a particular case
The assessees rested then case on the decision of the Privy Council in Commissioner of Income tax vs Shaw Wallace  Co 2 on which the High Court has mainly relied
In that case the assessees carried on business in India as merchants and agents for various companies
They were distributing agents for two on companies
These two agencies were terminated and a sum of Rs 1200000 was paid as compensation for the loss of these agency rights and the question was 1  2 1932 LR 59 IA 206 399 whether this was a capital payment
It was held to be a capital and not a revenue receipt because the sum received was not the result of carrying on the  agencies of the oil companies in other words it could 1 not be regarded as profits or gains from carrying on the business but was received in the nature of a solatium for cessation
The case was decided on the interpretation of the word business  as defined in section 24 of the Income tax Act under which it  includes any trade commerce or manufacture or any adventure or concern in the nature of trade commerce or manufacture 
These words it was held were wide  but underlying each of them is the fundamental idea of the continuous exercise of an activity which was also the idea underlying the relevant words of section 101 of the Act  in respect of the profits or gains of any business carried on by him  i e it is to be the profit earned by a process of production
The test of income was its periodicity because it connotes a periodical monetary return
This test of periodicity was not accepted by the Privy Council itself in Raja Bahadur Kamakshya Narain Singh s case 1
Lord Wright there said  income is not necessarily the recurrent return from a definite source though it is generally so 
The test of periodicity was rejected by this Court in Raghuvanshi Mills Ltd vs Commissioner of Income tax 2 where Bose J said that the remarks of periodical monetary return must be confined to the facts of that case and it was held that money received from an insurance company for insurance against losses was income representing loss of profits as opposed to loss of capital
In a later case The Commissioner of Income tax vs The South India Pictures Ltd 3 it was said that if Shaw Wallace  Co had other agencies similar to those of the two oil companies it would be difficult to reconcile the decision in that case with the later decisions in Kelsall Parsons  Co vs Commissioners of Inland Revenue 4 and other cases Per Das C J
In view of the decision in the South India Pictures  case and the observations of Bose J in the 1 1943 LR 70 IA 180
2   183
3   232
4  400 case of Raghuvanshi Mills Ltd 1 the authority of Shaw Wallace  Co s case 2 must be taken to be considerably shaken
We have then to see how the question has to be determined
Various tests have been laid down in decided cases
According to Lord Cave L C an expenditure made not only once and for all but with a view to bringing into existence an asset or an advantage for the enduring benefit of a trade has been treated as properly attributable to capital and not to revenue
British Insulated Cables 3 
According to Lord Atkinson the word  asset  need not be confined to  something material and Romer L J has added that the advantage paid for need not be of a positive character  and may consist in the getting rid of an item of fixed capital that is of an onerous character Anglo Persian Oil Co vs Dale 4 
If the receipt represents the aggregate of profits which an assesee would otherwise have received over a series of years the lump sum might be regarded as of the same nature as the ingredients of which it was composed  at p 431 5 but it is not necessarily in itself an item of income per Lord Buckmaster in Glenboig Union Fireclay Co 6 
In Van Den Berghs  case 7 there were three agreements between a British and a Dutch company operative till 1940 making it possible for them to carry on their business in friendly alliance  and providing for the sharing of profits in certain proportions
The agreements were terminated in 1927 and the Dutch company paid the English company a sum of pound 450000 as compensation
The question was the charac ter of the receipt whether capital or revenue
It was held by the House of Lords that it was the former because the agreements were not  ordinary commercial contracts in the course of carrying on their trade  they were not contracts for the disposal of their employees or for the engagement of agents or other employees 1   183 2 1932 LR 59 IA 206 3  213 222
4  146 5 Van Den Berghs Ltd v Clark 6 1922 12 Tax Cas
427 464
7  401 for the conduct of their business nor were they merely agreements as to how their trading profits when earned should be distributed as between the contracting parties
On the contrary the agreements related to the whole structure of the recipient s profit making apparatus
They regulated its activities defined what it might or it might not do and affected the whole conduct of its business 
According to Lord Macmillan if the agreements formed the fixed framework within which the circulating capital operated then they are not incidental to the working of its profit making machine but were essential parts of the mechanism itself and therefore they would result in a capital receipt and not revenue receipt
Thus the agreements were designed to ensure that the business was carried on to the best advantage but they did not themselves form part of the business
