Case: The Nandlal Bhandari Mills Ltd.,Indore Vs. The State Of Madhya Bharat

2. The appellant is a Textile Mill and a Public Joint Stock Company called the Nandlal Bhandari Mills, Ltd. The appellant had appointed a firm, Messrs. Nandlal Bhandari and Sons as agents, secretaries and treasurers of the Mills, and under cl. (6) of the agreement of agency, it agreed to pay to the agents an office allowance, commission on the Companys net profits and commission on the sale proceeds of sales of yarn, cloth, etc. The remuneration of the agents for the three accounting years was as follows:Remuneration As per agreement Accounting Years1941 1942 1943Rs. Rs. RsClause 6 1500 18,000 18,000 18,000(a) Fixed monthly allowance as office allowance P.M. for the year for the year(b) Commission on the Companys Net Profits @ 16% net on profits 2,68,335 6,15,946 10,52,939(c) Commission on the sale proceeds of sales of yarn cloth etc. @ 1-9-0 Per Cent. 1,10,156 1,64,751 2,71,6723. In computing the tax, the Mills claimed to deduct under R. 3(2)(ix) of the Rules the above amounts paid as remuneration. The Rule reads :"(ix) any expenditure (not being in the nature of capital) incurred solely or the purposes of earning such profits or gains."The Assessing officer accepted the appellants claim for deduction but only as to a part. We are not required in these appeals to consider the correctness of the quantum of the deduction in view of what transpired later. The Assessing officer also disallowed certain other claims made by the appellant, which again need not be mentioned. The appellant then appealed to the Appellate Authority, and on December 31, 1951, the Appellate Authority, while accepting some of the appellants other contentions, upheld the order refusing to deduct the agents commission on profits under R. 3(2)(ix). Three second appeals were preferred in the Madhya Bharat High Court under R. 13 of the amended Rules. They were dismissed by the High Court of Madhya Pradesh, and hence the present appeals.

Court's reasoning:
6. It seems that, as a result of this decision, a notification was issued in August. 1931, and another on February 2 /3, 1932 by the Commerce and Industry Department of the Holkar State8. All this would of course be pertinent to consider, if there was no legislative enactment on the subject. If the matter was not one concluded by law, then there would be room for judicial interpretation of the Rule. The rival claims in these appeals are thus confined to the legislative force of the notifications issued in 1931, 1932 and 1933 respectivelyIn so far as the legislative supremacy of the Cabinet was concerned, no question was raised before us.10. In our judgment, the two notifications cannot be described as "judicial interpretation." If anything, they must be interpreted as legislative exposition of R. 3 (2)(ix) and in the nature of an explanationThe same can be said of the Ruler of the Holker State. When to the order of the Ruler was added the usual mode of making and promulgating rules, the position which emerges is really unassailableexamination of the Rules, however, shows that there was no set pattern of language. Some of the Rules do not read line rules at allThe existence of such a rule seems to obliterate the frontiers between legislative, judicial and executive exercise of the power of a State, such as we understand it. There being no invariable use of a clear-cut legislative language, each general order emanating from the sovereign ruler and promulgated in the same manner as any other rule and having its roots in a resolution of the Cabinet must be regarded as one binding upon the subject. This is the purport of the decisions of this Court, and the present case falls in line with those which have been previously decided. There is nothing in the content, the character or the nature of these notifications, which would put them on a level lower than the Rules, which had been earlier promulgated.