dedol-hf/india-case-legal-rag huggingface dataset:
partially  excluded  area,  unless the  Governor  by  public
notification  so directs, and the Governor in giving such  a
direction  with respect to any Act may direct that  the  Act
shall  in its application to the area,   ............   have
effect  subject  to such exceptions or modifications  as  he
thinks fit."
     In  exercise  of the powers conferred on  him  by  this
section, the Governor of Bengal by a notification  published
on  the  14th December, 1946, directed  that  the  Essential
Supplies  Act  shall apply to the  district  of  Darjeeling,
which was an excluded area.
     Section  1(3)  of the Essential Supplies  Act  provides
that it shall cease to have effect on the expiration of  the
period mentioned in section 4 of the India (Central  Govern-
ment  and  Legislature) Act, 1946 (9 & 10 Geo. 6,  Ch.  39).
Section 4 of the latter Act provides as follows :--
     "The  period  mentioned...is  the period  of  one  year
beginning  with the date on which the Proclamation of  Emer-
gency in force at the passing of this Act ceases to  operate
or,  if the Governor-General by public notification  so  di-
rects, the period of two years beginning with that date:
     Provided that if and so often as a resolution approving
the extension of the said period is passed by both Houses of
Parliament, the said period shall be extended for a  further
period of twelve months from
131
the  date  on which it would otherwise expire  so,  however,
that  it  does not in any case continue for more  than  five
years  from the date on which the Proclamation of  Emergency
ceases to operate."
    The  Proclamation of Emergency referred to in this  sec-
tion  ceased  to operate on 31-3-1946. In the absence  of  a
notification  by the Governor-General under the second  part
of  the section, the Essential Supplies Act remained  opera-
tive only till 31-3-1947, under the first part.  The  Gover-
nor-General,  however,  issued a  notification  on  3-3-1947
continuing  its force for a period of 2 years from the  date
of cessation of emergency.  By virtue of this  notification,
therefore, the Essential Supplies Act would remain in  force
till  31-3-1948. On 18 7-1947, the Indian  Independence  Act
was passed, and India became a Dominion on 15-8-1947.  Under
section 9 read with section 19(4) of the Indian Independence
Act,  1947,  the GOvernor-General passed an Order  on  14-8-
1947,  which  substituted the words  "Dominion  Legislature"
for" both Houses of Parliament" in the proviso to section  4
of  the  India (Central Government  and  Legislature)   Act,
1946, and also introduced a new section 4A by way of adapta-
tion, providing that the powers of the Dominion  Legislature
shall  be exercised by the Constituent Assembly.   On  25-2-
1948,  the Constituent Assembly passed its first  resolution
extending the operation of the Essential Supplies Act by one
year up to 31-3-1949. On 23-3-1949, a second resolution  was
passed by the Assembly extending the life of the Act by  one
more year up to 31-3-1950.
    In  respect of these Acts and notifications three  ques-
tions were urged on behalf of the appellant:-firstly, wheth-
er  the Governor's notification of the 14th December,  1946,
continued the operation of the Essential Supplies Act in the
district of Darjeeling beyond the then period of life of the
Act, namely, the period of one year from the date of  cessa-
tion of emergency; secondly, whether a fresh notification by
the Governor under section 92(1) of the Government of  India
Act was not necessary. after the life of the Essential
132
Supplies. Act was extended by the Governor-General's   noti-
fication  of 3-3-1947; and thirdly, whether the  resolutions
passed  by the Constituent Assembly could operate to  extend
the life of the Essential Supplies Act.
     Now, it is clear that under section 1 (3) of the Essen-
tial  Supplies  Act, it shall cease to have  effect  on  the
expiration of the period mentioned in section 4 of the India
(Central Government and Legislature) Act, 1946.  The  period
mentioned  in that section is not necessarily one year  from
the  date of cessation of emergency.  It can  be 2 years  if
the  Governor General by notification so directs, and it may
go  up  to a maximum period of 5 years in instalments  of  1
year each, under the proviso.  The fixation of the period of
operation of the Essential Supplies Act is thus not left  to
any other enactment.  It is provided by the Act itself.   As
stated already, the notification of the 14th December, 1946,
issued by the Governor applied the Essential Supplies Act to
the  Darjeeling  district, and its life was extended  up  to
31-3-1948 by the notification of the Governor-General. It is
difficult  to see why a fresh notification under section  92
(1)  of the Government of India Act is required to  continue
the  life  of the Act in the district  of  Darjeeling.   The
Governor's  notification  extended  the  Act  to  Darjeeling
without specifying any particular period for its applicabil-
ity to that district, and it follows therefore that the  Act
would remain in force in the district so long as it remained
in force in the rest of India. It is only if its effect  had
ceased  earlier  than the coming into force  of  the  Indian
Independence Act and there was a reenactment by the legisla-
ture  which  was sought to be applied to an  excluded  area,
that a notification by the Governor under section 92 (1)  of
the  Government of India Act might be necessary.  Otherwise,
the question of a fresh notification does not arise.