They were not agreements which must be regarded as pertinent to trading activities which yielded profits
As such the totality of payments on account of those agreements were held to be a capital receipt
The various decided cases demarcate the areas on the two sides of the line in which a receipt may lie and in every case it has to be determined as to whether it falls on one side or the other
The simplest case is of income from property or business as distinct from something received in lieu of property or business itself
One illustration of this is insurance against fire destruction or damage and insurance against loss of profit the former would bring in compensation in the nature of a capital
Another instance is where the whole business is bought over and the receipt is the price of the business itself as opposed to a lump sum payment for the loss of profit calculated on a proper basis
The test of income i e periodicity or recurrence at fixed intervals has been doubted in this Court
Raghuvanshi Mills 1
Another test is afforded by cases of tangible immoveable property
If an owner of such property is paid compensation for not working a part of his property 1   183
51 402 e g a part of the demised premises the compensation is not profit because it is payment for sterilising that part of the asset from which otherwise profit might have been obtained
Glenboig Union Fireclay case 1 at p 464
There is no difference in cases of this kind whether the abandonment extends to the whole area or is circumscribed to a part because in either case it is sterilising an asset from which otherwise profit might have been obtained
 It makes no difference whether it may be regarded as a sale of the asset out and out or it be treated merely as a means of preventing the acquisition of profit that would otherwise be gained
In either case the asset of the company to that extent has been sterilised or destroyed 
Another test is whether the agreement related to the whole structure of recipient s profit making apparatus and affected the whole conduct of his business or was the loss of a part of the fixed framework of the business
If it is it is capital Van Den Bergh s case 2 
But compensation for temporary and variable elements of the recipient s profit making apparatus would be revenue MacDonald s case 3 
If the agreement affects the whole structure and character of the recipient s business then it is capital but not if the structure of the business is so designed as to absorb the shocks as by the cancellation of one agency Kelsall Parson s case4
In Bush Beach and Gent Ltd vs Road5 again the test of how the cancellation of the agreement affected the recipient s business was applied
Barr Crombie s case 6 is a case of capital asset as there the recipient lost his entire business which resulted in reduction of staff salaries and even in office accom modation
The result was the cesser of its trading existence
The transaction took the form of a transfer for a price from one party to another of something that formed part of the enduring asset of one of them
Compensation for the loss of an agency would be for the loss of a capital asset if the termination of the 1  464
2  3 4 1938 21 Tax Cas
5 6 1945 26 Tax Cas
406 403 agency was a damage to the recipient s business structure such as to destroy or materially cripple the whole structure involving serious dislocation of the normal commercial organisation but if it was merely compensation for the loss of trading profit i e in respect of commissions or it took the place of commission that would have been earned if the engagement had continued then it is revenue Wiseburg vs Domville 1
So that the decision as to whether compensation was capital or revenue would depend upon whether the cessation of the agency destroys or materially cripples the whole structure of the recipient s profit making apparatus or whether the loss is of the whole or part of the framework of business
If we apply these tests to the agreement which has been terminated in the present case it does not fall in any of the class of cases of destruction of a capital asset
For the appellant reliance was placed on the observations of Venkatarama Aiyar J in Commissioner of Income tax vs Rai Bahadur Jairam Valji 2 where it was pointed out that in an agency contract the actual business consists in the dealings between the principal and his customers and the work of the agent is only to bring about that business
In other words what the agent does is not business itself but something which is intimately and directly linked with it
But an examination of the context shows that that is not what these observations mean
The point that was to be decided in that case was whether a payment of compensation for the cancellation of a trading contract was a capital or revenue receipt and dealing with decisions relating to the cancellation of agency contracts which were quoted in support of the contention that they were capital the learned Judge_ observed that considerations applicable to agency contracts were inapplicable to trading contracts because the two classes of contracts were essentially different and these differences were there pointed out
The purpose of these observations was to show that receipts from 1 2 1959 SUPP
1 SCR 110  161 163
404 trading contracts were revenue and not that receipts from agency contracts are capital
