dedol-hf/india-case-legal-rag huggingface dataset:
Nettleship(1):''  Where a man going, g to be married  to  an
heiress,  his horse having cast a shoe on the  journey,  em-
ployed a blacksmith who did the work so unskilfully that the
horse was lamed, and the rider not having
(1) L. L. 3.  C.P. 409, 508
1003
arrived in time the lady married another; and the blacksmith
was  held  liable  for the loss of the  marriage."  And  the
learned  Judge  warned  "We should inevitably  fall  into  a
similar absurdity unless we applied the rules of commonsense
to  restrict  the extent of liability for the  breach  of  a
contract  of this sort."  The commonsense point of view  was
thus put by Lord Wright in Liesbosch, Dredger v. Edison S.S.
(Owners)(1):  ,, The law cannot take account  of  everything
that  follows  a wrongful act; it  regards  some  subsequent
matters  as outside the scope of its selection  because  'it
were infinite for the law to judge the cause of causes,'  or
consequence  of  consequences. Thus the loss of  a  ship  by
collision due to the other vessel's sole fault may force the
shipowner  into  bankruptcy and that again may  involve  his
family  in suffering, loss of education or opportunities  in
life, but no such loss could be recovered from the  wrongdo-
er. In the varied web of affairs the law must abstract  some
consequences  as  relevant, not perhaps on grounds  of  pure
logic  but simply for practical reasons."  These  considera-
tions have led the courts to evolve the qualifying rules  of
remoteness  subject  to which alone the broad  principle  of
restitutio in integrum now finds its application.
    Applying  these principles to the facts of  the  present
case, what is the position ? The respondents lost their  go-
ods by fires arising out of the explosion presumably due  to
the negligent conduct of the Government's officers or  serv-
ants  at the docks. Even if the appellants had taken  out  a
fire  insurance  policy in ordinary form it would  not  have
covered  the  loss, for fire due to explosion  would  be  an
excepted  peril. So, the appellants' failure keep the  goods
insured  produced  no direct consequence for  which  damages
could  in law be claimed. It is true enough to say  that  if
the  appellants  had taken out a fire policy   covering  the
goods,   the respondents could have obtained the full  value
of  the goods from the Government. But did the  respondents'
inability  to  recover such full value from  the  Government
arise directly or naturally in the usual course
[1933] A.C. 449.
1004
of things out of the appellants' failure to insure? I  think
not, since independent  and disconnected events had to occur
to  produce  the result, viz., the  Government's  scheme  of
compensation  embodied in the Ordinance, the agreement  with
the  Insurance Companies regarding their  contribution,  and
the  consequent distinction made between insured  and  unin-
sured property in  providing  compensation  for  their loss.
Suppose  the  fire  was caused by an explosion  due  to  the
negligence  of a private individual.  The respondents  would
have  their remedy  by suing him for damages.  But if he was
insolvent,  could  the  respondents'  inability  to  recover
damages from him be a direct and natural consequence of  the
appellants' failure to insure ? Surely not, for even if  the
appellants  had insured the goods according to their  agree-
ment with the respondents, the latter would be in no  better
position. Here, the Government, presumably being  satisfied,
or  at any rate apprehending, that the explosion was due  to
the  negligence of their servants, got the Ordinance  passed
providing  for payment of compensation by the Government  on
the terms stated therein and at the same time putting an end
to  all rights to recover compensation save as  provided  in
the  Ordinance and barring all suits and  other  proceedings
for that purpose.  As any claim  to compensation against the
Government must be based upon the negligence of their  serv-
ants,  the  Government  took no note of  excepted  risks  in
insurance  policies  and  undertook liability  to  pay  full
compensation  in  case of all  insured  property,  doubtless
because, under an arrangement with certain Insurance  Compa-
nies the Government obtained a proportionate contribution as
provided  for  in section 15, though on  the  hypothesis  of
their  servants' negligence their liability in law would  be
the  same in respect of insured and uninsured  property.  if
the Ordinance had provided for partial compensation in  both
cases,  as  it  would probably have done  if  the  Insurance
Companies had not agreed to come into the scheme with  their
contributions, the respondents could have no claim to recov-
er the balance from the appellants,
    1005
notwithstanding  that the supposed direct causal  connection
between  the  appellants' default and  the respondents' loss
would  still be there.  The truth is there was no such  con-
nection  and it was because of the provisions of  the  Ordi-
nance which made a distinction between insured and uninsured
property in the matter of compensation for explosion damage,
and  barred  rights and remedies under the  general  law  in
relation  theretto,  that  the respondents  were  unable  to
recover the balance of the value of their goods destroyed by
fire.   But  such inability cannot be  regarded  as  flowing
naturally or directly from the appellants' default.
