Appeal No 222 of 1956
40 Appeal by special leave from the judgment and decree dated December 8 1953 of the former Nagpur High Court in Misc
Civil Case No 55 of 1950
C K Daphtary Solicitor General of India K K Rajagopala Sastri R H Dhebar and D Gupta for the appellant
The respondent did not appear
October 3
The Judgment of the Court was delivered by SARKAR J
This is an appeal brought by special leave against the judgment of the High Court at Nagpur delivered on a reference under section 661 of the Income tax Act
The appeal is by the Commissioner of Income tax Madhya Pradesh and Bhopal
The respondents are the assessees Vyas  Dotiwala
The respondents have not appeared in this appeal
We shall presently set out the facts but before we do that we wish to state that the assessment years concerned were 1945 46 and 1946 47
Though there were two separate assessment orders in respect of these years ultimately when they came up before the Appellate Tribunal they were consolidated into one appeal
The appeal before us likewise concerns both these assessment years
It appears that in or about July 1943 when considerable difficulty was being felt about cloth the Deputy Commissioner Amraoti evolved a scheme to solve that difficulty
Under that scheme Kisanlal Vyas and a firm called Edulji Framji Dotiwala who have in these proceedings been referred to as Dotiwala undertook to finance the scheme without charging any interest or profit and were appointed as financiers and also distributors of a variety of cloth called standard cloth for the town and camp of Amraoti and certain areas in the interior It is not necessary to set out the various details of the scheme and it will be sufficient to state that Vyas and Dotiwala who as an association of persons are the assessees concerned agreed to open an account in the Imperial Bank of India to be operated by them out of which the purchases 41 of the cloth were to be financed
The orders for the cloth were to be placed by the Government with the mills and on the arrival of a consignment of cloth the assessees were to pay to the Deputy Commissioner Amraoti the value of the consignment together with 6 14 per cent
of the ex mill price
The consignment was thereupon to be opened and its contents checked by the assessees and the officials and delivered to the assessees on their granting a receipt for the same
The Deputy Commissioner would pay 4 12 per cent
of the ex mill price to the assessees out of the amount paid by the latter as aforesaid for contingent expenses of working the scheme
The scheme provided that the contingent expenses were not to exceed 3 percent
of the ex mill price
The cloth coming to the hands of the assessees was to be distributed in Amraoti town and camp through a shop to be opened by the assessees and in the interiors of the area concerned through Tehsildars with Patils under them
The substance of the arrangement of distribution appears to have been that it would be entirely under the control of the Deputy Commissioner who made himself responsible to the assessees for the sale proceeds receivable from the Tehsildars
The Deputy Commissioner was to decide the price for which the cloth was to be sold to the consumers and also the persons entitled to buy the cloth
Out of the sale proceeds the Deputy Commissioner was to pay to the assessees whatever they had advanced on account of the cloth
The most important provision in this scheme is para
14 which is set out below
Profits resulting from the scheme shall be utilised for such charitable purposes as may be decided on by the Deputy Commissioner in consultation with the advisory committee appointed to supervise the scheme
It appears that the books of the assessees showed Rs 34737 for the assessment year 1945 46 and Rs 17682 for the assessment year 1946 47 as profits earned in working the scheme
The Income tax Officer assessed the assessees to tax on the profits so earned
6 42 The assessment orders made by this officer would appear to show that the only point urged by the assessees before him against the assessment was that the income was exempt from taxation under section 43i a of the Indian Income tax Act 1922
The officer rejected this contention
The assessees went up in appeal to the Appellate Assistant Commissioner before whom the same contention appears to have been repeated
The Appellate Commissioner confirmed the order of the Income tax Officer
The assessees then appealed to the Appellate Tribunal
The Tribunal held that the assessees had objected to the assessment before the Income tax Officer on two grounds namely that the income was Dot the income of the assessees and that the income was exempt from taxation under section 43i a as appeared from their letter dated January 22 1947
One of these alone had been dealt with by that officer as appears from his order earlier referred to
The Appellate Tribunal agreed with the conten tion of the assessees that they were not liable to be taxed on the profits because these did not form their income
The Tribunal was of the view that the scheme was the scheme of the Deputy Commissioner and completely under his control that the assessees were merely the financiers and also managers under the Deputy Commissioner to carry out the scheme and that the assessees only helped to work the scheme
The Tribunal held that the profits that may have resulted from such working were not therefore theirs nor represented their income and the assessees could not be assessed to income tax thereon
In this view of the matter the Tribunal set aside the orders of assessment
Thereafter on the application of the revenue authorities the Tribunal referred the following question to the High Court under section 661 of the Act Whether on the facts of this case any income accrued to Messrs Vyas and Dotiwala as the result of their associating themselves as financiers in the scheme for the distribution of standard cloth and if so whether such income was assessable in their hands
43 On that reference the High Court held that under the charging section in the Indian Income tax Act 1922 namely section 4 it was necessary for the revenue authorities to prove that the assessees received or should be deemed to have received income or profit from the scheme during the relevant period
It held that the asseess had not actually received any such income and further that the expression  deemed to be received  in that section only meant deemed by the provision of the Act to be received and no such provisions of the Act had been relied upon on behalf of the revenue authorities
