dedol-hf/india-case-legal-rag huggingface dataset:
harvested  crops were brought to Mangalore to be  dried  and
cleansed  there in the factory of the selling agents of  the
assessee  and sold there by that company, the sale  proceeds
being  received  and retained at Mangalore by  the  assessee
himself.  The question was whether the assessee was entitled
to claim the benefit of the second proviso to section 4  (2)
of  the Income-tax Act and if so, to What extent ?   It  was
held by the learned Judges that the assessee was entitled to
exemption  of  the whole profits earned by the sale  of  the
produce at Mangalore, and the ground upon which the decision
rested  was  that the agricultural produce itself  could  be
taken  to be income in kind which accrued at Mysore  outside
British  India.  On appeal to the Privy Council, this  deci-
sion  was reversed and the Privy Council took the view  that
as the income was received in British India, the proviso  to
section 4 (2) had no application (2).  The particular  point
upon which the Madras High Court based its decision was  not
considered  by  the Judicial Committee and  was  left  open.
Obviously  in the case before us the manufactured  oil  that
was  produced at Raichur could not be taken to be income  or
profits  in  kind.   The  manufactured  products  themselves
cannot be regarded as income though the process of  manufac-
ture  yields  profits which form a portion  of  the  profits
ultimately  realised at the time of the sale.  The  question
before
(1) I.L.R. [1938] Mad. 25.
       Vide  Commissioner of Income-tax V. Mathias--66  I.A.
22.
    389
us is, where do the profits resulting from the manufacturing
process accrue or arise ?
    It  was  pointed out by Mukherji J. in Re  Rogers  Pyatt
Shellac  and  Co. v. Secretary of State for India  (1)  that
etymologically  the  word "accrues" connotes the idea  of  a
growth,  addition or increase by way of accession or  advan-
tage, while the word "arises" suggests the idea of growth or
accumulation  with a tangible shape so as to be  receivable.
The  two  expressions denote almost the same  idea  and  the
difference only lies in the fact that one is more  appropri-
ate than the -other when applied to particular cases.  It is
clear, however, as the learned Judge pointed out that  these
words  have  been  used in  contradistinction  to  the  word
"received"  and both of them represent a stage  anterior  to
the  point of time when the income becomes receivable;  they
connote  a character of income which is more or less  incho-
ate.  As I have stated already, in proviso (3) to section  5
of the Excess Profits Tax Act, the legislature has  deliber-
ately  left out the word "received" and has spoken only  of"
accruing" or "arising." This shows that the legislature  had
in  mind  cases  where profits could accrue to  parts  of  a
business  before  they were actually received.  When  a  raw
material  is  worked up into a new product  by   process  of
manufacture,  it  obviously increases in  value;   in  other
words,  there  is an accretion of profit to it and  the  in-
creased value represents this income or profit which is  the
result  of manufacture.   As these profits accrue by  reason
of  manufacture, the accrual, in my opinion, cannot  but  be
located at the place where the manufacturing process is gone
through.   It is immaterial that the manufactured goods  are
sold  later  on at various places.  If the  manufacturer  is
himself the seller, it might be that he receives the  entire
profits  including that of the manufacture only at the  time
of  the  sale; but in an inchoate shape, a  portion  of  the
profits  does accrue at the place of manufacture, the  exact
amount  of  which is only ascertained after the  sale  takes
place.   For purposes of computation, the two parts  of  the
business may be conceived of as being carried on by two
I.L.R. 52 Cal. 1. at p. 30.
390
different  sets  of persons. As soon as the  manufacture  is
complete,  that  part of the business is  finished  and  the
profits  that  accrue to that part certainly arises  at  the
place where the manufacture is carried on and not where  the
sale ultimately takes place. As the principle of section  42
of the Income-tax Act applies to this case the profits to be
deemed under that section to accrueor arise in British India
would only be the profits that may reasonably be  attributed
to one part of the operations,. namely, sales of part of the
oil;  and the profits accruing or arising out of  the  other
part  of the operation, namely, the manufacture of  the  oil
which  takes  place  outside India could not  be  deemed  to
accrue  or arise in India.  Where then these  profits  would
arise  or accrue or be deemed to arise or accrue  except  at
the place of manufacture ?
    My  conclusion,  therefore, is that the profits  of  the
manufacturing part of the assessees' business did accrue and
arise  at Raichur and the judgment of the High Court  should
be affirmed, though I do not concur in all the reasons given
by the learned Judges.
      J.--I substantially agree with the reasonings given in
the judgment just delivered by my learned brother  Mukherjea
and concur in dismissing this appeal.