    It  was suggested that the provisions of  the  Ordinance
must be taken to have displaced the ordinary rules of law as
to  remoteness  of damage, as section 18  (2)  extinguished,
retrospectively  from the date of the explosion, all  rights
and  remedies under the general law for obtaining  compensa-
tion for explosion damage and substituted the rights therein
provided.  The substituted right to compensation, so far  as
the Government and insured property were concerned, was  not
subject  to any restrictive conditions in the policies,  and
therefore,  it was claimed, the measure of damages  in  this
case  must be determined irrespectively of the existence  of
the  clause  excluding  "explosion" from the  scope  of  the
common form of policy.  The argument is, m my opinion,  more
ingenious  than sound.  The short answer to it is  that  the
Ordinance did not purport to displace or supersede any  rule
of law as to measure of damages or to amend or abrogate  any
terms  in  insurance.  policies.  There is  nothing  in  the
Ordinance  to indicate that the  clause excepting  explosion
contained  in the fire insurance policies issued  in  Bombay
should  be deemed to be null and void.  As  already  stated,
the  Government,  having accepted  liability  for  explosion
damage,  were  not  really concerned  with  the  restrictive
conditions  in the policies.  Their liability did not  arise
out  of such policies.  In view of certain Insurance  Compa-
nies  having agreed to contribute a certain proportion,  the
Government undertook liability
1006
to  pay  full  compensation for loss  of  insured   property
regardless of the terms o[ insurance, which had no relevance
to  the liability which they assumed.  To suggest,  in  such
circumstances,  that the clause excepting explosion risk  in
all fire policies issued in common form in Bombay was legis-
latively  abrogated is, in my opinion, extravagant and  far-
fetched.  The  respondents' goods were  destroyed  when  the
explosion occurred on the  14th April,  1944, and  on   that
date  they could  have  recovered  nothing  except   perhap-
snominal  damages for the appellants' failure to insure  the
goods  as  they agreed to do.  It  is difficult to  see  how
by  virtue  of  the Ordinance  passed more than  two  months
later,  their  claim against the appellants, which  the  re-
spondents  themselves are contending is not in any  way  af-
fected  by  the  provisons of the  Ordinance,  could  become
enlarged.
The next contention raised on behalf of the apellants before
us relates to the maintainability of the respondents'  coun-
ter-claim-   The contention is based upon section 18 (2)  of
the  Ordinance which provides that "no suit or  other  legal
proceedings  for any such compensation or  damages"   (i.e.,
compensation  or  damages for any damage to or loss  of  any
property,  rights or interests due to or in any way  arising
out of the explosion)"shall, save as aforesaid"  (exception-
snot material here)           "be maintainable in any  court
against  the  Crown  ......... or against any  other  person
whoms  oever......". The learned Chief Justice in the  Court
below makes no reference in his judgment to this contention,
but  Chagla  J. repelled it thus. "Now, in my  opinion,  the
defendants' claim does not arise out of the explosion nor is
it  in  any way due to the explosion.  The  plaintiffs  have
filed the suit as agents on an indemnity and the defendants'
answer  is  that they were entitled to set off  against  the
amounts due to the plaintiffs, the loss incurred by them  by
reason  of the fact that the plaintiffs as  the  defendants'
agents  did not carry out the defendants' instructions.   If
the plaintiffs' claim on the indemnity does not arise out of
the explosion equally so does the defendants' set-
     1007
off not so arise.  The defendants' cause of action is  fail-
ure  by the plaintiffs to carry out their  instructions  and
that  cause  of action has nothing whatever to do  with  the
explosion'". With all respect I find it difficult to  follow
this reasoning.  The appellants' claim on the indemnity does
not certainly arise out of the explosion, for their case  is
that  they purchased the goods in question paying the  price
on the respondents' instructions, and they claim to  recover
the  price  so paid notwithstanding the destroction  of  the
goods by fire for which they say they were in no way respon-
sible.   But the basis of the respondents' counter-claim  is
quite  different.  They say that if the appellants had  kept
the  goods  insured according to the  agreement,  they  (the
respondents)  could  have recovered the full  value  of  the
goods from the Government under section 14 of the Ordinance,
and  the appellants, having failed to do so, are  liable  to
pay by way of damages the balance of the value of the goods.
