Case: Central Coal Fields Limited Etc Vs. Bhubaneswar Singh and Others

which the management of the coking coal mine.....remained vested in the Central Government." The present dispute is within the ambit of sub-s. (2) of s. 21. Section 22 provides the procedure for the statement of accounts to be drawn up in regard to the period of management Sub-s. (1), so far as relevant, runs thus:"22. (1) The Central Government or the Government company, (the appellants before us are Government companies), as the case may be, shall cause the books in relation to each coking coal mine...... the management of which has vested in it under the Coking Coal Mines (Emergency Provisions) Act, 1971, to be closed and balanced as on the 30th day of April, 1972, and shall cause a statement of accounts, as on that day, to be prepared, within such time, in such from an d in such manner as may be prescribed, in relation to each such mine......in respect of the transactions effected by it during the period for which the management of such coking coal mine.............remained vested in it..." (underlining ours) 5. In exercise of the powers conferred by clause (e) of sub-s. 12) of s.34 of the Nationalisation Act, the Central Government have made a set of Rules known as the Coking Co al Mines (Statement of Account) Rules, 1972. The Rules prescribe the form in which the accounts are to be prepared and reference to this form we shall presently make. A policy decision to nationalise the coking coal companies was taken by the Central Government and with a view to facilitating nationalisation, the management was first taken over under the Management Ordinance followed by the statute with effect from October 17, 1971. This position continued till the Nationalisation Act came into force with effect from May 1, 1972. The Nationalisation Act contemplated two types of payments to be made to the owner-one, a sum of money contemplated under s. 10 of the Act for the extinguishment of title, and two-the due s, if any, payable in respect of the period of management as contemplated under s. 21 (2) of the Act and arrived at on the basis of accounts prepared in the manner prescribed. The Management Act did not contemplate any kind of curtailment of the normal incidents of ownership except the right of management. Very appropriately, therefore, the Nationalisation Act contemplated the books of account to be closed and a statement of accounts, as on April 30, 1972, to be prepared, with a view to determining the final position for the period of management;-payment to be made to the owner if there was a surplus fund and recovery to be made from him in case of shortfall.We find force in the submission of Mr. Shanti Bhushan that t he accounting for the period between October 17, 1971 and April 30, 1972, in the absence of any particular prescribed mode in the statute or the Rules made thereunder, had to be done according to the normal commercial practice. Since the statute contemplated the books to be closed and balanced, a balance sheet according to the normal commercial practice had to be drawn up. The observations of this Court in Commissioner of Income tax, Madras v. A. Krishna Swami Mudaliar &Ors., are worth quoting. Shah, J. (as he then was), spoke for the Court thus:"But whichever method of book-keeping is adopted in the case of a trading venture, for computing the true profits of the year the stock-in-trade must be taken into account. If the value of stock-in-trade is not taken into account, in the ultimate result the profit or loss resulting from trading is bound to get absorbed or reflected in the stock-in-trade unless the value of the stock-in-trade remains unchanged at the commencement of the year and the end of the year." 6. Under the Income-tax Act profits have to be ascertained for the purpose of computing tax liability. Under the Nationalisation Act the books had to be balanced with a view to finding out whether the Government company which was in management for the relevant period on behalf of the owner was to pay anything to the owner or the Government company having spent for the owner was entitled to recover any sum from the owner. Therefore, we accept the submission of Mr. Shanti Bhushan that the Nationalisation Act contemplated a balance-sheet according to the commercial procedure to be drawn up which necessarily require d stock in trade to be reflected. 7. Admittedly the amount claimed from the owner represents the cost of extraction of the coal from the mine. The appellants had conceded before the High Court and Mr. Sinha appearing for them before us accept ed the position that if the extracted coal had been sold before the appointed day, the owner would have been entitled to the price. The mere fact that the extracted coal remained in stock at the commencement of the appointed date can make no difference to the position. The expenses were to be set off against the sale price of the stock to be received at the time of disposal. Therefore, the stock of coal had to be taken into account for balancing the position. Reliance on the definition of mine and S. 10 of the Nationalisation Act to counteract this conclusion cannot avail the appellants. Indeed, the submission advanced on behalf of the appellants is so much opposed to common sense logic of the matter that in the absence of a legislative mandate we have no hesitation in rejecting it.Much of the controversy could have been avoided if reference had been made to the statutory form. Statement 8 in the prescribed form clearly indicates that the stock as on April 30, 1972, had to be taken into account. We are sorry to observe that the High Court omitted to make a reference to it, and are equally sorry to note that the Government companies have failed to do their duty as cast on them by law and driven the owner to unnecessary litigation

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Under the Income-tax Act profits have to be ascertained for the purpose of computing tax liability. Under the Nationalisation Act the books had to be balanced with a view to finding out whether the Government company which was in management for the relevant period on behalf of the owner was to pay anything to the owner or the Government company having spent for the owner was entitled to recover any sum from the owner. Therefore, we accept the submission of Mr. Shanti Bhushan that the Nationalisation Act contemplated a balance-sheet according to the commercial procedure to be drawn up which necessarily require d stock in trade to be reflectedAdmittedly the amount claimed from the owner represents the cost of extraction of the coal from the mine. The appellants had conceded before the High Court and Mr. Sinha appearing for them before us accept ed the position that if the extracted coal had been sold before the appointed day, the owner would have been entitled to the price. The mere fact that the extracted coal remained in stock at the commencement of the appointed date can make no difference to the position. The expenses were to be set off against the sale price of the stock to be received at the time of disposal. Therefore, the stock of coal had to be taken into account for balancing the position. Reliance on the definition of mine and S. 10 of the Nationalisation Act to counteract this conclusion cannot avail the appellants. Indeed, the submission advanced on behalf of the appellants is so much opposed to common sense logic of the matter that in the absence of a legislative mandate we have no hesitation in rejecting it.Much of the controversy could have been avoided if reference had been made to the statutory form. Statement 8 in the prescribed form clearly indicates that the stock as on April 30, 1972, had to be taken into account. We are sorry to observe that the High Court omitted to make a reference to it, and are equally sorry to note that the Government companies have failed to do their duty as cast on them by law and driven the owner to unnecessary litigationUnder thex Act profits have to be ascertained for the purpose of computing tax liability.Under theNationalisation Act the books had to be balanced with a view to finding out whether the Government company which was in management for the relevant period on behalf of the owner was to pay anything to the owner or the Government company having spent for the owner was entitled to recover any sum from the owner. Therefore, we accept the submission of Mr. Shanti Bhushan that the Nationalisation Act contemplated at according to the commercial procedure to be drawn up which necessarily require d stock in trade to be