That that is the true scope of these observations is clear from the following passage In holding that compensation paid on the cancellation of a trading contract differs in character from compensation paid for cancellation of an agency contract we should not be understood as deciding that the latter must always and as a matter of law be held to be a capital receipt
Such a conclusion will be directly opposed to the decisions in Kelsall s case 1 and Commissioner of Income tax vs South India Pictures Ltd 2
The fact is that an agency contract which has the character of a capital asset in the hands of one person may assume the character of a trading receipt in the hands of another as for example when the agent is found to make a trade of acquiring agencies and dealing with them 
The Court there observed that when the assessee holds a number of agencies the compensation paid for cancellation of any of them could be regarded as revenue receipt
This is inconsistent with the conclusion that an agency contract must always be regarded as a capital asset
The learned Judges further observed that they were not elaborating this part as they were there concerned with a trading contract and therefore the statement as to when receipts from agency contracts could be regarded as revenue receipts cannot be read as exhausting the circumstances under which they could be held to be revenue
As a matter of fact there are three kinds of cases of agencies shown by the decided cases 1 Kelsall Parsons case 1 where the recipient was carrying on several agencies and the test laid down was whether the business structure could absorb a shock of the terminate on of one
2 The other is where the compensation is for a temporary and variable element of assessee s profit making apparatus MacDonald s case 3
3 The third class of cases is represented by 1  2   232
3 405 Fleming  Co s case1 where the rights and advantages surrendered were such as to destroy or materially cripple the whole structure of the profit making apparatus
The agencies themselves are of different kinds1 where the agent himself carries on the business and sells the product of the principal and gets commission for it 2 where the agent s function is confined to bringing the principal and the customer together and be gets agency commission for the performance of only that service 3 where the agent is a distributor and distributes the products of the principal through his sub agents and charges commission for the distribution work
Cases 1 and 3 would not strictly fall within the scope of the  observations in Commissioner of Income tax vs R B Jairam Valji 2 and case 2 would fall within the second class of agreements mentioned in Van Den Bergh s case 3
The agreement which is now before us and which was surrendered was terminable at will
The amount of profit which the assessee made from working the agency contract in Hyderabad State alone was much more than the amount which the assees received for the termination of the whole of their agency outside the State
Thus it is clear that the termination did not affect the trading activities of the assessees and therefore the termination of the contract viewed against the background of the assessee s business Organisation and profit making structure appears to be no more than compensation for the loss of future profit and commission
The true effect of the facts of this case appears to be this that in 1939 the assessee s area of distribution was increased from the State of Hyderabad to the whole of India and in 1950 it was again reduced to the original area of 1931
The assessees never lost their agency
As a result of this contraction of area they at the most have lost some agency commission
The compensation therefore was in the nature of surrogatum and in this view of the matter it is revenue and not capital
1 2 1959 Supp 1 SCR 110  161 163
3  406 I would therefore allow this appeal with costs throughout
By COURT In accordance with the majority judgment of the Court the appeal is dismissed with costs throughout
Appeal dismissed


Summary:
The prosecution case was that on 2381981 between 12 30 100 pm on hearing screams and cry of the deceased aged about 18 years PW2 alongwith her father PW3 and PW4 rushed to the house of the appellant They saw the father of appellant No 1 father in law of the deceased alongwith the husband and mother in law of the deceased hurriedly com ing out of the kitchen while the deceased was lying on the floor engulfed in flames
As the appellant No 1 did not respond to the request of PW2 to give her something to extinguish the fire PW2 requested the father of the appellant No 1 to give a bed sheet or blanket while the father of the appellant No 1 was passing on a bed sheet to PW2 the appellant No 2 mother in law of the deceased objected
In the meanwhile PW2 took the bed sheet from the father of the appellant No 1 and tried to extinguish the fire
The deceased asked PW2 for some water
PW3 removed the burning petticoat from the body of the deceased to save her from further burning
While doing so he also received some burn injuries
PW2 poured water into the deceased s mouth and enquired from her as to what had happened
667 The deceased told PW2 that her mother in law had poured kerosene over her and her husband had set fire to her
The deceased asked for more water which was again given to her by PW2