It  is a little difficult to see how it could be  said  that
the respondents' claim "does not arise out of the  explosion
nor  is it in any way due to the explosion".  The bar  under
section  18  is not based upon the nature of  the  cause  of
action  for  the  suit or proceeding barred,  but  upon  the
damage or loss of property having been "due to or in any way
arising  out    of" the explosion.  Indeed, the  respondents
appear  to  my  mind to be in a dilemma in  regard  to  this
point. They must necessarily say, in order to have been able
to claim the full value of the goods from the Government  if
they  had  been insured, that the damage to  the  goods  was
"explosion   damage  to  property,  being damage  caused  by
fire to property insured whether wholly or partially at  the
time  of the explosion against fire under a policy  covering
fire  risk".  For, unless they said that, no claim could  be
made  against  the Government under section 14, and  so  the
very  basis of their claim against the appellants that,  but
for  the appellants' neglect of duty, the respondents  could
have recovered the full value of the goods from the  Govern-
ment, would fail. But if they had to say that the goods were
lost by explosion damage within the meaning
1008
of section 14, it seems to me, they would be bringing  them-
selves   under  the bar of section 18 (2).  The  respondents
cannot therefore claim that the loss of the goods was explo-
sion  damage  within the meaning of the Ordinance so  as  to
bring  the case within section 14 and at the same time  con-
tend  that  the loss was not "due tO or did not in  any  way
arise out of the explosion" in order to avoid the bar  under
section 18.  Both section 14 and section 18 have in view the
physical cause for the loss or damage to property for  which
compensation  is  claimed  and not the cause  of  action  in
relation  to the person against whom relief is sought.   The
respondents  cannot,  in my opinion, be allowed to  take  up
inconsistent  positions in order to bring themselves  within
the one and to get out of the other.
    I  would  therefore  allow the appeal  and  dismiss  the
counter-claim.
DAS J. agreed with the Chief Justice.
                                        Appeal dismissed.
Agent  for the appellants: Mohan Behari Lal.
Agent for the respondents:/. N. Shroff.
PETITIONER:
EXECUTORS OF THE ESTATE OF J.K. DUBASH
        Vs.
RESPONDENT:
COMMISSIONER OF INCOME TAX, BOMBAYCITY.
DATE OF JUDGMENT:
21/12/1950
BENCH:
KANIA, HIRALAL J. (CJ)
BENCH:
KANIA, HIRALAL J. (CJ)
SASTRI, M. PATANJALI
DAS, SUDHI RANJAN
CITATION:
 1951 AIR  111            1950 SCR  969
 CITATOR INFO :
 R          1958 SC 269  (10)
 RF         1986 SC 376  (21)
ACT:
   Indian  Income-tax  Act  (XI of 1922), s.  25  Death  of
person carrying on business--Executors carrying on  business
as going concern for selling it under terms of will--Whether
"succeed in such capacity "to testator--Date of succession.
HEADNOTE:
   A person who carried on a business on which tax had been
levied  under the Income-tax Act of 1918 died on the 9th  of
April,  1942,  leaving  a will by which  he  authorised  his
executors to carry    on his business as a going concern, as
if  they were absolute owners but without being  responsible
for  loss,  for a period not exceedin     12  months  during
which if any of his nephews wanted to purchase the business,
they might sell it to him or them. The business was sold  to
one  of the nephews on the let January, 1993.  The  question
being  whether for the purposes of s. 25 (4) of the  Income-
tax  Act  of 1922 is amended in 1939 the succession  to  the
business            took place on the 9th April, 1942,  when
the  testator  died or on the 1st January,  1943,  when  the
business was sold:
Held,  affirming the decision of the Bombay High  Court,
that inasmuch as the business got vested in the executors on
the death    of thetestator and the executors carried on the
business within the meaning of es. 3 and 10 of the Act,  and
as such became personally liable as assessees and there  was
thus a change in the assessee, a succession to the  testator
"in  such capacity" took place on the date of the  death  of
the  assessee,  even  though the executors  carried  on  the
business as a going concern under the terms of the will  and
the  business was also being carried on not lot the  benefit
of  the executors but for the benefit of the estate  of  the
testator.