In this view of the matter the High Court answered the question framed in the negative
The learned Solicitor General contends that the High Court failed to appreciate the real question
He says that the question was not whether income was received or deemed to be received but whether income had accrued and the point for decision was as appeared from the judgment of the Tribunal whether the profits formed the income of the assesses
We agree with this criticism of the judgment of the High Court
On the point that arises from the question framed we think that the Tribunal went wrong
It is not disputed that the assessees worked the scheme and such working produced the profits as found in the assessment orders
The Tribunal thought that since the scheme was completely under the control of the Deputy Commissioner the assessees could not be said to have carried on business by working the scheme
We are unable to see that the fact of the control of the Deputy Commissioner can prevent the working of the scheme by the assessees from being a business carried on by them
In our view it only comes to this that the assessees had agreed to do business in a certain manner
The fact that the Deputy Commissioner guaranteed the payment by the Tehsildars of the price due from them to the assessees would indicate that the assessees were treated as the owners of the business
It would indicate that if there had been no such guarantee the loss due to the failure of the Tehsildars to pay their dues would have to be borne 44 by the assessees
Again the claim may be in the alternative by the assessees for exemption under section 43i a would not arise unless the assessees were carrying on a business
Lastly para
14 of the scheme which we have earlier set out clearly contemplates profits resulting from the scheme
The provision that the profits would be devoted to charity to be decided by the Deputy Commissioner would indicate that without it the profits would have been utilisable by the assessees
The profits belonged to the assessees and hence the necessity for this agreement so that the assessees might be made to spend them on charity
If as the Tribunal thought the profits were of the Government there was no necessity for the Government providing for the profits being expended on charity for the Government if minded to do so could have done it without such a provision
The fact remains that the working of the scheme produced profits and apart from para
14 such profits undoubtedly belonged to the assessees
If they chose to agree by para
14 to devote the profits to charity that was their business the profits made by them would not change their character and cease to be the assessees  income because they agreed to devote their income to charity
We might also say that there is nothing in the scheme which shows that the assessees had undertaken not to make any profits on the distribution work under the scheme they had only agreed to finance the scheme without receiving any interest or profit
Furthermore since the assessees actually made the profits they are liable to pay tax thereon whether they agreed not to make any profits or not
We wish also to point out that it is not the assessees  case that they have been made to pay out the profits for any charity
For these reasons we think that the profits were the profits of the assessees and they are liable to pay tax on them
With regard to the assessees  claim for exemption under section 43i a they are clearly not entitled to any
That claim of the assessees has not been accepted by any of the Courts below
Section 43i a applies to income derived from business carried on on behalf of a religious and charitable institution when the income 45 is applied solely to the purpose of the institution and the business is carried on in the manner provided
It is enough to say that the scheme considered as a business was not carried on on behalf of any religious or charitable institution
Once it is held that the assessees made the profit how they use it would not matter
In the result we would answer both parts of the question framed in the affirmative
We hold that the profits were the income which accrued to the assessees and such income is assessable to income tax and is not exempt from taxation under section 43i a
The appeal is allowed with costs here and below
Appeal allowed


Summary:
Some of the erstwhile employees of Burmah Shell in an earlier writ petition claimed restoration of the commuted portion of pension and enhancement of pension on par with the pensioners of Hindustan Petroleum Corporation Limited HPCL
At the time of hearing the claim for restoration of the commuted portion of pension was given up
This Court accepted the claim of the petitioners as regards enhancement of pension and ordered a sizeable hike in the pension
The present writ petition claims the same relief which was given up at the time of hearing of the earlier writ petition viz restoration of commuted portion of pension
Admitted ly HPCL had deferred its decision till 1992 in this regard
On behalf of the petitioners it was contended that though HPCL has deferred its decision till 1992 the peti tioners were not precluded from approaching this Court and that the earlier decision did not operate as res judicata
On behalf of the respondents it was contended that as soon as HPCL revises its scheme the petitioners would also be entitled to the benefit thereof and that grant of the relief earlier would create disparity between the persons who receive pension from HPCL and those from the Respondent
Dismissing the writ petition this Court HELD 11
It would be inappropriate to interfere and grant the relief as prayed for at this stage since that would create disparity between the personnel who receive pension from Hindustan Petroleum Corporation Ltd and the respondent Corporation
965B 963 12
This Court has already held that the retired per sonnel of Burmah Shell would be entitled to a hike in pen sion at par with pensioners of HPCL
WP No 59087 decid ed on 115
1988
HPCL has not accorded to its pensioners the relief of restoration of the commuted portion of pension after the expiry of 15 years
The order passed by this Court is as recent as May 11 1988
After such a short time lag and in the absence of any substantial change in the posi tion it is not desirable to entertain the claim for resto ration of commuted pension
The petitioners are governed by a special scheme which is not at par with Government em ployees or the other Public Sector Undertakings
964G H 965A Common Cause  Ors
vs Union of India   referred to