Section  19(4)  of the Indian Independence  Act,  1947,
provides as follows:--
     "In  this Act, except so far as the  context  otherwise
requires--
133
    References to the Government of India Act, 1935, include
references  to  any  enactments amending  or   supplementing
that  Act, and, in particular, references     to  the  India
'(Central Government and Legislature) Act, 1946;  ......  "
    The  adaptations  made by the   Governor-General   under
sections 9 and 19 of the Indian Independence Act substituted
the words "ConstitUent Assembly" for "both Houses of Parlia-
ment"  in  section 4 of the India  (Central  Government  and
Legislature) Act, and the Constituent Assembly by two  reso-
lutions  of  different dates has extended the  life  of  the
Essential Supplies Act till 31-3-1950. As soon as the  adap-
tations  came into force by order of  the  Governor-General,
the  Constituent Assembly acquired the powers  conferred  on
both  Houses  of  Parliament under section 4  of  the  India
(Central  Government and Legislature) Act. The  validity  of
the adaptations is beyond question.
    The case of Jatindra Nath Gupta v. The Province of Bihar
and  Others(1)  has no application here.  In  the  case  now
before  us, the Legislature has itself applied its mind  and
has fixed the duration of the Act, but has left the  machin-
ery to reach the maximum period by instalments to be  worked
out  in  a particular manner. There is here no  question  of
delegation  at all, much less delegation of any  legislative
power.
The appeal therefore fails and is dismissed.
           Criminal Appeal No. 25 of 1951.
    In  this  case,  the appellant Bichan  Chand  Molla  was
charged with loading 28 bags of millmade cloth from a  truck
into a specially chartered aircraft at the Dum Dum  airport,
on  behalf  of his employers,  Messrs.  Amarchand  Pannalal,
without a permit, as required under clause 4 (2) of the West
Bengal  Cotton Cloth and Yarn Movement Control Order,  1947.
He was convicted under section 7 (1) read with section 8  of
the Essential Supplies Act and sentenced to 9months'  rigor-
ous imprisonment and a fine Of Rs. 1,000 by the
(1) [1949] F.C.R. 596.
       18
134
1st  Class Magistrate of Barrackpore. The Sessions Judge  of
24-Parganas  dismissed the appeal preferred by the  accused.
A revision application filed by him in the High Court shared
the same fate.
    The legal argument urged in this appeal was the same  as
in  the earlier appeal, and has to be repelled as  untenable
for  the   reasons   already stated.  A  special  point  was
sought  to be argued that the element of mens rea was  want-
ing.  But the question was considered by the High Court, and
it  was  held that there are two facts from which  mens  tea
could be inferred. When questioned, the accused stated  that
he  was.loading handloom bales and not millmade  cloth.   He
had no permit with him and was not able to produce any  even
from  his  employers.  These facts under  the  circumstances
warrant the inference of a criminal intent.
  This appeal also will therefore stand dismissed.
 Agent for the appellant: R.R. Biswas.
 Agent  for the respondent: P.K. Bose.
Agent for the intervener: P.A. Mehta.
135
PETITIONER:
COMMISSIONER OF INCOME TAX, BOMBAY
        Vs.
RESPONDENT:
FINLAY MILLS LTD.
DATE OF JUDGMENT:
01/10/1951
BENCH:
KANIA, HIRALAL J. (CJ)
BENCH:
KANIA, HIRALAL J. (CJ)
MAHAJAN, MEHR CHAND
AIYAR, N. CHANDRASEKHARA
CITATION:
 1951 AIR  464            1952 SCR   11
 CITATOR INFO :
 F          1955 SC  89  (21)
 RF         1973 SC 318  (12)
ACT:
    Indian   Income-tax   Act  (XI  of   1922),   s.   10(2)
(xv)--Expenditure   incurred  for  registration   of   trade
mark--Whether business expenditure-Effect of registration.