    Per  PATANJALI SASTRI J.--The expression  "succeeded  by
another  person" in s. 26 (2) and s. 25 (4) of the  Act  in-
cludes  not  only cases of succession inter vivos  but  also
cases of succession on death.
    While  it is true that a transfer of ownership is  ordi-
narily involved in cases of succession falling within s.  26
(2) and s. 25 (4),        it is not an essential element  of
succession within the meaning those provisions.
    The  words "in such capacity" in 8.26 (2) and s. 25  (4)
mean nothing more than the capacity of a person who  carries
on the business as the predecessor was carrying it on,  that
is, with liability to be taxed on its profits and gains.
970
Commissioner of Income-tax, Bombay v.P. E, Polson  (L.R.
7 I.A. 196) referred to.
    Jupuli   Kesava   Ra, o  v. Commisioner  of   Icome-tax,
Madras (59 Mad. 377) explained.
JUDGMENT:
    APPEAL (Civil Appeal No. CV of 1949) from  a Judgment of
the  Bombay High Court (Chagla C.J. and Tendolkar J.)  dated
March 19, 1948, in a reference made by the Income-tax Appel-
late Tribunal under section 66 (1) of the Indian  Income-tax
Act (Income* tax Reference No. 26 of 1947).
Sir N.P. Engineer (R. J. Kolah, with him) for the appel-
lant.
    M.C. Setalvad, Attorney General for India, (G. N. Joshi,
with him) for the respondent.
    1950.  December  21.  The Court  delivered  Judgment  as
follows:
    KANIA  C.J. -- This is an appeal from a judgment of  the
High  Court  at  Bombay  delivered on  a  reference  by  the
Income-tax  Appellate Tribunal under the  Indian  Income-tax
Act.   The material facts are these.  The assessees  (appel-
lants) are the executors of the will of Mr. J.K. Dubash  who
died on the 9th of April, 1942, having made his last will on
the  8th of April, 1942. Probate of the will was  issued  to
the executors on the 10th of August, 1942. During his  life-
time,  the  testator  carried on the  business  of  shipping
agents.   Clause  13 of the will contains  directions  about
carrying on this business of the testator till its disposal.
It directs the executors to carry on the business as a going
concern  after his death with power to make fresh  contracts
and  discharge the existing and future liabilities  and  all
other usual-and necessary  powers,  unless  special  circum-
stances  arose which, in the opinion of the executors,  made
it expedient to sell the business earlier. This business was
to  be carried on for a period not exceeding  twelve  months
during which time the executors were to ascertain whether or
not  any  of his nephews was willing to  purchase  the  said
undertaking.  For this purpose and generally for  sale  pur-
poses,  he  directed that the executors shall,  as  soon  as
possible,
971
after his death, have a valuation made of the said undertak-
ing.   The undertaking was to be sold so as to  include  all
his  interest in the premises, the goodwill,  the  stock-in-
trade,  plant, furniture etc. but excluding  securities  for
money  and cash in the bank to the credit of the account  of
that  undertaking.  If the executors were  satisfied  before
the  expiration of one year from the testator's  death  that
the  said undertaking would not be sold to his  nephews  be-
cause  none  was  willing or able to purchase it  or  if  it
remained unsold, at the end of a year, to any of the nephews
then  (whichever  event first happened) the  executors  were
directed  to  sell the undertaking to such third  person  on
such  terms  and at such price as they thought  proper.  The
clause  ended with the following words:-.-"I  expressly  de-
clare  that in carrying on the said undertaking my  trustees
shall, in addition to all powers, discretion and authorities
vested in them by law, have power to carry on or discontinue
any  part of the said undertaking or to augment or  diminish
the capital employed and generally to act as absolute owners
without being responsible for any loss."  The business  was,
so1d to one of the nephews on the 1st of January, 1943.  The
appellants  contended that within the meaning of section  25
(4)  of  the  Indian Income-tax Act the  succession  to  the
business  took place on the 1st of January, 1943, while  the
taxing authorities contended that the succession was on  the
9th  of  April,  1942, when the testator  died.   The  first
question  submitted for the High Court's opinion related  to
this dispute.