The deceased s statement made to PW2 was overheard by PW3 PW5 and some others who also reached the spot on hearing her cries
PW5 went away to inform the matenal uncle of the deceased with one Ramakrishna on his motor cycle
There PW5 found PW1 the brother of the deceased and informed about the burning of the deceased and also what he had heard the deceased telling PW2
PW1 reached the house of the appellant with Ramakrishna on his motor cycle
He saw a number of persons including PWs 2 and 3 gathered there
The deceased was lying on the floor and she had no clothes on her
PWl noticed that she had received burn injuries from her breasts downwards to her legs
On seeing her plight PWl started crying and hitting his head against a piller
When the deceased noticed PW1 had come she asked PW2 to bring her brother inside
PW2 went out and brought PWI to the kitchen
The deceased took the palm of her brother PWl into her own palms and told him to tell mother and father that her mother in law poured kerosene on her and her husband set her or fire
She requested him that he should not fight anyhow she was dying She also told PWl to take back the cash given to her and to divide it amongst her sisters in equal share and to get them married to nice persons
The appellant No 1 the husband of the deceased came inside the kitchen with folded hands and begged her for forgiveness saying that he would not repeat what he had done
PWI got wild and caught hold of the neck of the appellant No 1
FIW2 and PW3 rushed towards them and released the appellant No 1 from the hold of PW1
They sent PWI to another uncle s house and told the uncle to take care of PW1
When PWI returned to the house of the deceased after one hour he saw that PW6 a local Doctor was giving first aid to the deceased and she was lying on a cot in the verandah
PW6 advised at about 330 pm to remove the deceased to the Government Hospital
The deceased was brought to the hospital at about 5 pm
At about 530 pm PW9 a doctor examined the deceased and declared her dead
PWl along with his uncle went to the Police Station adjacent to the hospital and lodged the FIR
A case under section 302 IPC was registered 668 and police investigation was started
Both the appellants were not found in the village when search for them was made by the investigating officer
The appellant No 1 surrendered in the Court on 10111981 while the appellant No 2 surrendered in the Court on 7121981
The Trial Court held that there was no motive for the appellant to commit the crime that the evidence of PWs 2 to 4 could not be relied upon that PW1 had made improvements in his statements recorded at the trial and therefore the oral dying declaration made to him could not be relied upon
The Trial Court also held that there was unexplained delay in lodging report with the policy
It acquitted the appellants holding that the case was one of suicide and not of murder
The State filed appeal in the High Court
The High Court held that the chain of the established circumstances was complete and the circumstances were sufficient to establish that the appellants alone had committed the crime of murder of the deceased
The High Court convicted both the appellants for the offence under section 30234 IPC and sentenced each one of them to imprisonment for life
Hence this appeal before this Court under section 2a of the 
The appellants contended that since the Trial Court had acquitted the appellants the High Court was not justified in recording an order or conviction as the findings recorded by the Trial Court could not be said to be perverse that the dying declarations were not worthy of reliance and the motive was feeble and not established that the surrendering of the appellants themselves in the court on 10111981 and 7121981 itself was enough to show that they had no guilty conscious and the prosecution was not justified in relying upon this conduct as an adverse conduct against the appellants and that since all neighbors had become hostile out of fear the appellants did not act either to put off the fire or remove the deceased to the hospital
The respondent State submitted that the findings of the Trial Court were not only conjectural but also perverse and the evidence of the wit 669 nesses was disbelieved on mere surmises that the Trial Court didnot properly discuss the two dying declarations made by the deceased and since the dying declarations have been proved by reliable evidence these by themselves could form the basis of conviction of the appellants that the High Court after a careful appraisal of the evidence had rightly set aside the judgment of the Trial Court which suffered from illegality as well as manifest error and perversity and that the prosecution had established the case against the appellants beyond every reasonable doubt and their appeal deserved to be dismissed
Dismissing the appeal this Court HELD101
In a case based on circumstantial evidence the settled law is that the circumstances from which the conclusion of guilt is drawn should be fully proved and these circumstances must be conclusive in nature
Moreover all the established circumstances should be complete and there should be no gap in the chain of evidence
The proved circumstances must be consistent only with the hypothesis of the guilt of the accused alone and totally inconsistent with his innocence