HEADNOTE:
    The  expenditure incurred by a company carrying  on  the
manufacture and sale of textile goods in registering for the
first  time its trade marks which were not in use  prior  to
the 25th January,
12
1937,  is  revenue expenditure and  an  allowable  deduction
under  Sec.  10 (2) (xv) of the Indian Income-tax  Act.  The
fact  that a  trade mark after registration could  be  sepa-
rately  assigned  and not as a part of the goodwill  of  the
business  only, does not make the expenditure for  registra-
tion  capital  expenditure.  It is only  an  additional  and
incidental facility given to the owner of the trade mark; it
adds nothing to the trade mark itself.
   Judgment of the Bombay High Court affirmed.
   Commissioner  of Income-tax, Bombay v. The Century  Spin-
ning  and  Weaving  and Manufacturing Co.  Ltd.  ([1947]  15
I.T.R.  105) approved.  British Insulated and Helsby  Cables
Ltd.  v. Atherton ([1926] A.C. 205), Southern v. Borax  Con-
solidated  Ltd.  ([1942] 10 I.T.R. Supp.  1),  Henriksen  v.
Grafton Hotel Ltd. ([1942] 2 K.B. 184) referred to.
JUDGMENT:
CIVIL APPELATE  JURISDICTION:  Civil  Appeal
No. 103 of 1950.
     Appeal from a Judgment of the Bombay High Court (Chagla
C.J. and Tendolkar J.) dated 25th March, 1949, in Income Tax
Reference No. 31 of 1948.
 M.   C.   Setalvad,   Attorney-General for   India  (G.  N.
Joshi, with him) for the appellant.
 R.J. Kolah, for the respondent.
1951.  Oct. 1. The Judgment of the Court was  delivered
by
     KANIA  C.J.--This is an appeal from a judgment  of  the
High  Court at Bombay and it arises out of the  opinion  ex-
pressed by the High Court in respect of a question submitted
to  it  by the Income-tax Tribunal. The material  facts  are
these. The respondent is a textile mills company carrying on
the business of manufacturing and selling textile goods. For
the  assessment  years 1943-44 and  '1944-45,  covering  the
accounting periods ending with the calendar years 1941, 1942
and 1943, the respondent claimed the expenditure incurred by
it  in registering for the first time its trade marks  which
were not in use prior to the 25th February, 1937, as revenue
expenditure and an allowable deduction out of its income for
the  said  periods, under section 10(2) (xv) of  the  Indian
Income tax Act. Following the decision  of  the Bombay  High
Court  in Commissioner of Income-tax, Bombay v. The  Century
Spinning
13
and  Weaving  and Manufacturing Co.  Ltd.(1),  the  Tribunal
allowed  the  claim of the assessee.  At the desire  of  the
appellant, the Tribunal submitted the following question for
the opinion of the High Court :-
    "Whether,  on  the facts of the  case,  the  expenditure
incurred  by  the assessee company in  registering  for  the
first  time its trade marks which were not in use  prior  to
the  25th  February,  1937, is revenue  expenditure  and  an
allowable  deduction under section 10(2) (xv) of the  Indian
Income-tax Act ?"
    The  High  Court, following its  previous  decision  and
finding  that the fact of the trade marks having  come  into
use after the 25th of February, 1937, made no difference  in
the  result, answered the question in the affirmative.   The
Commissioner  of Income-tax, Bombay, has come on  appeal  to
us.
    It was argued on behalf of the appellant that the  ques-
tion  whether  a certain disbursement was of  a  capital  or
revenue nature, has to be decided according to the principle
laid  down  in British Insulated and Helsby Cables  Ltd.  v.
Atherton(2).  In that case the company which carried on  the
business of manufacturers of insulated cables established  a
pension fund for its clerical and technical salaried  staff.
The fund was constituted by a trust deed which provided that
members should contribute a percentage of their salaries  to
the  fund and that the company should contribute  an  amount
equal to half the contributions of the members; and  further
that the company should contribute a sum of pound 31,784  to
form  the  nucleus  of the fund and to  provide  the  amount
necessary  in order that past years of service of  the  then
existing staff should rank for pension. That sum was arrived
at  by  an actuarial calculation on the basis that  the  sum
would  ultimately be exhausted when the object for which  it
was  paid  was attained. The House of Lords held  that  this
payment  was  in the nature of capital expenditure  and  was
therefore  not  an admissible deduction.   Although  in  the
opinions expressed by the different members of the House  of
Lords
(1) [1917] 15 I.T.R. 105.             (2) [1926] A.C. 205.