    The  second question referred to the High Court for  its
opinion was in respect of an amount paid by the executors to
the  widow  of  the testator.  That  question  was  answered
against  the appellants by the High Court.  Learned  counsel
appearing  for the appellants intiated that he did not  want
to  contest  the High Court's decision on  the  point.   The
appeal therefore is limited to the first question only.
    Section  25  of the Indian Income-tax Act,  1939,  gives
certain  concessions in respect of a business where tax  had
been paid by the person carrying the business
972
under  the  provisions of the Indian Income tax  Act,  1918.
The material part of sub-clause 4 of section 25 is in  these
terms :--
    "Where  the  person who was at the commencement  of  the
Indian  Income-tax  (Amendment)  Act, 1939  (VII  of  1939),
carrying  on any business, profession or vocation  on  which
tax  was  at any time charged under the  provisions  of  the
Indian  Incometax  Act, 1918, is succeeded in such  capacity
by another person............  "
The  scheme  of section 25 read with the  provisions  of
section 26 (2) appears to be to give relief, inter alia,  to
persons  who were carrying on business in 1921 and had  been
taxed on their income under the Income-tax Act of 1918.   By
a  change  effected by the Incometax Amendment Act  of  1922
they  were  subjected to taxation twice on'  the  income  of
1921-22.   The relief is intended against this levy  of  tax
twice over.
     The  rival contentions urged on behalf of  the  parties
are  these.  The assessee contends that on the death of  the
testator  under clause 13 of the will of the  deceased,  the
executors were carrying on the business of the deceased only
for  the purpose of winding it up, and there was no  succes-
sion to the business on the death of the deceased within the
meaning  of  section 25 (4) of the Income-tax  Act.   It  is
argued  that  the clause provides for nothing  else  than  a
direction to carry on the business with a view either (a) to
sell it within a year to one of the nephews, or (b) to  sell
it  to someone else at the end of the year as a  going  con-
cern.  it was pointed out that all directions in the  clause
permitting contracts to be made etc. were for the purpose of
keeping  the  business alive and not allowing it to  die  so
that the business which was a valuable asset of the deceased
could be sold as a going concern with its goodwill.  It  was
therefore  argued that the succession to the  business  took
place  only on the 1st of January, 1943, when  the  business
was sold by the executors to one of the nephews in terms  of
clause  13  of  the will. In actual money,  the  contest  is
whether the executors
973
are  entitled to get the benefit of the exemption  from  in-
come-tax in respect of the profits earned only for the  nine
days between the 1st of April and the 9th of April, 1942, or
between  the 1st of April, 1942, and  1st of January,  1943,
under section 25 (4) of the Indian Income-tax Act.  The High
Court has answered the  question against the assessee.
    In  our  opinion, the conclusion of the  High  Court  is
correct.  It cannot be disputed that in the event of a  sale
or gift of the business by the original owner the succession
within the meaning of section 25 (4) will take place only on
the date of such sale or gift and the exemption from liabil-
ity  to tax will be for a period terminating on.  that  day.
It  cannot again be seriously disputed that if the  testator
settled'  his business on trust under a deed  of  settlement
there will be a succession to the business by another person
on the day of the settlement.  Similarly in the event of his
death intestate his heir-at-law will succeed to the business
on  the date of his death.  The argument advanced on  behalf
of the appellants that in the present case having regard  to
the  terms of clause 13 of the will there has been "no  suc-
cession  in  such capacity to another  person"  because  the
executors were carrying on the business only with a view  to
sell  it as a going concern, cannot be accepted  because  on
the  day of the death of the deceased the  estate  including
the  business got vested in the executors and the  executors
carried on the business within the meaning of section 3 read
with  section  10 of the Act and as such  became  personally
liable  as assessee. Thus there came about a change  in  the
assessee and therefore "a succession in such capacity"  took
place within the meaning of section 25 (4) of the Income-tax
Act.   It seems clear that if the testator  had  transferred
the business to a trustee, although the trustees will not be
the beneficial owners, in law there will be a succession  of
the  business to another person within the meaning of.  sec-
tion 25 (4) of the Indian Income.tax Act.  If in such a case
that  result  follows there appears no reason why  when  the
legal estate is transferred by operation of law to an execu-
tor
974
there should not be considered a succession to the estate by
another  person  within the meaning of the same  section  25
(4).   The words "in such capacity" in that  clause  further