The courts have therefore the duty to carefully scrutinize the evidence and deal with each circumstance carefully and thereafter find whether the chain of the established circumstances is complete or not before passing an order of conviction
679 E F 102In a case based on circumstantial evidence motive assumes great significance as its existence is an enlightening factor in a process of presumptive reasoning
The motive in this case is alleged to be the greed of dowry
679 H 103The evidence led by the prosecution to establish the existence of motive is wholly reliable and is also consistent
The prosecution has successfully established that the appellants had strong and compelling motive to commit the crime because of her parents not agreeing to get the land registered in the name of the first appellant and their insistence to have the land registered in the name of their own daughter instead
The motive has been conclusively established by the prosecution
682 D 104Both the dying declarations are oral
They have been made to friends and to the brother of the deceased respectively
In view of the close relationship of the witnesses to whom the oral dying declarations were 670 made it becomes necessary for the court to carefully scruitinize and appreciate the evidence of the witnesses to the dying declarations 683
B 105PW1 is the brother of the deceased and therefore a very close relation but mere relationship cannot be a ground to discard his testimony if it is otherwise found to be reliable and trustworthy
In the natural course of events the deceased who was on the verge of her death would have conveyed to her near and dear ones the circumstances leading to her receiving the burn injuries
PW1 has given a very consistent statement and has reproduced the words of the deceased clearly and truthfully
Nothing has been brought out in the cross examination to discredit his testimony at all
683 C D 16Despite searching cross examination of both PW2 and PW3 nothing has been brought out in their cross examination to discredit them or doubt their veracity at all
After carefully analysing their evidence it is found that PWs 2 and 3 as witnesses worthy of credence and trustworthy684 F 107From the evidence of PWs 12 and 3 both the dying declarations are provedto have been made by the deceased
They are the statements made by thedeceased and relate to the circumstances leading to her death
Both the dying declarations are consistent with each other and appear to have been made by the deceased voluntarily and in the natural course of events
They have a ring of truth about them
684 G 108The medical evidence fully corroborates the prosecution case and lendssupport to the dying declaration and more particularly the manner inwhich the deceased had been set on fire686 D 109The normal human conduct of any person finding someone engulfed in flames would be to make all efforts to put off the flames and
save the life of the person
Though the appellants were the closest relations of the deceased they did not do anything of the kind
They rendered no first aid to the deceased
Their conduct at the time of the occurrence therefore clearly points towards their guilt and is inconsistent with their innocence
The appellants did not even accompany the deceased to the hospital in the matador van
Had the husband not been a party to the crime one would have expected that he would be the first person to take steps to remove the deceased to the hospital and leave no stone unturned 671 to save her life
An innocent mother in law would have also done the same even if she had no love or emotional feelings for her daughter in law
Neither the husband nor the mother in law of the deceased took any steps to remove the deceased to the hospital let alone accompany her to the hospital
This conduct also is inconsistent with their innocence and consistent only with the hypothesis as stated by the deceased in her dying declarations that the mother in law had poured kerosene on her while her husband had lit fire and put her on flames
686 H 687 A D 110The prosecution has thus successfully established that the conduct ofboth the appellants both at the time of the occurrence and immediatelythereafter is consistent only with the hypothesis of the guilt of the appellants and inconsistent with their innocence
688 B 111Absconding by itself may not be a positive circumstance consistent only with the hypothesis of guilt of the accused because it is not unknown that even innocent persons may run away for fear of being falsely involved in a criminal case and arrested by the police but coupled with the other circumstances the absconding of the appellants assumes Importance and significance
The prosecution has successfully established this circumstance also to connect the appellants with the crime
688 E F 112The prosecution has successfully established all the circumstances appearing in the evidence against the appellants by clear cogent and reliable evidence and the chain of the established circumstances is complete and has no gaps whatsoever and the same conclusively establishes that the appellants and appellants alone committed the crime of murdering the deceased on the fateful day in the manner suggested by the prosecution
All the established circumstances are consistent only with the hypothesis that it was the appellants alone who committed the crime and the circumstances are inconsistent with any hypothesis other than their guilt