Appeal dismissed.
Agent for the Appellant: P.A. Mehta.
Agent for the Respondents: Ranjit Singh Narula.
     391
PETITIONER:
SHETH MANEKLAL MANSUKHBHAI
        Vs.
RESPONDENT:
MESSRS. HORMUSJI JAMSHEDJI GINWALLAAND SONS.
DATE OF JUDGMENT:
21/03/1950
BENCH:
MAHAJAN, MEHR CHAND
BENCH:
MAHAJAN, MEHR CHAND
FAZAL ALI, SAIYID
MUKHERJEA, B.K.
CITATION:
 1950 AIR    1            1950 SCR   75
 CITATOR INFO :
 RF         1977 SC2425  (5)
ACT:
    Transfer  of Property Act (IV of 1882), 8.  53-A--Agree-
ment  to  lease evidenced by correspondence--Lessee  put  in
possession--Acceptance of rent for several years--No  regis-
tered lease deed--Suit for ejectment of lessee as  trespass-
er--Maintainability--Doctrine of partperformance.
HEADNOTE:
  The predecessor in interest of the defendant, being desir-
ous of putting up a factory in certain plots of land situat-
ed within     a Taluqdari estate which was under the manage-
ment  of  the Government under the  Gujarat  Taluqdars  Act,
1888, applied in writing to the Taluqdari Settlement Officer
for  a permanent lease of the plots.  The Taluqdari  Officer
agreed  to  grant a lease on certain terms  subject  to  the
sanction  of  the Government and forwarded a letter  to  the
Government stating the offer to take the plots on lease, his
provisional  acceptance of the same subject to the  sanction
of  the  Government  and the terms of the lease   and  by  a
Resolution dated 5th September, 1917, the Government granted
the  sanction.  The defendant's predecessor was put in  pos-
session and though a formal lease deed was not executed  and
registered,  the Taluqdari Officer and after the release  of
the estate by the Government, the agent of the taluqdar, and
the plaintiffs who came in as ijaradars continued to receive
the agreed rent up to 1939..  In 1933 the plaintiffs  insti-
tuted a suit to eject the defendant alleging that he was  a.
mere trespasser as there was no registered lease deed:
    Held,  that the correspondence which passed between  the
defendant's predecessor-in-title and the Taluqdari  Officer,
the  letter  sent by the latter to the Government,  and  the
Resolution     of the Government dated 5th September,  1917,
proved that there was a contract in writing to grant a lease
on  the terms.stated in the Taluqdari Officer's letter,  and
as  the  defendant's predecessor was put  in  possession  in
furtherance of this contract and the rents agreed upon  were
accepted  for  several  years, s. 53-A of  the  Transfer  of
Property  Act was applicable to the case and the  plaintiffs
were not entitled to eject the defendant.
Judgment of the Bombay High Court reversed.
76
JUDGMENT:
APPEAL  from the High Court of Judicature at Bombay:  Appeal
No. XXXVII of 1949.
This was an appeal from a judgment and decree of the  Bombay
High  Court dated 9th March, 1943, in Second Appeal No.  717
of 1940, varying the decree of the Assistant Judge,  Ahmeda-
bad,  in Appeal No. 173 of 1936 reversing the decree of  the
joint Sub-Judge, Ahmedabad, in Suit No. 830 of 1933.
R.J. Thakur, for the appellant.
     Nanak  Chand Pandit, (Diwan Charanjit Lal,  with  him),
for the respondents.
     1950.  March 21.  The judgment of the Court was  deliv-
ered by
     MAHAJAN  J .--This is an appeal from the  judgment  and
decree of the High Court of Bombay dated 9th March 1943  and
made in Second Appeal No. 717 of 1940 varying the decree  of
the  Assistant Judge, Ahmedabad, in Appeal No. 173  of  1936
reversing  the decree of the Joint Sub-Judge, Ahmedabad,  in
Suit No. 830 of 1933.
The  suit out of which this appeal arises was filed  by
the  respondent firm in ejectment to recover  possession  of
survey  Nos.  222, 223, 225 and 226 situate  in  Rampura  in
Ahmedabad district and for mesne profits, as early as  July,
1933,  and during its 17 years' span of life it had a  some-
what chequered career.  Those responsible for drawing up the
pleadings  did not take pains to comprehend correctly as  to
what they were about and the whole litigation was  conducted
in  a  slovenly  and  slipshod   manner.    Evidence   which
should have been produced at the beginning was allowed to be
produced  at a much later stage after the case went back  on
remand and the suit was determined by the Assistant Judge on
fresh  issues and fresh materials. It was in  this  confused
state  of the record that it was eventually decided  by  the
High  Court  and its judgment is by no  means  satisfactory,
The  long  time taken in deciding the  suit  which  involved
determination of a few simple issues is such as is calculat-
ed to bring into ridicule the administration of justice.
77
    There  is a talukdari estate called the Bhankoda  estate
in  Viramgam  taluka in Ahmedabad district.  It  is  jointly
owned by several talukdars in different shares and comprises
twelve  villages one of which is Rampura in which  the  suit
lands are situate.  By Government Resolution No. 8170, dated
30th   August  1912, the estate was taken  under  Government
management  under  section 28 of the Gujarat  Talukdars  Act
(Bombay Act VI of 1888).  The firm of Shah Manilal  Maganlal
and  Bros. (predecessors in interest of the  appellant)  de-
sired  to erect a ginning factory on survey Nos.  228,  225,
and  226 and with that object approached the Talukdari  Set-
tlement  Officer for a permanent lease of these survey  num-
bers.  The said officer agreed to grant a lease  subject  to
sanction  of  Government.  By Resolution No. 10795  of  1917
dated  5th September 1917 the Government of  Bombay  granted
the  requisite sanction. Exhibit 181 is a certified copy  of
the  letter  from the Chief Secretary to Government  to  the
Commissioner and to the Talukdari Settlement Officer and  in
detail  it  mentions the various steps taken to  effect  the
transaction.
    On  9th  December 1916 an application was made  by  Shah
Manilal  Maganlal in writing signed by him to the  Talukdari
Settlement Officer offering to take a permanent lease of the
above  mentioned survey numbers on an annual rental  of  Rs.
290 for the purpose of erecting a ginning factory.  On  12th
July 1917 the said officer accepted provisionally this offer
after  taking  into consideration the objections  raised  by
some  of the talukdars in respect of the grant of  a  lease.
He  submitted  the papers to government with  the  following
recommendations :--
"As  the petitioner was in urgent need to  start  opera-
tions during the current ginning season I have in  anticipa-
tion of Government sanction permitted him to enter upon  the
land and have the honour to approach you for sanction  under
section 27 (A) of the Court of Wards Act, the provisions  of
which  have  been made applicable to  Talukdari  Estates  by
section 29 (G) of the Gujarat Talukdars Act,"
78
    The  conditions of the lease agreed upon by the  parties
were  annexed with this letter and a copy of the  offer  was
also sent to Government. Ex. 181 recites the contents of the
offer and states the undertaking given by the lessee.  There
is intrinsic evidence within its contents to show that these
writings were signed by the proposer. The Talukdari  Settle-
ment Officer in a signed writing accepted the offer and sent
it  for  Government  sanction. It further  appears  that  he
communicated his acceptance to the lessee and agreed to give
a lease if Government gave sanction.  The survey numbers  in
question  were  in possession of tenants and it  was  agreed
that  the lessee would take possession after making  private
settlements  with them.  It was also agreed that if no  such
private  arrangement  could  be made,  then  the  settlement
officer  would take steps to issue ejectment notice  against
the tenants.  On 20th July, 1917, the Commissioner forwarded
the  papers to Government with his recommendations  and  the
Government  on 5th September, 1917, sanctioned the  arrange-
ment agreed to by the Talukdari Settlement Officer with Shah
Manilal Maganlal.  The sanction order is signed by the Chief
Secretary  to the Government and it contains an  endorsement
of  its having been sent to the officers concerned.   It  is
thus  clear  that a binding agreement to  lease  the  survey
numbers  in  question  was effected  between  the  Talukdari
Settlement Officer and Shah Manilal Maganlal with the  sanc-
tion  of the Government. Though a draft of a formal deed  of
lease  was prepared, no such document was formally  executed
or registered for reasons which it is not necessary to state
herein.
    Soon  after the agreement the lessee took possession  of
the  survey numbers in suit and put up thereupon  a  ginning
and  a pressing factory, a bungalow, engine rooms and  other
structures.   He tendered the agreed rent to  the  Talukdari
Settlement  Officer who received it from him.  He  continued
receiving  it  for about two years when the estate  was  re-
leased from the management of the Government and came  under
the  management of the talukdars. The manager  appointed  by
the  talukdars continued to receive rent from the lessee  as
had been settled by the Talukdari Settlement Officer.