14
    the  line  of approach is not completely the  same,  the
principle  stated by Lord Cave in his speech has  been  test
distinguish capital expenditure from revenue expenditure. It
was recognised that a sum of money expended, not of necessi-
ty and with a view to a direct and immediate benefit to  the
trade,  but  voluntarily and on the  grounds  of  commercial
expediency, and in order indirectly to facilitate the carry-
ing  on of business, may yet be expended wholly  and  exclu-
sively  for the purposes of the trade.  The Lord  Chancellor
observed that the question appeared to be a question of fact
which was proper to be decided by the Commissioners upon the
evidence  brought before them in each case.  The  test  that
capital  expenditure  is a thing that is going to  be  spent
once  and for all and income expenditure is a thing that  is
going  to recur every year was considered an useful  element
in arriving at the decision but was not certainly the  deci-
sive  fact. The Lord Chancellor observed  as  follows:--"But
when an expenditure is made, not only once and for all,  but
with a view to bringing into existence an asset or an advan-
tage  for  the enduring benefit of the trade, I  think  that
there  is very good reason for treating such an  expenditure
as properly attributable not to revenue but to capital."
  In order to appreciate the true position here Correctly it
is  next necessary to notice the relevant provisions of  the
Indian  Trade Marks Act, 1940.  It may be noted that  before
this  Act there was no Trade Marks Act in India but  it  was
recognised  that an action lay for infringement of  a  trade
mark  independently of an action for passing off goods.  The
Act  opens  with the preamble "whereas it  is  expedient  to
provide  for the registration and more effective  protection
of  trade marks ......  "Section 2(1) of the Act  defines  a
trade mark as meaning "a mark used or proposed to be used in
relation to goods for the purpose of indicating or so as  to
indicate  a  connection in the course of trade  between  the
goods  and  some person having the right to  use  the  mark,
whether  with or without any indication of the  identity  of
that person." Section 14 permits the
15
proprietor  of  a trade mark to have the trade  mark  regis-
tered.  The  Attorney-General, on behalf of  the  appellant,
relied  on  sections  20, 21, 28 and 29 in  support  of  his
contention.  He  argued  that before the  Trade  Marks  Act,
although  the proprietor of a trade mark could  maintain  an
action  for infringement of his trade mark and the cause  of
action in such a case was quite different from the cause  of
action  in  an action for passing off goods,  by  the  Trade
Marks  Act the right of the owner of the trade mark  is  in-
creased  by section 21, and it is made assignable  independ-
ently of the goodwill under sections 28 and 29 of the  Trade
Marks Act. The question thus resolves itself into whether by
reason  of  these two incidents the case  falls  within  the
principle  laid down by Lord Chancellor Cave,  as  mentioned
above.
   In  our  opinion, the contention urged on behalf  of  the
appellant must fail.  It is not contended that by the  Trade
Marks  Act a new asset has come into existence. It was  con-
tended that an advantage of an enduring nature had come into
existence.  It was argued that just as machinery may  attain
a higher value by an implementation causing greater  produc-
tive  capacity,  in the present case the  trade  mark  which
existed before the Trade Marks Act acquired an advantage  of
an enduring nature by reason of the Trade Marks Act and  the
fees paid for registration thereunder were in the nature  of
capital expenditure.  In our opinion, this analogy is falla-
cious.   The machinery which acquires a  greater  productive
capacity  by reason of its improvement by the  inclusion  of
some new invention naturally becomes a new and altered asset
by  that  process. So long as the machinery lasts,  the  im-
provement  continues  to the advantage of the owner  of  the
machinery. The replacement of a dilapidated roof. by a  more
substantial  roof  stands on the same footing.   The  result
however of the Trade Marks Act is only two-fold.  By  regis-
tration, the owner is absolved from the obligation to  prove
his  ownership  of the trade mark.  It is treated  as  prima
facie proved on production of the registration  certificate.
It thus merely saves him the trouble of leading evidence, in
the event of a suit, in a court
16
    of  law, to prove his title to the trade mark.   It  has
been  said that registration is in the nature of  collateral
security  furnishing  the  trader with a  cheaper  and  more
direct  remedy against infringers,  Cancel the  registration
and  he  has still his right enforceable at  common  law  to
restrain the piracy of his trade mark. In our opinion, 'this
is neither such an asset nor an advantage as to make payment
for its registration a capital expenditure.  In this connec-
tion it may be useful to notice that expenditure incurred by
a  company in defending title to property is not  considered
expense  of a capital nature.  In Southern (H. M.  Inspector
of  Taxes)  v. Borax Consolidated Limited(1).  it  is  there
stated that where a sum of money is laid out for the  acqui-
sition  or  the improvement of a fixed capital asset  it  is
attributable to capital, but if no alteration is made in the
fixed  capital  asset by the payment, then  it  is  properly
attributable  to  revenue, being in substance  a  matter  of
maintenance, the maintenance of the capital structure or the
capital asset of the company.  In our opinion, the advantage
derived by the owner of the trade mark by registration falls
within  this  class of expenditure.  The fact that  a  trade
mark  after registration could be separately  assigned,  and
not as a part of the goodwill of the business only, does not
also make the expenditure for registration a capital expend-
iture.  That is only an additional and  incidental  facility
given to the owner of the trade mark. It adds nothing to the
trade mark itself.