688 G H 687 A 201Under Section 32 when a statement Is made by a person as to the cause of death or as to any of the circumstances which result In his death in cases in which the cause of that person s death comes into question such a statement oral or in writing made by the deceased to the witness is a relevant fact and is admissible in evidence
The statement made by the deceased called the dying declaration falls in that category provided it has been made by the deceased while in a lit mental condition
684 H 685 A B 672 202A dying declaration made by person on the verge of his death has a special sanctity as at that solemn moment a person is most unlikely to make any untrue statement The shadow of impending death is by itself the guarantee of the truth of the statement made by the deceased regarding the causes or circumstances leading to his death
A dying declaration therefore enjoys almost a sacrosanct status as a piece of evidence coming as it does from the mouth of the deceased victim
Once the statement of the dying person and the evidence of the witnesses testifying to the same passes the test of careful scrutiny of the courts it becomes a very important and a reliable piece of evidence and if the court is satisfied that the dying declaration is true and free from any embelishment such a dying declaration by itself can be sufficient for recording conviction even without looking for any coroboration
If there are more than one dying declarations then the court has also to scrutinise all the dying declarations to find out if each one of these passes the test of being trustworthy
The Court must further find out whether the different dying declarations are consistent with each other in material particulars before accepting and relying upon the same
685 C E 203Both the dying declarations are consistent with each other in all material facts and particulars
That the deceased was in a proper mental condition to make the dying declaration or that they were voluntary has neither been doubted by the defence in the course of cross examination of the witnesses nor even in the course of arguments both in the High Court and before this Court
Both the dying declarations have passed the test of credit worthiness and they suffer from no infirmity whatsoever
685 F G 204The prosecution has successfully established a very crucial piece of circumstantial evidence in the case that the deceased had voluntarily made the dying declarations implicating both the appellants and disclosing the manner in which she had been put on fire shortly before her death
This circumstance therefore has been established by the prosecution beyond every reasonable doubt by clear and cogent evidence
685 G H 301There has been an alarming increase in cases relating to harassment torture abetted suicides and dowry deaths of young innocent brides
This growing cult of violence and exploitation of the young brides though keeps on sending shock waves to the civilised society whenever it happens continues unabated
There is a constant erosion of the basic 673 human values of tolerance and the spirit of live and let live 
Lack of education and economic dependence of women have encouraged the greedy perpetrators of the crime
It is the woman who plays a pivotal role in this crime against the younger woman as in this case with the husband either acting as a mute spectator or even an active participant in the crime in utter disregard of his matrimonial obligations
689 C D 302Awakening of the collective consciousness is the need of the day
Change of heart and attitude is what is needed
If man were to regain his harmony with others and replace hatred greed selfishness and anger by mutual love trust and understanding and if woman were to receive education and become economically independent the possibility of this pernicious social evil dying a natural death may not remain a dream only
690 D 303The legislature realising the gravity of the situation has amended the laws and provided for stringent punishments in such case and even permitted the raising of presumptions against the accused in cases of unnatural deaths of the brides within the first seven years of their marriage
690 H 304The was enacted in 1961 and has been amended from time to time but this piece of social legislation keeping in view the growing menance of the social evil also does not appear to have served much purpose as dowry seekers are hardly brought to book and convictions recorded are rather few
691 A 305Laws are not enough to combat the evil
A wider social movement of educating women of their rights to conquer the menace is what is needed more particularly in rural areas where women are still largely uneducated and less aware of their rights and fall an easy prey to their exploitation
691 B 306The role of courts under the circumstances assumes greater importance and it is expected that the courts would deal with such cases in a more realistic manner and not allow the criminals to escape on account of procedural technicalities or insignificant lacune in the evidence as otherwise the criminals would receive encouragement and the victims of crime would be totally discouraged by the crime going unpunished
The courts are expected to be sensitive in cases involving crime against women
691 C 674 State Delhi Administration vs Lavnan  Ors Crl
Appeals 93 and 94 of 1984 decided on 2391985 referred to