79
    On  4th May, 1924, a possessory mortgage of the  ginning
factory  along with all its buildings was effected  by  Shah
Manilal Maganlal in the sum of Rs. 1,40,000 in favour of the
defendant.   The  mortgage included in the schedule  of  the
mortgaged  property some other property as 'well.   The  two
contestants  in the suit, the defendant and the  plaintiffs,
acquired  their  rights in this property  during  the  years
1924-25.   The  defend ant came in as a mortgagee  as  above
stated, while the plaintiffs came in as ijaradar and assign-
ee  of certain mortgage rights.  The plaintiffs  since  then
have been receiving the rent according to the grant made  by
the  Talukdari  Officer.   In the year  1933  the  appellant
purchased the equity of redemption of the suit property at a
court auction and became vested with all the rights of Mani-
lal  Maganlal in this property, the value of which  has  now
been estimated in the neighbourhood of Rs. 38,000.
In  the  year 1933  the plaintiffs discovered  that  the
defendant   had  no  registered  lease  in  his  favour  and
therefore  in  law he  was not entitled to the rights  of  a
permanent  tenant  in respect of the   survey   numbers   in
dispute.  They  therefore instituted the present  suit   for
ejectment  of the defendant.  In the 2nd and 3rd  paragraphs
of  the plaint it was  admitted that in .the course  of  the
correspondence  with  the Government of Bombay a  lease  was
negotiated   between the firm of Shah Manilal  Maganlal  and
the  Talukari  Settlement Officer in respect of  the  survey
numbers in dispute for a period of fifty years at an  annual
rental  of Rs. 290, but it was stated that  because  Manilal
Maganlal did not execute a formal registered lease they were
in  possession  as  trespassers. In the  4th  paragraph  the
authority  of the Talukdari Settlement Officer to grant  the
lease was also challenged.  In the 8th paragraph it was said
that  the plaintiffs received the amount of the lease up  to
31st July 1932 and that no notice was necessary to be given,
the position of the defendant being that of a trespasser. It
was however alleged that a notice was given on 25th December
1930,
11
80
    The suit was defended on a number of grounds,inter alia,
it  was pleaded that the plaintiffs had no right to  sue  in
ejectment,  not being the landlord inasmuch as they had  not
obtained  any right in the land itself and had not  acquired
complete title by an assignment of the whole of the interest
of  the talukdars in the survey numbers in dispute.  It  was
pleaded  that  the defendant was a permanent tenant  of  the
survey numbers and that the plaintiffs' own conduct debarred
them from claiming ejectment.
   The  trial Judge decreed the suit on the finding that  as
no  written lease was forthcoming it should be deemed to  be
non-existent.  It was said that no efforts had been made  to
show  that  the Settlement Officer had sanctioned  with  the
approval  of the Government a permanent lease in respect  of
survey  Nos. 223 and 225 to Shah Manilal Maganlal.   In  the
concluding  part  of the judgment it was remarked  that  the
doctrine  of equitable part performance could not  apply  to
the  present  case. Though no specific issue was  raised  on
this  point,  the matter seems to have been argued  at  some
stage  before  the trial Judge on facts found  or  admitted.
There was an unsuccessful effort to obtain a review of this
decision  on  the  ground  of  discovery  of  fresh  materi-
als.  Thereafter the matter was taken to the court of appeal
and  it  was alleged in ground No. 3  that  the  Subordinate
Judge  had erred in not considering the position created  in
the  case by the equitable rule of law embodied  in  section
53-A  of the Transfer of Property Act.  On 30th July,  1938,
the appellate court made an order of remand under Order XLI,
Rule  25,  and  called for a report  on  the  following  two
issues:-
   (1) Whether the plaintiff was a mortgagee in occupa-
tion of S. Nos. 222, 223, 225 and 226 ?
   (2) Whether the suit was bad for non-joinder of
parties ?
    The  trial Judge reported on the remand  issues  against
the  plaintiffs.  He also admitted in evidence a  number  of
documents produced after remand and one of these is Ex. 181.
A point was raised that documents produced after remand Were
not relevant to the issues remanded
81
and should not be admitted.  This contention was  overruled.
The Assistant Judge allowed the appeal on 27th April,  1940.
He  held that the plaintiffs had failed to  establish  their
right to maintain the suit either as ijaradars or as assign-
ees  of mortgage  rights.   In para. 21 of his  judgment  he
observed as follows :--
    "Ex.  181  shows that the terms of the lease  have  been
reduced to writing though  no regular  lease appears to have
been executed.  On the question whether the lease is binding
on  the plaintiff, I think section 53-A of the  Transfer  of
the  Property Act is a complete answer.  Ex. 181 shows  that
the  Talukdari Settlement Officer, with the sanction of  the
Government, contracted to lease out these lands.  The  writ-
ing is signed by the Government.  The terms of the lease can
be ascertained clearly from Ex. 181.  It is not denied  that
the  defendant's predecessor-in-title was put in  possession
of this property in performance of that contract.  Also  the
acceptance by the Talukdari Settlement Officer as   well  as
by  the plaintiff of the rent of the property as   fixed  by
that  contract shows that. the possession of  the  defendant
and his predecessor-in-title was in part performance of  the
contract  of   lease.  Admittedly, there  is  no  registered
lease.   The conditions of section 53-A of the  Transfer  of
Property  Act are fully satisfied and the plaintiff  cannot,
therefore,  eject the defendant on the ground that there  is
no registered lease."
    Further  on the learned Judge said that section 53-A  of
the  'Transfer  of  Property Act embodied  the  doctrine  of
estoppel  and a plea to that effect had been taken  inasmuch
as  the  defendant  had pleaded  that  the  plaintiffs  were
estopped  by  their conduct from asking for  possession  and
that therefore no separate issue was raised on this point.
    The  unsuccessful  plaintiffs went up in  second  appeal
against this decision to the High. Court of Bombay. The High
Court  allowed  the appeal and modified the  decree  of  the
Assistant Judge.  It decreed the plaintiffs' suit in respect
of survey Nos. 223 and 225 and dismissed the suit in respect
of survey Nos. 222 and 226,
82
On  the  question of the plaintiffs' title to  maintain  the
suit the High Court reached the following decision:-
    "If  it were necessary we would hold that the  plaintiff
has sufficiently proved that it is entitled to maintain this
suit  in its capacity as ijaradar as well as  assignee  from
the mortgagees. But we think even apart from that, plaintiff
is  entitled to bring this suit because on  the  defendant's
own admission he has paid rent to the plaintiff for three of
the  suit fields, viz., survey Nos. 223, 225, and  226,  and
that  too not the interest of 84 Dakdas in them but for  all
the  100 Dakdas.  In fact, ever since the plaintiff came  on
the  scene  the defendant has treated the plaintiff  as  the
landlord  as regards these three survey numbers, and in  the
present  suit, therefore, the defendant cannot  dispute  the
plaintiff's right to sue."
    In a later part of the judgment it was observed that  in
any case Ginwalla as the manager of the plaintiff firm would
be  entitled to continue the present suit as  receiver.   On
the  second  question the learned judges of the  High  Court
observed as follows :-
    "We do not think it necessary to decide whether if there
had been a signed contract by the transferor in the  present
case,  it would have fallen under section  53-A,because,  in
our  opinion, the correspondence Which is summarized in  the
Government Resolution cannot be regarded as evidence of  the
contract,  and  secondly,  the terms of  the  contract  also
cannot be deduced from the correspondence with any  reasona-
ble  certainty.   We, therefore, hold  that  the  Government
Resolution  on which the defendant relies is no evidence  of
the writing of a contract referred to in section 53-A of the
Transfer of Property Act, and apart from that the  defendant
has  no legal basis on which he can claim to hold  the  land
either as a permanent lessee or for a particular period."
   The  principal  questions canvassed in this  appeal  are,
whether the plaintiff firm has proved its title to  maintain
the  present suit in ejectment against the  defendant,'  and
whether  the  defendant is entitled to the  benefit  of  the
provisions of sec. 53-A of the Transfer of Property Act. The
question as to the maintainability of the suit'
83
against  the  defendant without a proper notice  was  raised
before the High Court but permission to argue it was refused
because  the  matter had not been raised in  either  of  the
lower Courts.
    The  appeal  was  elaborately argued before  us  by  the
learned  counsel for the parties, but in our view, it  is  '
not  necessary to consider and decide all the  points  urged
because  we consider that the Assistant Judge was  right  in
entertaining  and giving effect to the plea under sec.  53-A
of  the Transfer of Property Act and we are satisfied   that
no   substantial grounds existed  for reversing- that  deci-
sion  in  second  appeal.  This section  introduced  in  the
Transfer of Property Act in 1929 is in these terms :--
    "Where  any person contracts to transfer for  considera-
tion  any immovable property by writing signed by him or  on
his behalf from which the terms necessary to constitute  the
transfer can be ascertained with reasonable certainty,
    and  the  transferee  has, in  part-performance  of  the
contract,  taken  possession  of the property  or  any  part
thereof  ......  and has done some act in furtherance of the
contract, and the transferee has performed or is willing  to
perform his part of the contract,