     In the judgment of the High Court some emphasis is laid
on  the fact that by reason of registration the duration  of
the trade mark is only for seven years, and it does not thus
possess  that permanency which is ordinarily required of  an
expenditure to make it a capital expenditure and in order to
prove  the existence of a benefit of an enduring  character.
The learned Attorney-General contended that the view that as
the  benefit of registration lasted for seven  years,  i.e.,
for a limited period, it prevented the expenses of registra-
tion being treated as capital expenditure, is unsound
(1) [1942] 10 I.T.R. Suppl. 1.
17
and for that contention he relied on Henriksen (Inspector of
Taxes)  v. Grafton Hotel Ltd.(1).  In that case, tenants  of
licensing  premises by agreement with the landlord  paid  by
instalment  the monopoly value fixed by the  licensing  jus-
tices  when  granting the licence under section  14  of  the
Licensing  (Consolidation) Act, 1910.  These were sought  to
be  deducted as revenue expenditure but were  disallowed  by
the  Court. Lord Greene M.R. first considered that the  pay-
ment fell into the same class as the payment of a premium on
the  grant of a lease or the expenditure on improvements  to
the  property  which justices may require to be  made  as  a
condition of granting a licence. Having reached that conclu-
sion  he  rejected the argument that the payment  not  being
made in one lump sum but by instalments made a difference in
the  character  of  the payment.   He  observed  as  follows
:--"Whenever a licence is granted for a term, the payment is
made  as on a purchase of a monopoly for that term.  When  a
licence is granted for a subsequent term, the monopoly value
must be paid in respect of that term and so on. The payments
are recurrent if the licence is renewed, they are not  peri-
odical  so  as to give them the quality  of  payments  which
ought  to be debited to revenue account.  The thing that  is
paid for is of a permanent quality although its  permanence,
being conditioned by the length of the term, is  shortlived.
A  payment of this character appears to me to fall into  the
same  class  as the payment of a premium on the grant  of  a
lease,  which is admittedly not deductible."  The  Attorney-
General  relied on these observations to point out that  the
permanence  of the advantage was thus not dependent  on  the
number of years for which it was to enure for the benefit of
the  proprietor  of the trade mark.  In our  opinion,  these
observations  have to be read in the context in  which  they
have been made. The learned Master of the Rolls was discuss-
ing  only the question of payment being made by  instalments
as not making any difference in the nature of the
 (1) [1942] 2 K.B. 184.
       3
18
expenditure.   It was first held by him that the payment  in
question  was of a capital nature and of the same  character
as  premium paid on the grant of a lease and  was  therefore
necessarily of a capital nature. Having come to that conclu-
sion,  he  only  rejected the contention  that  because  the
premium  was paid in more instalments than one it  lost  its
character a capital expenditure.  In our opinion, this is an
entirely  different thing from stating that the fact of  the
advantage being for a limited time altered the character  of
the  payment in any way.  As observed by Viscount Cave  L.C.
the  question  is  always  one  of  fact  depending  on  the
circumstances of each case individually.
    In our opinion, the decision of the High Court  reported
in  Commissioner of Income-tax, Bombay v. The Century  Spin-
ning  and Weaving and Manufacturing Co. Ltd.(1)  is  correct
and in the present case also the contention of the appellant
must fail.  The appeal therefore fails and is dismissed with
costs.
Appeal dismissed.
Agent for the appellant: P.A. Mehta.
Agent for the respondent: R.A. Govind.
(1) [1947] 15 I.T.R. 105.
PETITIONER:
COMMISSIONER OF EXCESS PROFITS TAX,BOMBAY CITY
        Vs.
RESPONDENT:
SRI LAKSHMI SILK MILLS LTD.
DATE OF JUDGMENT:
18/09/1951
BENCH:
MAHAJAN, MEHR CHAND
BENCH:
MAHAJAN, MEHR CHAND
FAZAL ALI, SAIYID
MUKHERJEA, B.K.
CITATION:
 1951 AIR  454            1952 SCR    1
 CITATOR INFO :
 D          1955 SC 176  (14)
 D          1965 SC1974  (5)
 D          1969 SC1062  (7)
 RF         1988 SC 460  (5,7)
ACT: