17. This takes us to the second contention which was somewhat faintly contended and that is, if operation of sub-section (2) of section 115J, as given in the Board's circular is accepted, the provision of sub-section (1) of section 115J would be rendered unconstitutional, as it will be discriminatory and violative of articles 14 and 19(1)(g) of the Constitution of India. The discrimination alleged is that the provision is applicable only to companies but not to other units of taxation. This contention in our view is without any substance. In Jain Brothers v. Union of India , the Supreme Court observed that it was well-settled that in fiscal enactments the Legislature had a larger discretion in the matter of classification so long as there is no departure from the rule that persons included in a class were not singled out for special treatment. In that case the classification of firms as the registered firm and the unregistered firm and taxing them differently, was questioned as arbitrary and violative of article 14. It was held that it was open to the Legislature to say that once a registered firm committee a default attracting penalty, it should be deemed or considered to be an unregistered firm for the purpose of imposition of penalty and no question of discrimination under article 14 could arise in such a situation. It was also observed that there was nothing to prevent the Legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but withholding the same when it committed a default and became liable to imposition of penalty.
18. On the question of applicability of article 14 to fiscal legislation, in ITO v. N. Takin Roy Rymbai , the Supreme Court has laid down as under :


Suryalatha Spinning Mills Ltd. ... vs Union Of India And Anr. on 20 February, 1996

"In taxation laws the State has, in view of the intrinsic complexity of fiscal adjustments of diverse elements, a considerably wide discretion in the matter of classification for taxation purposes. Legislature has ample freedom to select and classify persons, districts, goods, properties, incomes and objects which it would be tax and which it would not tax. So long as the classification made within this wide and flexible range by a taxing statue does not transgress the doctrine of equality it is not vulnerable to attack on the ground of discrimination merely because it taxes of exempts from taxation, some incomes or objects and not others. Nor is the mere fact that a tax falls more heavily on some in the same category, by itself a ground to render the law invalid."
19. The same principle is reiterated in R.K. Garg v. Union of India [1982] 133 ITR (SC) and Kerala Hotel and Restaurant Association v. State of Kerala .
20. Before concluding the discussion on this aspect, we may usefully refer to the judgment of the Division Bench of the Delhi High Court in National Thermal Power Corpn. Ltd. v. Union of India , wherein the Division Bench has held that the provision of section 115J is not violative of article 14 or 19(1) of the Constitution.
21. We are in respectful agreement with the view expressed by the learned judges.
22. The next contention is that sub-section (1) of section 115J results in double taxation. We are unable to appreciate this contention. Firstly, because what is being taxed is income determined on the basis prescribed under the said impugned provision and there is no provision to re-tax the same income as such, as of fact there is no double taxation. And, secondly, because double taxation per se would not render an otherwise valid provision, invalid. (See Jain Brothers v. Union of India .


23. However, learned counsel submits that if the losses, etc., which are not set-off or adjusted against the income determined as taxable under section 115J(1) and are not allowed to be carried forward, it would result in double taxation. We do not think so. The right to carry forward, it would result in double taxation. We do not think so. The right to carry forward losses, unadjusted allowances, etc., is kept intact by sub-section (2) of section 115J; merely because the amount equal to the income determined as taxable under sub-section (1) is not treated as unabsorbed loss, etc., which under no provision of the Act can be so treated, it cannot be said that there is double taxation.
24. For the aforementioned reasons, the writ petitions are without any substance and accordingly we dismiss them; having regard to the circumstances of the cases, we make no order as to costs.


Ratanchand Hirachand vs Askar Nawaz Jung And Ors. on 18 March, 1975

JUDGMENT Chinnappa Reddy, J.
 1. Nawab Salar Jung III, a nobleman of erstwhile Hyderabad State died on 2-3-1949 leaving behind him a vast estate but no issue. Not unnaturally several persons came forward claiming to be heirs of the late Nawab Sajjid Yar Jang and Turab Yar Jung first cousins of the late Nawab were two such claims. But a notification published in the Jarida dated 9-5-1949 the Nizam made the Salar Jung Estate Administration Regulation, 1358 F, and appointed a Committee known as the Salar Jung Estate Committee to administer the estate of late Nawab Salar Jung. The regulation provided that no person including heirs, if any, of the late Salar Jung shall be entitled to the possession of the estate of the deceased so long as it was under the administration of the Committee. It was further provided that the Committee should function until the Government dissolved it by notification. This Committee was continued by the Nawab Salar Jung Bahadur (Administration of Assets) Ordinance 1949 made by the Governor General of India on 12-11-1949. The Ordinance was replaced by the Nawab Salar Jung Bahadur (Administration of Assets) Act, 1950 ( a Central Act). The Nawab Salar Jung Committee was continued by this Act and it was provided that no suit or other legal proceeding for the enforcement of any right or remedy in respect of any asset shall be instituted in any Court by any person other than the Committee save with the previous consent of the Central Government.


2. On 31-5-1949 the Nizam of Hyderabad appointed a Commission to enquire into the question of succession to the estate of the late Nawab and one of the questions referred to the Commission was whether the Jagir of the law Nawab escheated to Government. Another question was who were the heirs of late Salar Jung. The Commission was unable to proceed with the enquiry as some of the claimants filed a Writ Petition in the High Court challenging the jurisdiction of the Commission to enquiry into the question of succession. The writ petition was ultimately allowed by the High Court of Hyderabad by the judgment dated 23-9-1952. The High Court held that the Commission was not the proper forum for determining the question of succession to the estate of the Nawab. The High Court, however, directed that the management of the estate might remain with the Committee until the question of succession was settled by the Civil Court in an appropriate action. The question of succession was ultimately settled as a result of the compromise between the various claimants, including the Government. The compromise was embodied in the decree passed in O.S. 13/58 a suit filed by some of the claimants.


3. We stated that Sajjid Yar Jung and Turab Yar Jung were two of the persons claiming to succeed to the estate of Nawab Salar Jung. According to the plaintiff (a business of Bombay), Sajjid Yar Jung, did not have the wherewithal to establish his claim to a share i the estate of Salar Jung. He, therefore, approached the plaintiff for financial help to enable him to pursue his establish his claim. The plaintiff agreed to do so. Sajjid Yar Jung agreed to return all amounts advanced by the plaintiff from time to time. In addition he also agreed to give the plaintiff a one anna share in the amount received from the estate of Salar Hung Sajjid Yar Jung executed an agreement to that effect on 27-6-1952. Pursuant to the agreement Sajjid Yar Jung and his agents were drawing large amounts from the plaintiff from time to time. The total of the amounts so drawn came to about Rs.75,000. Sajjid Yar Jung was enabled to pursue and establish his claim. He, however, passed away before the plaintiff could be paid his share of the amount received from the estate of Salar Jung. The plaintiff estimated the amount due to Sajjid Yar Jung from the estate of Salar Jung at about Rs. 60 lakhs. He claimed that he would be entitled to about Rs. 3 lakhs in addition to the return of the sums advanced by him. The plaintiff, therefore, filed a suit against the heirs of Nawab Sajjid Yar Jung for accounts and for administration of the estate of the late Nawab. He impleaded as parties to the suit the sons, daughters and widow of Nawab Sajjid Yar Jung as defendants 1 to 8. The receiver of the estate of Nawab Salar Jung Bahadur was impleaded as the 19th defendant.


of Nawab Salar Jung Bahadur was impleaded as the 19th defendant.


4. The heirs of the late Nawab who contested the suit denied that the plaintiff had advanced any amounts to the Late Nawab and generally denied all that was said in the plaint. They also pleaded that the suit was barred by limitation. They further pleaded that the agreement dated 27-6-1952 was unenforceable in law as it was "in the nature of a chaperty deal" which was 'opposed to public policy and forbidden by law."


5. The learned Chief Justice of the City Civil Court found that the agreement was true, that it was admissible in evidence, that amounts were advanced by the plaintiff to late Sajjid Yar Jung as claimed by the plaintiff ad that the suit was not barred by limitation. However, he found that the agreement was opposed to public policy as the object of the agreement was that the plaintiff should wield his influence with the Central and State Ministers to have Sajjid Yar Jung recognised as the heir of Salar Jung in return for his being given a one anna share in the amount to be received by the Sajjid Yar Jung from the estate of Salar Jung. On that ground learned Chief Judge held that the agreement could not be enforced. He also held that it was unconscionable. He further held that even the amounts actually received by the Sajjid Yar Jung could not be recovered by the plaintiff. The suit was dismissed with costs. The plaintiff has preferred this appeal.


6. The appeal was filed against all the legal representatives of the Sajjid Yar Jung. During the pendency of the appeal, Askar Nawaz Jung, 1st defendant in the appeal, died. C.M.P. No. 1990/1972 was filed to bring on record the legal representatives of Askar Nawaz Jung as parties in the appeal. Twelve persons were mentioned in C.M.P. No. 1990/72 as the legal representative of Askar Nawab Jung. Respondent No. 8 was 'Dorothy Baker alias Zaibunnissa alias Nazim and Hamidunnisa alias Baby, both being minors were proposed to be represented by their mother Dorothy Baker alias Zaibunnissa Begum alias Munavari Jahan Begum, respondent No. 8. It was mentioned in the petition that respondents 8 to 12 were residing opposite Dr. Kirloskar's Nursing Home in Bashir Bagh, Hyderabad. C.M.P. 1992/1972 was filed to appoint the 8th respondent as guardian of respondents 11 and 12. On the ground that the notices sent to respondents 8, 11 and 12 were returned unserved for the reason that they had vacated the house and the advocate for the appellant had not filed fresh batta with correct address though informed abut it, matter was posted first before the Deputy Registrar and later before the Court for orders. On 30-1-1974 Gopal Rao Ekbote, C.J. and Chennakesav Reddy, J., passed the following order :


"Even in regard to the 1st respondent C.M.P. 1990 and 1992 of 1972 were filed to bring on record the legal representatives and to appoint R-8 as guardian for minor respondents 11 and 12, all the respondents except respondents 11 12 were served with notices. The notices which were sent to R-8 for self and as guardian for minor respondents 11 and 12 were returned unserved with the endorsement 'house vacated'. Intimation of the fact was given to the counsel in the first week of December 1973 and he was asked to file a fresh batta with correct address and other costs. The order, however, was not complied with till today. The matter was placed before Deputy Registrar thrice. No one was present and nothing was done in that behalf. Even today no one appeared. We are therefore constrained to dismiss the appeal even as against the 1st respondent on the same ground. Although some of L.Rs. are served, but others are not served, particularly minors. Therefore, the appeal will abate against R. 1 as a whole.


Post the appeal for final hearing next week."
On 10-6-1974 when the appeal came up for hearing before one of us and Krishna Rao, J., the learned counsel for the respondents raised a preliminary objection that the abatement of the appeal against the first respondent had, in law, resulted in an abatement of the entire appeal. At that stage, while going through the records, the learned counsel for the appellant claimed to have discovered that respondents 8, 11 and 12 in C.M.P. 1990/72 had in fact been served with notices and that the matter had been wrongly posed before the Court on 30-1-1974. At his request we adjourned the case to enable him to file applications to set aside the order dated 30-1-1974. Thereafter the appellant filed C.M.P. Nos. 4740 and 4824 of 1974 to condone the delay in seeking to set aside the orders dated 30-1-1974 passed in C.M.P. Nos. 1990/72 and 1992/72. Notice was ordered to the respondents. The appeal and the C.M.P. are now before us.


7. We have looked into the original notices issued to respondents 8 to 12 in C.M.P. Nos. 1990 and 19921 of 1972. We find that some persons received the notices on 26-12-1972 on behalf of respondents 8, 11 and 12. Whoever was the person that received the notices it was certainly not the 8th respondent. The signature of the person who has signed on the notices bears no resemblance whatever to the signature of the 8th respondent. On the other hand, we find that notices appear to have been taken out once again to respondents 8, 11 and 12 and on 1-11-1973 the Process server made an endorsement on the notices to the effect that the respondents had vacated the house and gone to live elsewhere. It is clear that respondents 8, 11 and 12 were never served with notices. The order dated 30-1-74 cannot therefore be set aside on the ground of mistake of fact. The learned counsel for the appellant also argued that the Court was wrong in holding that the appeal had abated against respondent No. 1 as a whole. He argued that when notices had been served on nine out of the twelve legal representatives, the court acted without jurisdiction in declaring that the appeal had abated against the 1st respondent 'as a whole'. We will consider this question with preliminary objection raised by the learned counsel for the respondents that the appeal having abated against the first respondent it must be considered to have abated as a whole against all the respondents.


8. In support of his preliminary objection Sri Jaleel Ahmed relied on a catena of decisions to which we shall make a brief reference in State of Punjab v. Nathu Ram, , land belonging to two brothers was acquired. The Arbitrator to whom the question of compensation was referred made an award against which the Government preferred an appeal. During the pendency of the appeal one of the brothers died. His legal representatives were not brought on record. So the appeal abated against him. The Supreme Court held that the appeal could not proceed against the other brother either. Reghubir Dayal J., observed that the Court would not proceed with an appeal (a) when the success of the appeal might lead to the court's coming to a decision which would be in conflict with the decision between the appellant and the deceased respondent and which would, therefore, lead to the court's passing contradictory decrees with respect to the same subject-matter; (b) when the appellant could not have brought the action for the necessary relief against those respondents alone who were still before the court; and (c) when the decree against the surviving respondents would be ineffective.

 9. In Ramswarup v. Munshi, a pre-emption decree had been granted. The vendees preferred an appeal to the Supreme Court. Of the five appellants first and second appellants constituted one group and appellants 3, 4 and 5 constituted another group. While the appeal was pending the first appellant died, but his legal representatives were not brought on record. The sale in the case was not a sale of any individual item of property but one of the entire set of properties. The Supreme Court held that the decree was a joint one and as part of the decree had become final by reason of abatement, the entire appeal must be held to be abated.


10. In Rameswar Prasad v. Shambehari Lal, , it was held that if in respect of one appellant the appeal had abated and the decree in favour of the respondents had become final to that extent, it would be against the scheme of the Code of Civil Procedure to hear the appeal if the decree of the lower court proceeded on a ground common to all the plaintiffs or defendants.


11. In Raghunath v. Ganesh, , Shamdass and Jaigopal had purchased the property prescribed as Lot No. 8 under a single sale deed. Jaigopal died and his legal representatives were not brought on record. The appeal in the Supreme Court was concerned with several items of property, besides Lot No. 8 which were in the possession of other defendants. An argument was advanced that the failure to bring the legal representatives of Jaigopal on record resulted in the abatement of the entire appeal. The Supreme Court repelled the contention and said that the interests of the other defendants who were in possession of various other properties were independent and, therefore, the whole of the appeal could not abate because the heirs of certain deceased defendant which was in possession of one property had not been brought on record. But so far as lot No. 8 was concerned, it was held that since there was only a single sale deed the appeal abated and could not proceed against Shamdas also. This case is an instructive case since it shows how the death of a respondent may not allow further proceedings in an appeal against some respondents while it may allow further proceedings in an appeal against other respondents depending upon whether the interests of the other respondents were the same as the interest of the deceased respondent.
 12. In Gupta v. Murali Prasad, , the three tests laid down by the Supreme Court in State of Punjab v. Nathu Ram, were reiterated and it was further pointed out that the tests were not cumulative and that even if one of them was satisfied the court would have to dismiss the appeal.


13. In Md. Suleman v. Md. Ismail, the plaintiff instituted a suit against persons who were not the only heirs of a deceased person against whose estate of the plaintiff had a claim. The plaintiff had made diligent and bona fine enquiry and had instituted the suit in the genuine belief that the defendants were the only persons interested in the estate. It turned out that there were others also who were interested in the estate. The Supreme Court was of the view that the question whether a decree obtained by a creditor against the heirs of a deceased person was binding upon the entire estate or only upon those who were impleaded eo nomine as parties was part of the law of procedure which regulated all matters gong to the remedy. The Supreme Court held that in the absence of fraud or collusion and in the absence of other circumstances which would indicate that there had not been a fair or real trial or that the absent heir had a special defence was not and could not be tried in the earlier proceeding, the decree would bind the absent heirs also.


14. The principles deducible from these decisions of the Supreme Court are that on the abatement of an appeal against one respondent the Court cannot proceed with the appeal against the other respondents (1) If the success of the appeal would lead to contradictory decisions with respect to the same subject-matter (2) if the appellant could not have brought the action against the remaining respondents only and (3) if the decree granted against the surviving respondents would be ineffective. The tests are not cumulative and the entire appeal will have to be dismissed even if one of them is satisfied. These principles are founded on the assumption that the appellant has allowed the appeal to abate against one of the respondents by his own default. But where the appellant after diligent and bona fide enquiry genuinely believes that some persons alone are the heirs of the deceased respondent and brings them on record, a decree passed against such persons would bind the entire estate of the deceased person, subject of course to the absence of fraud or collusion or other circumstances which would indicate that there had not been a fair or real trial, or that the absent heir had no special defences which were open to them. If these principles are applied it must be held that the failure of the appellant to bring on record respondents 8, 11 and 12 in C.M.P. No. 1990/72 resulted in the abatement of the appeal against Askar Nawab Jung the 1st respondent in the appeal, as was held in the order passed by the Gopal Rao Ekbote, C.J., and Chennakesav Reddy, J., on 30-1-1974. Applying the same principles it must be further held that abate of the appeal against Askar Nawab Jung, the 1st respondent, must also lead to the position that the appeal cannot be heard against the other respondents either. The interests of the other respondents in the appeal are the same as the interests of Askar Nawab Jung


interests of the other respondents in the appeal are the same as the interests of Askar Nawab Jung and any success in the appeal against the other respondents would lead to contradictory decisions. On the one hand, the agreement would be void against Askar Nawab Jung heirs while it would be valid against the other respondents. This is a situation which the appellant had brought upon himself. There was no diligence at all on his part. It is not a case where he was not aware who the heirs of Askar Nawab Jung were. He filed a petition to implead all the heirs of Askar Nawab Jung but defaulted in taking appropriate steps to bring all of them on record. Even after the order of Gopal Rao Ekbote, C.J., and Chennakesav Reddy, J., was passed on 30-1-1974 he did not take any steps to have the order reviewed on any of the grounds now mentioned. In the petitions filed by him he does not even state why he delayed in filing the petitions. We have, therefore, no option but to hold that in view of the abatement of the appeal against the 1st respondent, it is not permissible for us to proceed with the appeal against the other respondents.


15. The learned counsel for the appellant argued that in an action for administration it was not necessary that all the heirs of the deceased should be impleaded as parties. He relied on the decision of the Privy Council Mohammedali v. Safia Bai, AIR 1940 PC 215. That was a case where a Mohammadan heir brought a suit against his co-heirs for administration. On the death of one of the defendants the legal representatives were not brought on record. It was held that the suit for administration did not come to an end. The Privy Council pointed out that the contention that the plaintiffs suit had abated as a whole involved an assumption that the plaintiff was claiming relief against the deceased and that the deceased's heirs were entitled to resist the grant of such relief. No step of that reasoning could be justified, according to their Lordships. The situation here is completely different. The action is not by an heir against his co-heirs. The action is by a creditor against the heirs representing the estate of the deceased. Relief was claimed by the plaintiff against all the defendants and each of the defendants had a right to resist the grant of relief to he plaintiff whether or not the others resisted the action. We do not think that the reasoning in Mohammedali v. Safia Bai, AIR 1940 PC 215 (Supra) can possibly apply to the facts of the present case.


16. Assuming that our conclusion that the appeal has been determined by its abatement against the 1st respondent is not correct, we will proceed to consider the appeal on its merits. It was argued by the learned counsel that the learned Chief Judge of the City Civil Court had invented a new ground of public policy in deciding that the suit agreement was opposed to public policy. This he urged, was impermissible and he relied on the observations of the Supreme Court in Cherulal Prakh v. Mahadeo Das, . Subba Rao, J.,, (as he then was) after referring to a few earlier cases on the subject of public policy stated that the position thus :--


"The doctrine of public policy may be summarized thus : Public policy or the policy of the law is an illusive concept. It has been described as "untrustworthy guide", "variable equality", 'uncertain one'. 'Unruly horse' etc., the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society but in certain cases, the court may relieve them of their duty on a rule founded on what is called the public policy, for want of better words. Lord Atkin describes that something done contrary to public policy is harmful thing but the doctrine is extended not only to harmful cases but also to harmful tendencies, this doctrine of public policy is only a breach of common law, and, just like any other breach of common law, it is governed by precedents the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations it should only be invoked in clear and incontestable cases of harm to the public; though the heads are not closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interests of stability of society not to make any attempt to discover new heads in these days."


It will be noticed that the Supreme Court did not altogether ban the evolution of a new head of public policy. In fact, in a modern progressive society with fast changing social values and concepts it becomes more and more imperative to evolve new heads of public policy, whenever necessary, to meet the demands of new situations. Law cannot afford to remain static. It has, of necessity, to keep pace with the progress of society and judges are under an obligation to evolve new techniques or adapt old techniques to meet the new conditions and concepts. As was said by Dankwerta L.J., in Nagle v. Fielden, 1966 (2)QB 633 at p. 650:
 "The law relating to public policy cannot remain immutable. It must change with the passage of time. The wind of change blows upto it."
Professor Winfield described public policy as "a principle of judicial legislation or interpretation founded on the current needs of the community." Therefore, he thought that public policy was necessarily variable and that its very variability was its surest foundation. In an essay on 'Public Policy in English Common Law' (42 Harvard Law Review P. 76) he said :
 "Public policy is necessarily variable. It may be variable not only from one century to another, not only from one generation to another, but even in the same generation. Further it may vary not merely with respect to the particular topics which may be included in it, but also with respect to the rules relating to any one particular topic................ This variability of the doctrine and not a missile to be flung at it. Public Policy would be almost useless without it."
 17. The whole concept of limiting the heads of public policy is based on the concept of 'freedom of contract' which was considered so very fundamental in the days when laissez faire ruled the roost. This concept was succinctly stated by Jessel MR. In 1875 as follows:


"You have this paramount public policy to consider, that you are not rightly to interfere with the freedom of contract."
But, Laissez faire had its day and its corner stone. 'Freedom of contract' has not ceased to have the idealistic attraction it had in the 19th Century. We are now more and more concerned with the social and economic interest of the community rather than individual interest. A.C. Guest in his introduction in Anson's Law of Contract (23rd Edition) says :
 "Today the position is seen in a very different light. Freedom of contract is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the economic interests of the community at large. In the more complicated social and industrial conditions of a collectivist society it has ceased to have much idealistic attraction. It is once realised that economic equality often does not exist in any real sense, and that individual interests have to be made to subserve those of the community. Hence there has been a fundamental change both in our social outlook and in the policy of the legislature towards contract, ad the law today interferes at numerous points with the freedom of the parties to make what contract they like."
 18. With this fundamental change of outlook on the concept of Freedom of contract Jussel M.R's concept of limiting 'public policy' in the name of 'Freedom of Contract' must be considered to be on its way to becoming archaic. Further, in our view, in a developing democracy like ours dedicated to the establishment of a new social order, we cannot afford to shut the door firmly against new heads of public policy.


19. It is true that public policy should not depend upon 'the idiosyncratic inferences of a few judicial minds'. (Lord Atkin in Fender v. St. John Mild May (1938) AC 1) and moral indignation must not be mistaken for public policy (Starke J., in Jenkins v. Smith, 1969 VR 267). These are trite sayings which need not deter morality indignant judicial minds from searching for new heads of public policy which satisfy the test of advancement of the highest public good and the prevention of clear and incontestable public hard. As far back as 1853 in Egerton v. Earl Brownlow, (1853) 4 HLC 1 at p. 151, Lord Chief Baron Pollock said :
 "My Lords, it may be that Judges are no better able to discern what is for public good than other experienced and enlightened members of the community but that is no reason for their refusing to entertain question, and declining to decide upon it. Is it, or is not, a part of our common law that in a new and unprecedented case where the mere caprice of a testator is to be weighed against the public good, the public good should prevail? In my judgment it is."


Lord Chief Baron Pollock's speech was echoed by Viscount Haldane in Rodrigueaz v. Speyer Brothers, 1919 AC 59, Viscount Haldane expressed the view that in deciding upon questions of public policy Judges should be guided by the opinions of men of the world as distinguished from opinion based on legal learning. He also pointed out that what the law recognised as contrary to public policy turned out to vary greatly from time to time and that the dictum of Lord Halsbury in Janson v. Drieftein Consolidated Mines Ltd., 1902 AC 484, that courts cannot invent new heads of public policy should not be taken too laterally. Of course, as observed by professor Winfield in his essay.


"It is not to be expected that men of the world are to be supposed as expert witnesses in the trial of every action raising a question of public policy. It is the Judges themselves, assisted by the bar who here represented the highest common factor of public sentiment and intelligence."
Thus the twin touchstones of 'public policy' are advancement of the public good and prevention of public mischief and these questions have to be decided by Judges and not as men of legal learning but as 'experienced and enlightened members of the community' 'representing the highest common factor of public sentiment and intelligence.' Enunciation of public policy is the crystallizing of the opinions of Judges as men of the world."

 20. Public policy has often enough been described as 'an unruly horse' and this description appears to have scared away judicial minds from lading the steed into new pastures. To quote professor Winfield again.


"That animal has proved to be a rather obtrusive not to say blundering steed in the law reports. It would have been more effective if we had not been so much of it. It has gone reverberating down the history of our law..................... some Judges appear to have thought it more like a tiger and have refused to mount it at all ............"
In a short note in 59 Law Quarterly Review P. 298 Dr. F.A. Mann observed :
 "public policy may be an unruly horse. But this does not mean that on the proper occasion a Judge must not take his courage in his hand and mount the steed."
 21. Similarly, Lord Denning in Enderby Town Football Club v. F.A. Limited, (1970) 3 WLR 1021 said, "I know that over three hundred years ago Hobart C.J. said, 'the public policy is an unruly horse.' It has often been repeated since. So unruly is the horse, it is said (per Burrough J., in Richardson v. Mellis, (1824) 2 Bing 229 at p. 252), that no Judge should try to mount it lest it run away with him. I disagree. When a good man in the saddle the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice, as we done in Nagle v. Fielden, (1966) 2 WLR 1027."


22. We have said so much amount 'public policy' at the risk of being thought presumptuous because it is our firm belief that it is as fascinating a weapon in the judicial armoury as 'ultra vires', 'natural justice', etc., and certainly capable of being put to far greater and effective use much in the hope that at some not too distant date the Supreme Court will 'unblinker the unruly horse.'


23. The learned Chief Justice said tat it was against the public policy to order into an agreement the object of which was to influence the Central and State Minister as. If this is a new head of public policy we are ready to sponsor it. But is by no means a new head of public policy. It comes under the head 'Agreement Tending to Injure the Public Service' mentioned at page 325 of Anson's Law of Contract, 23rd Edition. In Egerton v. Earl Brownlow, (1853) 4 HL Cas 1 (supra), Lord Chief Baron Pollock stated :
 "the conclusions to which I have arrived, from the decided cases and the principles they involve, are, that all matter relating to the public welfare all acts of the legislature or the executive must be decided and determined upon their own merits only; and that is against the public interest (and therefore not lawful) for any one officiously, wantonly and capriciously........... to create any pecuniary interest or other bias of any sort in the decision of a matter of public nature and which involves the public welfare ............."
 24. In Montefoire v. Menday Motor Components Co. Ltd., (1913) 2 KB 241, the defendants entered into an agreement with the plaintiff in the following terms:
 "In consideration of your finding me the necessary capital, I am prepared to pay you 10 percent on the amount intorudced either direct or indirect and also to allot you forty shares in the Menday Motor Components Company Ltd."


According to the plaintiff a member of the Imperial Air Fleet Committee be arranged with the Treasury to provide the defendant, a manufacturer of Components of aircraft with the sum of ( 2000. He claimed that he was, therefore, entitled to be paid ( 200 and to have allotted to him forty shares in the defendant Company. In the course of the trial the Judge thought it right to call attention to the question whether there was not a defence open to the defendants that the contract sued upon was void at being contrary to public policy. The Judge fund that plaintiff had talked to the defendant "fairly of his acquaintance with high official of the Air Board" and he defendant thought that the plaintiff had 'put in a good word for him'. Shearman J., expressed the view that it was well settled that if on the face of a contract it was apparent that it was unlawful, it was the duty of the Judge himself to take the objection, and that, too, whether the parties take or waive the objection. He then proceeded to say :
 "A contract may be against public policy either from the nature of the acts to be performed or from the nature of the consideration. In y judgment it is contrary to public policy that a person should be hired for money or valuable consideration when he has access to persons of influence to use his position and interest to procure a benefit from the Government."
After referring to Normal v. Cole, (1800) 3 Esp. 253 and Statute 5 and 6 Edward 6, C. 16, Shearman J., further stated :


"While I do not go to the length of holding that the defendants were bargaining with the plaintiff that they should receive an office under the Crown, I agree with the remarks of Coltman J., in the case of Hopkins v. Prescott, (1847) 4 CB 578 at p. 596 that where a person undertakes for money to use his influence with the Commissioners of Taxes to procure for another party the right to sell stamps & c., if the contract were not void by statute, it would be void at common law as contrary to public policy. It is well settled that in judging this question one has to look at the tendency of the acts contemplated by the contract to see whether they tend to be injurious to the public interest. In my judgment a contract of the kind has a most pernicious tendency. At a time when public money is being advanced to private firms for objects of national safety it would tend to corrupt the public service and to bring into existence a class of persons somewhat like those who in ancient times of corrupt politics were described as 'carriers', men who undertook for money to get titles and honours for those who agreed to pay them for their influence; see the remarks of Lord St. Leonards in Egerton v. Earl Brownlow, (1853) 4 HLC 1 at p. 234.


It has been urged upon me in the course of the argument that a Judge must act with great caution in declaring a contract void as against public policy Burrough J., in Richardson v. Mellish, (1824) 2 Bing 229 at p. 252 said that public policy 'is a very unruly horse, and when once you get astride it you never know where it will carry you' and Lord Bramwell in Mogul Steamship Co., v. Mcgregor Gow & Co., (1892) AC 25 at p. 45, Lord Halsbury in Janson v Drieftein Consolidated Mines Ltd. (1902) AC 484 at p. 491 repeat the warning. But, applying the words of Pollock C.B. in Egerton v. Earlbrownlow (1853) 4 HLC 1 at p. 49, I think I am bound to look for the principles of former decisions, and not to shrink from applying them with firmness and caution to any new and extraordinary case that may arise."
In my judgment it is both in accordance with precedent and with public interest that I should declare this contract void as against public policy, with the result that both the action and the counter-claim are dismissed with costs."


25. In our view, an agreement, the object of which is to use the influence of a person with Ministers of the Government to obtain favourable decisions, is destructive of all sound and good administration. It discloses a tendency to corrupt or to influence public servants to decide and determine matters otherwise than upon their own merits, a tendency most injurious to the public interest. We do not have the slightest doubt that such an agreement is contrary to public policy. We also wish to emphasize that it is irrelevant that the persons proposed to be influenced are incorruptible and are persons 'whose ability honesty and patriotism are beyond all question' as in the case of Montefoire v. Menday Motor Components Co. Ltd., (1918) 2 KB 241 (supra). It is the very tendency of the agreement that makes it contrary to public policy.
 26. The learned counsel for the appellant urged that this ground was not expressly raised in the written statement. As pointed out by Shearman, j., in Monterfoire v. Menday Motor Components Co. Ltd., (1918) 2 KB 241 it is the duty of the Judge to take the objection whether parties take or waive the objection if it comes to his notice that the agreement is contrary to public policy. The learned counsel then argued that the evidence in this case did not justify the finding of the learned Judge that the object of the agreement was to influence Ministers of the Government.
 27. Ex. A-27 is the agreement executed by the late Nawab Sajjid Yar Jung. It is as follows:
 "I Nawab Sahid Yar Jung Bahadur of Hyderabad Deccan wish that you should help me and my family in promoting our cause, i.e., in our being recognised as heirs to the late Nawab Salar Jung Bahadur's property.


For the regard and love and affection that I held for you and for the time help that you have rendered me and will render me in future, I, by my free will and consent, promise to pay out of my proportionate share, a share of one anna in a rupee, within three months only after getting the possession of the property.
 The letter dated...........    is not in addition to this officer and on getting your full share that letter shall stand cancelled.  Executed this document in favour of Seth RatanChand Hira Chand of 26, Napean Sea Road, Bombay and sign in confirmation whereof this 27th day of June, 1952 at 1, B. Passa Road, New Delhi.

        Sd. Sajid Yar Jung.

Witnesses :

1.   Sarfraz Hussain,

2.   G.N. Hardas."


It is interesting to notice that the plaintiff was required to help the Nawab and his family "in promoting our cause, i.e. in our being recognised as heirs of the late Nawab Salar Jung Bahadur's property." The use of expression 'promoting' is significant and it appears to us to contemplate much more than mere financing. We do not, however, wish to stress too much upon the use of this expression. The evidence of the plaintiff himself, as P.W. 10, gives more than a clue as to the true object of the agreement and what was expected of the plaintiff. He stated that he was an industrialist, a justice of the peace and the Chairman and Director of more than a dozen companies. He was approached by Sajjid Yar Jung and his brother for help them "to represent their case before the Union Ministers." He stated 'the representation to be made was regarding the estate of late Salar Jung and Sajjid Yar Jung and his brother wanted recognition for themselves and his sisters as the heirs of Salar Jung." He further stated that it was requested that he should accompany them to the Union Ministers concerned for representing their case to the Union Government. It appears to be fairly clear from these statements that the help which Sajjid Yar Jung wanted from the plaintiff was to represent their case before the Union Ministers i.e. to bring to bear his influence with the Union Ministers. It is nobody's case that the plaintiff is an adept at advocacy. The plaintiff added "they are made a request that I should advance monies to meet their expenses.............." This statement indicates that the request for financial help was secondary to the request to represent their cause i.e. to use his influence. The plaintiff stated that he took Sajjid Yar Jung to the concerned Ministers on two or three occasions at New Delhi and that after they learnt that the case was being considered favorably by the Union Government they came down to Hyderabad.


they learnt that the case was being considered favorably by the Union Government they came down to Hyderabad. Sajjid Yar Jung requested him to meet the then Chief Minister Sri B. Ramakrishna Rao. Accordingly he met him. He further stated that he arranged for Sajjid Yar Jung's meeting with the Union Ministers who were seized with the subject-matter of Salar Jung's estate. He himself met three Ministers in connection with the representation of Sajjid Yar Jung. They were late N.Gopalaswamy Iyyengar, Late Sardar Vallabhhai Patel and Late Lal Bahadur Sastry. He has met Lal Bahadur Sastry earlier at Hyderabad along with Sajjid Yar Jung at the time of Congress Sessions. His meeting with the Ministers according to him, created a very favourable impression. At the time when he took up the assignment on behalf of Sajjid Yar Jung he expected an early disposal of the matter by the Government of India. It would have been so disposed of but for the stay orders of the High Court. He pursued the matter with the authorities at Delhi and the Union Government entered into correspondence with the local Government on the representation of Sajjid Yar Jung. With a show of modesty he added "I am not supposed to know which influence weighed with the Union Government or the local Government. I am only concerned with the result". The evidence of the plaintiff can lead but to one conclusion namely, that Sajjid Yar Jung promised to give imprisonment a one-anna share in the amount to realised from the estate of Salar Jung in return for the influence which the plaintiff was to bear upon the Union and State Ministers. One of the attestors of the agreement, a friend and consultant of Sajjid Yar Jung, was examined as P.W. 11. He also stated, "Sajjid Yar Jung wanted a representation of his case to be made to the


stated, "Sajjid Yar Jung wanted a representation of his case to be made to the Government of India and to the then Hyderabad Government. Sajjid Yar Jung wanted me to find a financier who can help him financially and also represent his case to the concerned Government". Later, he stated, "the plaintiff met two or three Union Ministers along with Sajjid Yar Jung and represented the case of the Nawab. I was present at the meeting with Mr. Lal Bahadur Sastry, who was then a Minister." Again, he stated, "the help rendered by the plaintiff was the financial help as also the representations he made to the persons concerned in the Union and the State Governments." The evidence of the plaintiff and P.W. 11 leave no doubt in our minds that the object of the agreement was to influence the Union and State Ministers and to advance and expend all amounts necessary in that connection. We agree with the finding of the learned Civil Judge on this question.


28. The learned counsel argued that late Gopalaswamy Iyengar, late Sardar Vallabbhai Patel, late Lal Bahadur Sastry and late B.Ramakrishna Rao were incorruptible public servants and that there could be no question of influencing them. As already pointed out by us earlier, the question is not about the integrity of the persons proposed to be influenced but about the tendency of the agreement.
 29. Even so, the learned counsel for the appellant argued that the plaintiff was entitled to a return of all the amounts advanced by him with interest. He relied upon the decisions in Hussain Baksh v. Rahmat Hussain, ILR (1889) 11 All 128 and Venkataswamy v. Nagi Reddy, AIR 1962 Andh Pra 457. Both were cases of champerty. Both were cases where the agreements wee held to the extortionate and unconscionable. In both cases the amounts actually advanced were directed to be refunded. The law is well settled in India that Champertous agreements are not as such opposed to public policy. They will not be enforced if they are extortionate and unconscionable in which the persons advancing the monies will be entitled to get a return of the same. In the present case, we are not concerned with a plain and simple champertous agreement. The object of the agreement was to influence Ministers and to incur necessary expenditure in connection therewith. There were no two independent agreements one for influencing the Ministers and the other for advancing monies. The agreement was one whole agreement and if it could not be enforced in part it could not be enforced as a whole. The whole of the agreement was tainted by the vice of being opposed to public policy.


30. In passing the learned Chief Judge appeared to hold that the agreement was also unconscionable. The learned counsel for the appellant invited our attention to several cases where agreements to give 1/4th share. 3/32nd share, 3/16th share had been upheld by Courts. In the present case, what Sajjid Yar Jung agreed to give was only a 1/16th share. It could not, therefore, be said to be unconscionable. That, however, makes no difference in our final conclusion.


31. In the result, we uphold the judgment and decree of the lower court and dismiss the appeal with costs. C.M.P. Nos. 4740, 4924/1974 are dismissed.

32. Appeal dismissed.


Commissioner Of Income-Tax, ... vs Zaibunnisa Begum on 17 March, 1984

JUDGMENT Y.V. Anjaneyulu, J.
 1. Two questions are referred to this court by the Income-tax Appellate Tribunal under s. 256(1) of the I.T. Act, 1961 :
"(1) Whether, on the facts and in the circumstances of the case, the entire land or any part of it could be treated appurtenant to the building for the purpose of applying the provisions of section 54 of the Income-tax Act, 1961 ?
(2) Whether the department was justified in reading 'reasonableness' before the words 'land appurtenant thereto' in section 54 of the Income-tax Act and whether the Tribunal was right in repelling such an interpretation ?
2. The matter relates to the assessment year 1964-65. The assessee and her three sisters were the joint owners of house property consisting of a fairly large building and extensive land, each one owning 1/4th share. The building has a built-up area of 17,136 sq. ft. and the total extent of land including the land on which the building stands is 13,029 sq. yards. The building as well as the entire extent of land was acquired by the Government under the Land Acquisition Act for construction of the office of the Accountant-General. Compensation was initially awarded by the Land Acquisition Officer and it was enhanced by the Second Additional Chief Judge, City Civil Court, Hyderabad, pursuant to reference made under s. 18 of the Land Acquisition Act. The compensation finally awarded was :
 Rs.

(a)  Compensation for land                       5,21,160
(b)  Compensation for the building               1,71,360
(c)  Solatium                                    1,03,878
                                              -------------
                                                 7,96,398
                                              -------------


3. In the income-tax return field for the assessment year 1964-65, the assessee declared her share of capital gain arising on the transfer of the land and building by way of compulsory acquisition. The assessee claimed that she constructed a building for her residential purposes at a cost of Rs. 80,000 within a period of two years from the date of transfer of the abovesaid building together with land. Accordingly, the sum of Rs. 80,000 was claimed as deduction under s. 54 of the I.T. Act, 1961 (hereinafter referred to as "the Act"), from out of her share of capital gain. Omitting matters which are not the subject-matter of dispute in the present reference, it is enough to state that the ITO determined the assessee's 1/4th share of capital gain on the transfer of the land and building jointly owned by the assessee and her three sisters at Rs. 1,42,283 and set off against the same a sum of Rs. 75,000 which he estimated as the cost of building constructed by the assessee for her residential purposes under s. 54 of the Act. Doing so, he arrived at the capital gain for the purpose of assessment at Rs. 67,283 and included the same in the total income.


4. Against the order of the ITO, the assessee filed an appeal before the AAC and questioned the correctness of the computation of the capital gain at Rs. 1,42,283. The dispute, inter alia, related to the original cost (market value) of the land and building as on January 1, 1954, and also the determination by the ITO of the cost of the building newly constructed for the assessee's residential purposes at only Rs. 75,000 against Rs. 80,000 claimed. The question regarding determination of the original cost (market value) as on January 1, 1954, is not relevant for the purpose of the present reference and it is not, therefore, necessary to refer to that matter. On the question of the estimated cost construction of the new residential house at Rs. 75,000, the AAC did not interfere with the estimate made by the ITO at Rs. 75,000. The AAC went further into the question whether the deduction of Rs. 75,000 representing the cost of construction of the new residential house could be set off against the entirety of capital gain arising on the sale of building as well as the land or should be limited to the extent of capital gain arising on the sale of the building and land "reasonably appurtenant" to the building. The provisions of s. 54(1) of the Act were construed by the AAC as permitting the set-off of the amount spents on the construction of a new building for residential purposes only against the capital gain arising on the transfer of the building and land, which is "reasonably appurtenant" to the building. The AAC was of the view that, if the land contiguous to a building is vast in extent, the entire extent of land could not be considered to be appurtenant to the building and only a reasonable portion of such land could be so considered under law. He, accordingly,


building and only a reasonable portion of such land could be so considered under law. He, accordingly, directed the ITO to redetermined the capital gain on the transfer of the building and the land reasonably appurtenant to the same and, if such capital gain should be less than Rs. 75,000, restrict the deduction under s. 54(1) of the Act only to the extent of the restricted sum. The AAC obviously held the view that the capital gain derived on the sale of land, which is not reasonably appurtenant to the building should be taxed in entirety and no part of the sum of Rs. 75,000 spent on the construction of the new residential house should be set off against such capital gain. As the ITO did not examine the question from the above points of view, he directed the ITO to re-work out the capital gain on the aforesaid basis.


5. The assessee filed an appeal to the Income-tax Appellate Tribunal questioning the correctness of the above view of the AAC. It was urged before the Income-tax Appellate Tribunal that the AAC wrongly construed the provisions of s. 54(1) of the Act, inasmuch as the language of s. 54(1) did not provide for the classification of the land appurtenant to a building as "reasonably appurtenant" and otherwise. According to the assessee, the entire extent of land contiguous to the building should be considered as land appurtenant to the building for purposes of s. 54(1) of the Act and the sum of Rs. 75,000 spent on the construction of the new residential house should be set off against the entirety of the capital gain arising on the sale of the building as well as the land. The Income-tax Appellate Tribunal accepted the assessee's contention. The Tribunal was of the view that the AAC was in error in qualifying the word "appurtenant" occurring in s. 54(1) as "reasonably appurtenant". In that view of the matter, the Tribunal reversed the order of the AAC concerning this point. Thereupon, the Commissioner of Income-tax asked for and obtained the present reference from the Tribunal under s. 256(1) of the Act.


6. Sri M. Suryanarayana Murthy, learned counsel for the Revenue, submitted that on a plain construction of the provisions contained in s. 54(1), it must be held that the expression "being buildings or lands appurtenant thereto" should necessarily refer only to that extent of land which is reasonably required for purposes of proper enjoyment of the house. According to the learned counsel, if a house stands on a vast extent of land, it would be improper to consider the entire extent of land as appurtenant to the building for purposes of s. 54. The learned counsel contends that the deduction under s. 54(1) is not permitted against capital gain arising on the sale of (entire) land as such, but only against the sale of the building and land appurtenant thereto. Thus, where a building together with land is sold, the learned counsel urges, it is necessary to enquire and determine the extent of land which is required for the purpose of proper enjoyment of the building as such and the appurtenant land can be restricted only to that reasonable extent and cannot be extended to the entire extent of land. Learned counsel draws attention to the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, which was inserted by the Finance Act of 1976 with effect from April 1, 1977. It would be appropriate to extract the Explanation referred to by the learned counsel :
"Explanation. - For the purposes of this clause, - ....
(b) 'land appurtenant, in relation to any dwelling unit or units comprising a building, means, -


(i) in an area where there is any law in force providing for the minimum extent of land contiguous to the land occupied by any building to be kept as open space for the enjoyment of such building, the minimum extent of land contiguous to the land occupied by the building comprising such dwelling unit or units required to be kept as open space under such law;
(ii) in any other area, an extent of land not exceeding one-third of the plinth area of the building comprising the dwelling unit or units at the ground level contiguous to the land occupied by such building."
7. Learned counsel states that the same considerations should prevail for determining the land appurtenant for purposes of s. 54 of the I.T. Act also. Learned counsel relied on certain decisions to which we shall presently refer, supporting his contention that the extent of the land appurtenant to a building has to be determined with reference to the facts of each case bearing essentially in mind the extent of land required for proper enjoyment of the building.


8. Sri Parvatha Rao, learned counsel appearing for the assessee, reiterates the pleas taken by the assessee before the lower authorities. According to the learned counsel, there is absolutely no provocation for restricting the land appurtenant to building to any reasonable extent for purposes of s. 54 of the Act. According to the learned counsel, the language of s. 54 does not lend support to the Revenue's plea that any enquiry could be conducted for purposes of determining the extent of the land reasonably required for the purpose of proper enjoyment of the house and to treat such reasonable extent only as land appurtenant to the building. Learned counsel states that the Explanation to s. 5(1)(ivc) of the W.T. Act relied on by the Revenue cannot be applied for purposes of s. 54 of the I.T. Act. Learned counsel further contended that the extent of land in the present case is in any event, not so extensive as to call for any determination of the land reasonably appurtenant to the building, especially in view of the fact that the building was owned by four co-owners and the total extent of land of 13,029 sq. yards was necessary for the proper enjoyment of the building by all the four co-owners. It was pointed out that there was no material for the authorities below to show that the land contiguous to the building was used for any purpose other than the enjoyment of the house and consequently, no enquiry was called for.


9. We may now notice the relevant provisions of the Act. Under s. 45 of the Act, any profits or gains arising from the transfer of a capital asset effected in the previous year shall be chargeable to income-tax under the head "Capital gains". The expression "capital asset" in defined in s. 2(14) of the Act as meaning property of any kind held by an assessee, whether or not connected with his business or profession. The definition excludes certain categories of capital assets which are not relevant for out purpose. Section 48 of the Act provides that the income chargeable under the head "Capital gains" shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the capital asset and the cost of any improvement thereto. Section 54 of the Act, which is relevant for out present purpose, deals with capital gain arising on the sale of property used for residence and it may be usefully extracted below :


"54. Profit on sale of property used for residence. - Where a capital gain arises from the transfer of a capital asset to which the provisions of section 53 are not applicable, being buildings or lands appurtenant thereto the income of which is chargeable under the head 'Income from house property', which in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his mainly for the purposes of his own or the parent's own residence, and the assessee has within a period of one year before or after that date purchased, or has within a period of two years after that date constructed, a house property for the purposes of his own residence, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, -
(i) if the amount of the capital gain is greater than the cost of the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or


(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain."


10. It is clear from the above provisions that if capital gain arises on the transfer of buildings or lands appurtenant thereto, the income of which is chargeable under the head "Income from house property", and within the specified period an assessee acquires a house property for the purpose of his own residence, then the capital gain shall be reduced by the cost of the new house property. This is the plain effect of the provisions of s. 54. The basic requirement is that the capital gain should arise from the transfer of buildings or lands, the income of which is chargeable under the head "Income from house property". If land alone is sold, the provisions of s. 54 will have no application, inasmuch as the income from the land is not chargeable under the head "Income from house property". In order to secure the benefit of s. 54, it is necessary that the building together with land is transferred and the income from such building and land is chargeable under the head "Income from house property" under s. 22 of the Act. Inasmuch as the cost of the new house property acquired by the assessee for the purposes of his own residence is liable to be set off against the capital gain arising on the transfer of the buildings or lands appurtenant thereto, the question arises whether the expression "lands appurtenant thereto" covers the entire extent of land transferred along with the building or only a portion of such land as may be considered appurtenant to the building. The Revenue contends that the expression "land appurtenant thereto" does not cover the entire extent of land that may be transferred along with the building, but is limited only to the extent of land which is required for the proper enjoyment of the house and may, therefore, be considered as appurtenant to the building. In other words, what the Revenue contends is that if, in a given case, a vast extent of land is


what the Revenue contends is that if, in a given case, a vast extent of land is also transferred along with the building, it is not permissible to consider the entire extent of land as appurtenant to the building. An enquiry should be conducted for the purpose of ascertaining the extent of land required for effectively and properly enjoying the building and the land appurtenant should be restricted only to that extent and the capital gain ascertained accordingly. The set-off of the cost of the new house property acquired by the assessee for the purpose of his own residence can be made against the capital gain so computed.


11. The expression "land appurtenant thereto" occurring in s. 54 of the Act has not been defined. It must, therefore, be understood in its popular and non-technical sense. It is not possible to accept the Revenue's contention that clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act, 1957, defining "land appurtenant" for the purpose of that clause should be considered equally applicable for the purpose of understanding that expression occurring in s. 54 of the I.T. Act. If the Legislature thought that the same technical meaning given in clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act should be applied to that expression occurring in s. 54 of the I.T. Act, nothing would have prevented the Legislature from doing so. The above Explanation was introduced in the W.T. Act with effect from April 1, 1977, and I.T. Act has been amended any number of times between 1977 and 1984, and yet the Legislature did not think it fit to define the expression "land appurtenant thereto" occurring in s. 54 of the I.T. Act in terms identical to clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act. It is interesting to find that the above Explanation in the W.T. Act is only for the purpose of s. 5(1)(ivc) because it is specifically stated so. That Explanation can have no application for any other purpose in the W. T. Act itself. It is, therefore, difficult to accept the Revenue's contention that the above technical meaning in clause (b) of the Explanation to s. 5(1)(ivc) of the W.T. Act should be extended to s 54 of the


of the W.T. Act should be extended to s 54 of the I.T. Act. It must also be remembered that we are dealing with the income-tax assessment year 1964-65 and the amendment in the W.T. Act came into force only on April 1, 1977. It is equally difficult to accept the assessee's contention that whatever be the extent of land transferred along with the house, should be considered appurtenant to the building. The fallacy in this contention will be apparent if we take into account the fact that the land contiguous to a building can be used for purposes other than the enjoyment of the building. Take for instance a case where a part of the land contiguous to the building is independently leased for a fire-wood depot. The land contiguous to the building may be so vast in its extent that a person can conveniently lay out the surplus extent of land into plots and sell those plots without causing detriment to the proper enjoyment of the building. Could it be said that, in these cases, the land leased for a firewood depot or sold by laying out into plots constituted land appurtenant to the building ? We do not think so. There is force in the contention of the learned standing counsel for the Revenue that the expression "land appurtenant thereto" occurring in s. 54 of the Act is a matter of enquiry depending upon the facts and circumstances of each case and the authorities must determine the extent of land that is considered to be appurtenant to the building based on some acceptable criteria to which we shall advert a little later.


12. Our attention has not been drawn to any decided cases on this point under the I.T. Act or, for that matter, under the W.T. Act. We have already stated that the expression "land appurtenant thereto" occurring in s. 54 of the Act is used in a broad, popular and non-technical sense and it must be so understood.
13. We may now examine some decisions bearing on this point arising under different enactments. In Palaniappa Chettiar v. Vairavan Chettiar [1960] 1 MLJ (Sh.N.) 29, a case arising under the Madras Buildings (Lease and Rent Control) Act, the Madras High Court held that the word "appurtenant" includes all structures of property abutting or adjacent to the main tenement or property, which are proper and necessary for its due enjoyment.


14. In Trim v. Sturminster Rural District Council [1938] 2 KB 508; 2 All ER 168 (CA), which arose under the Housing Act, 1936, the meaning of the expression "house" turned out to be significant. Under s. 188 of the said Act, that expression was defined as including "any yard, garden, outhouses, and appurtenances belonging thereto or usually enjoyed therewith". The question arose whether a cottage and ten acres of adjoining grass land came within the expression of "house" for the above purpose. It was held that it was not the cottage together with the whole of the ten acres of land, but only the cottage with its outhouses, yards, curtilage and gardens, that constituted the "house" within the definition, inasmuch as the term "appurtenances" was there used in its well-established legal sense as including only such matters as outhouses, yards and gardens, and not land as meaning a corporeal hereditament. It was further held that the question as to exactly how much of the ten acres ought to be included in the appurtenances of the cottage and, therefore, in the "house" was one for the decision of the county court judge, his decision to be confined, however, to matters which, on the face of it, would be something considerably less than the whole of the ten acres.


15. We may notice the judgment of the Madras High Court in Irani v. Chidambaran Chettiar, . The matter arose under the Madras Buildings (Lease and Rent Control) Act, 1946. The question in that case was whether the 1st defendant was a "tenant in possession of building" within the meaning of the Act. He would be a tenant of a building if what was leased to him was within the definition contained in the Act. The word "building" is defined in the Madras Act as meaning "any building or hut or part of a building or hut let or to be let separately for residential or non-residential purposes and includes : (a) the garden, grounds and outhouses, if any, appurtenant to such building, hut or part of such building, or hut and let or to be let along with such building or hut, (b) any furniture supplied by the landlord for use in such building or hut or part of a building or hut". After considering the legal and popular meaning of the expression "appurtenant", Satyanarayana Rao J. observed at page 655 of the report as under :
"The meaning of the word 'appurtenant' given in the Oxford Dictionary is :
'Belonging as a property or legal right; constituting a property or right subsidiary to one which is more important; appertaining as if by right to; proper, suited or appropriate to; relating to, pertinent."


16. That is the primary meaning of the word 'appurtenant'. In Budhi Mal v. Bhati, AIR 1915 All 459, "an appurtenance" is defined as an appendage, an adjunct, or something belonging to another thing as principal and passing as an incident to it. In Trim v. Sturminster Rural District Council [1938] 2 KB 508; 2 All ER 168 (CA), the learned judge considered the meaning of the word 'appurtenance' at pages 515 and 516 (of [1938] 2 KB) and observed that the word 'appurtenance' had never been extended to include land, as meaning a corporeal hereditament, which does not fall within the curtilage of the yard of the house itself - that is, not within the parcel of the demise of the house. That may be so. In the definition contained in the Act, the grounds and outhouses, if any, appurtenant to such building are included in the definition. As pointed out in Thomas v. Owen [1888] 20 QBD 225 (CA) at pp. 231, 232, the word 'appurtenance' has also a secondary meaning as equivalent to 'usually occupied' and this was cited with approval in Woodfall on Landlord and Tenant. If from 1914 this entire ground was occupied for the purpose of continuing the superstructure along with the building belonging to the lessor and the whole of it is treated as one unit, the site may be treated as an appurtenance in the secondary sense of the word."
17. In a separate but concurring judgment, Raghava Rao J. observed at pages 658 and 659 of the report as under :


"In my opinion the word 'appurtenant' occurring in the definition of 'building' in the Act with which we are concerned is used in the broad, secondary and non-technical sense of 'relating to', 'usually enjoyed or occupied with' and 'adjoining' just noticed by me. The idea of the legislature seems to be that if grounds appurtenant to the building in this sense are let along with the building they should stand attracted to the operation of the Act. That the grounds should also be let along with the building would not be a matter of specific provision in the definition of the statute, if the primary or legal sense of the word 'appurtenant' were intended, as in that case anything appurtenant to another in that sense would pass with it under the demise whether specifically let or not along with it. It is settled law that where a word admits of senses more than one, that sense is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the legislature. The paramount object in construing statutes is to ascertain the legislative intent and the rule of strict construction is not violated by permitting the words to have their full meaning, or the more extensive of two meanings best effectuating the intention. They are indeed frequently taken in the widest sense, sometimes in a sense more wide than etymologically belongs or is popularly attached to them in order to carry out effectively the legislative intent, or to use Lord Coke's words 'to suppress the mischief and advance the remedy' (vide Maxwell on the Interpretation of Statutes, 9th edition, by Sir Gilbert Jackson, 280)."


18. It is clear from the observations of Satyanarayana Rao J. and Raghava Rao J. above referred to that, if the expression is used in the Act in a primary sense, then the meaning attached to that primary sense must be given irrespective of other considerations. We have already stated that the expression "land appurtenant thereto" was defined in a primary sense for purposes of s. 5(1)(ivc) of the W.T. Act. It would follow that the expression occurring in s. 5 (1)(ivc) should be understood in that primary sense and it is not open to the courts to impose any other considerations. Where, however, the expressions used convey more than one sense-a primary and secondary sense-that sense is to be adopted which best harmonises with the context and promotes in the fullest manner the policy and object of the Legislature. In our opinion, the expression "land appurtenant thereto" has also a secondary meaning as equivalent to "usually enjoyed or occupied with". There is no indication that the Legislature used the above expression in s. 54 of the I.T. Act limiting its sense and meaning artificially to any particular extent. Considerations governing the limitations imposed upon the meaning of that expression under sister enactments like the W.T. Act and the Urban Ceiling and Regulation Act, 1976, cannot be imported into s. 54 of the I.T. Act. In our opinion, that expression is used in s. 54 of the I.T. Act in a wider sense. It is, therefore, imperative that the tax authorities will have to determine the extent of land appurtenant to a building transferred, taking into consideration a variety of circumstances that may be relevant for the purpose. It is not possible to lay down infallible tests to be applied for the determination of the extent of land appurtenant to a building, as the tests vary depending upon the facts and attendant circumstances of


land appurtenant to a building, as the tests vary depending upon the facts and attendant circumstances of each case. For instance : (1) If the building together with the land is treated as an indivisible unit and enjoyed as such by the persons occupying the building, it is an indication that the entire extent of land is appurtenant to the building; (2) If the building has extensive lands appurtenant thereto and even if the building and the land have been treated as one single unit and enjoyed as such by the occupiers, an enquiry could be made to find out whether any part of the land contiguous to the building can be put to independent user without causing any detriment to the effective and proper enjoyment of the building as such. Such an enquiry should be conducted not based on any artificial considerations but from the point of view of the persons occupying the building. The number of persons or different branches of families residing in the building, the requirements of the persons occupying the building consistent with their social standing, etc., are relevant for the purpose. If any surplus is arrived at on such enquiry, then the extent of such surplus land may not qualify to be treated as land appurtenant to the building; (3) If there is any evidence to indicate that any portion of the land contiguous to the building was put to user other than the enjoyment of the building, then that provides a safe indication regarding the extent of land put for such user. For instance, the land used by the occupiers for commercial, agricultural and horticultural purposes, although forming part of the land adjacent to the building, does not qualify to be treated as land appurtenant to the building; (4) If the owner or occupier is deriving any income from the land which is not liable to be assessed as income from house property under s. 22 of the I.T. Act, then the extent of such land does not qualify to be treated as land appurtenant to the building; and


extent of such land does not qualify to be treated as land appurtenant to the building; and (5) any material pointing to the attempted user of the building for purposes other than the effective and proper enjoyment of the house would also afford a safe guide to determine the extent of surplus land not qualifying to be treated as land appurtenant to the building.


19. The above tests are illustrative and by no means exhaustive. It is for the tax authorities to apply their mind properly to the facts of each case and to devise tests suitable and appropriate to each case.
20. In the present case, it is stated that the total extent of land is 13,029 sq. yards and this included the land on which the building is constructed. It is also stated that four co-owners are separately residing in this building prior to its acquisition. Although the AAC did not spell out how the land appurtenant should be determined, he merely directed the ITO to make an enquiry to determine the extent of land that is reasonably appurtenant to the building. We do not find any error in the direction given by the AAC. While it is true, as Sri Parvatha Rao, learned counsel for the assessee, contends, that there is no material on record to indicate that the land was put to any non-residential user and the building and land was not treated as a single unit in the past, it is clear that the ITO did not apply his mind to the matter. If the ITO applies his mind and makes an appropriate enquiry to determine the extent of land appurtenant to the building in the present case, he may conceivably come to a conclusion that the entire extent of land appurtenant to the building could be treated as "land appurtenant" to the building. We see no reason why this enquiry directed by the AAC should be shut out, inasmuch as there is no legal infirmity in giving a direction to the ITO make an appropriate enquiry. In our opinion, the Tribunal was in error in coming to the conclusion that the AAC was not justified in directing the ITO to enquire into the matter for the above purpose.


21. In the absence of necessary details, it is not possible for this court to indicate any answer to the question referred, that is to say, whether the entire land or any part of it could be treated as appurtenant to the building for the purpose of applying the provisions of s. 54 of the I.T. Act. We, therefore, return the reference unanswered with a direction that the ITO shall make an enquiry into the matter bearing in mind the principles set out above and come to an appropriate conclusion regarding the extent of land appurtenant to the building. The assessee will be entitled to adduce necessary evidence during the course of such inquiry.
22. Reference returned unanswered.


Commissioner Of Income-Tax vs Hyderabad Deccan Liquor ... on 31 July, 1972

JUDGMENT Sriramulu, J.
 1. The following three questions of law have been referred to this court by the Income-tax Appellate Tribunal, under Section 66(2) of the Indian Income-tax Act, 1922 :
 " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessment on the association was invalid ?
 (2) Whether the Tribunal was within its powers to rehear the entire appeal and decide all issues which did not form the subject-matter of the reference before the High Court without any direction from the High Court?
 (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Appellate Assistant Commissioner has the power under law to uphold the ex parte assessment on the basis of an alleged non-compliance by D. D. Italia when the Income-tax Officer making the ex parte assessment did-not refer to that default at all in the assessment order?"
 2. The material facts, so far as they are relevant for answering the above questions, are :


D. D. Italia, a member of the Hyderabad Deccan Liquor Syndicate (hereinafter referred to as " the Syndicate "), filed return of his individual income for the assessment year 1358 Fasli, which included his share income from the Syndicate of Rs. 77,972. According to him, the Syndicate had earned from its liquor business for the year 1358 F. an income of Rs. 2,07,926. The Income-tax Officer assessed D. D. Italia to income-tax for the assessment year 1358 F. in September 1952. Another member of the Syndicate, by name, Namchand, was also assessed to tax in respect of his share income from the Syndicate for the same year.


3. Since the Syndicate did not file its return of income for the year 1358 F. before the expiry of the assessment year 1358 F. its income chargeable to tax for that year escaped assessment. Bansilal managed the business of the Syndicate, had maintained its accounts and also kept the account books of the Syndicate with him. Notices issued by the Income-tax Officer to Bansilal as representing the Syndicate, under Section 30(2) read with Section 46 of the Hyderabad Act, were returned unserved, on the ground that he had gone on pilgrimage to Benaras. Notice dated August 13, 1951, issued to Bansilal, as representing the Syndicate was affixed on the outer door of Bansilal's house, as he was out of station. On the basis of the report of the inspector submitted to him, the Income-tax Officer, in writing, held that there was a valid service of notice on Bansilal under Section 30(2) read with Section 46(1) of the Hyderabad Act. Since no return was filed on behalf of the Syndicate, best judgment assessment was made on the Syndicate in the status of an "A.O.P." (association of persons) on a total income of Rs. 4,43,256.


4. On appeal against the assessment, the assessee, inter alia, contended before the Appellate Assistant Commissioner that since the Syndicate was defunct on the date of assessment, best judgment assessment made on it, without serving notices on all the members of the A.O.P. was bad. It was also contended that no notice was served on Bansilal and the one served on him by affixture was only a " summons " under Section 49 for the production of the account books and not a " notice under Section 30, read with Section 46 of the Hyderabad Act ", requiring him to rile a return. After considering the remand report which was submitted by the Income-tax Officer in pursuance of the remand order, the Appellate Assistant Commissioner held that Bansilal was duly served with a notice under Section 30(2) read with Section 46(1). The Appellate Assistant Commissioner also justified the best judgment assessment made on the Syndicate, on the ground that one of the members of the Syndicate, namely, D. D. Italia, was served with such a notice.
 5. The Appellate Assistant Commissioner rejected all the contentions raised by the assessee and confirmed the assessment.


6. In further appeal to the Income-tax Appellate Tribunal the assessee raised four objections. The first objection, was that the assessment made on the A.O.P. was bad in law, as it was made on the A.O.P. which was, admittedly, defunct on the date of the assessment. The Tribunal considered that the first objection raised by the assessee went to the very root of the matter and, therefore, considered only that objection, and did not go into other objections. On the strength of the decision of this court in Raja Reddy Mallaram v. Commissioner of Income-tax, [1960] 39 I.T.R. 636 (A.P.). the Tribunal upheld the contention of the assessee and set aside the assessment, as no notices were served on all the members of the erstwhile association of persons before making the assessment.
 7. At the instance of the Commissioner of Income-tax, the following question of law was referred to this court:
 " Whether an assessment can be made on a dissolved association of persons without service of notice on all the erstwhile members of the association ?"


8. That question was answered by this court in favour of the department and against the assessee. The appeal was once again heard by the Tribunal. The Tribunal then considered the other objections raised before it by the assessee and found that what was served on Bansilal by affixture was only a " summons" and not a "notice" to file the return of income of the Syndicate. Notices issued in the name of D. D. Italia were served on his employee, Manchusha, and it was not a valid service. D. D. Italia was not the principal officer of the association. Having elected and assessed the individual members of the A.O.P. in respect of their share incomes, the Income-tax Officer could not once again assess the same income in -the hands of the A.O.P. The Tribunal, once again, set aside the assessment.
 9. The aforesaid questions have, therefore, been referred to this court under Section 66(2) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax.
 10. The first contention raised by the department was that the Income-tax Officer had not the necessary information with him on the basis of which he could be considered to have elected to assess the individual members of the A.O.P. instead of the A.O.P. By assessing the members of the A.O.P. it could not be said that the Income-tax Officer had elected to assess the individual members of the A.O.P. instead of the A.O.P. In support of this submission, the learned standing counsel for the income-tax department, Sri P. Rama Rao, strongly relied upon the decision of the Supreme Court in Income-tax Officer v. Bachu Lal Kapoor, .


.
 11. In order to appreciate the above contention it is necessary to notice the relevant provisions of the Hyderabad Income-tax Act. Section 3 of the Hyderabad Act (section 4 of the Indian Income-tax Act of 1922), which is the charging section, provides that income-tax shall be charged for any year, at the prescribed rates, in respect of the total income of the previous year of: (i) every individual, (ii) Hindu undivided family, (iii) company, (iv) firm or its partners, and (v) association of persons or the individual members of the association.


Section 17(3) of the Hyderabad Act (Section 14 of the Indian Income-tax Act of 1922) provides that tax shall not be paid by an assessee if he is a member of an association of persons in respect of any portion of the amount which he is entitled to receive from the association on which tax has already been paid by the association. Section 56 of the Hyderabad Act (section 44 of the Indian Income-tax Act of 1922) provides that if the A.O.P. is dissolved, every person who was, at the time of its dissolution, a member of such association, shall in respect of the income of the association, be jointly and severally liable to assessment and for the amount of tax payable. Provisions of Chapter IV relating to deductions and assessment, apply to the assessment.
 12. The decision of the Supreme Court in Income-tax Officer v. Bachu Lal Kapoor will not lend any assistance to the department. That was a case in which the Hindu undivided family was first assessed to tax and then after accepting the claim of partition of the Hindu undivided family the Income-tax Officer made assessments against the members of the Hindu undivided family. Subba Rao J. (as he then was), observed that after the proceedings initiated against the Hindu undivided family under Section 34 culminated in the assessment of the Hindu undivided family, appropriate adjustments had to be made by the Income-tax Officer in respect of the tax realised by the revenue on that part of the income of the family assessed in the hands of the individuals. To do so, was not to reopen the final orders of assessment but, in reality, to arrive at the correct figure of tax payable by the Hindu undivided family.


13. In that very judgment, his Lordship Subba Rao J. (as he then was), pointed out that Section 3 conferred an option on the Income-tax Officer to assess either an A.O.P., or the members of the association, but no such option is conferred on the Income-tax Officer to either assess the Hindu undivided family or its members in respect of the income of the family.


Therefore, that decision will not lend any assistance to the department's contention that, after making an assessment on the A.O.P., adjustments could be made in respect of taxes paid by the individual members of the A.O.P.
 14. In Joti Prasad Agarwal v. Income-tax Officer, [1959] 37 I.T.R. 107 (All.). 23 members of an association of persons), out of 30, were assessed to tax in respect of their share incomes from the A.O.P. The Income-tax Officer then assessed the A.O.P. to tax. The legality of the assessment was challenged. The Allahabad High Court held that once the income of an association was charged to tax in the hands of the individual members and those assessments remained valid assessments, there could be no fresh assessment of the income in the hands of the association. Once an income has been charged to tax in the hands of one of the entities mentioned in Section 3 of the Act, it cannot be charged again in the hands of another of those entities subsequently. Section 3 of the Act, which is the charging section, only talks of charging the income of certain persons, and does not talk of income-tax being charged on persons. This implies that the charge is to be levied on income only once.


15. In Commissioner of Income-tax. v. Murlidhar Jhawar & Puma Ginning and Pressing Facctory, , the Supreme Court held that the partners of an unregistered firm might be assessed individually, or they might be assessed collectively in the status of an unregistered firm, but the Income-tax Officer could not seek to assess the one income twice--once in the hands of the partners and again in the hands of the unregistered firm. In giving that decision, the Supreme Court followed the principle laid down by it in Commissioner of Income-tax v. Kanpnr Coal Syndicate, . That principle is :
 " The Section (Section 3) expressly treats an association of persons and the individual members of an association as two distinct and different assessable entities. On the terms of the section the tax can be levied on either of the said two entities according to the provisions of the Act."
 16. The exercise of the option to assess one or the other of the two entities under Section 3 of the Income-tax Act assumes knowledge on the part of the Income-tax Officer of the existence of two alternatives.


17. In Rajareddy Mallaram v. Commissioner of Income-tax the facts were almost identical with the facts of this case. After serving notice under Section 34 of the Indian Income-tax Act, 1922, on one member of the A.O.P., the Income-tax Officer" made an ex parte assessment on the A.O.P. for the year 1358 Fasli, and tried to recover the tax from another member of the A.O.P., Raja Reddy Mallaram. Raja Reddy Mallaram then challenged the legality of the assessment before this court. This court held that the assessment was bad in law, as the assessment was made on the A.O.P. and not on the members of the A.O.P., at the time of its dissolution, jointly and severally and, therefore, the demand of tax could not be enforced particularly against any member of the A.O.P. on whom notice under Sections 34 and 22(4) was not served. Aggrieved by the decision of this court, the Commissioner of Income-tax filed an appeal to the Supreme Court. The decision of the Supreme Court is now reported in Commissioner of Income-tax v. Raja Reddy Mallaram, [1964) 51 I.T.R. 285 (S.C.).. The Supreme Court reversed the decision of this court. The Supreme Court upheld the validity of the assessment on the A.O.P. and justified the demand of tax from Raja Reddy Mallaram. In corning to such conclusion, Shah J., speaking for the court, observed that :


" Under Chapter IV of the Indian Income-tax Act, 1922, an association of persons may be assessed as a unit of assessment or the individual members may be assessed separately in respect of their respective shares of the income. The Act contains no machinery for assessing the income received by an association of persons in the hands of its members collectively. Nor can there be a partial assessment of the income of an association limited to the share of the member who is served with the notice of assessment. Section 44 ensures, by a fiction, the continuity of the personality of the association of persons even after its dissolution for the purpose of assessment, and the procedure for assessment after its dissolution of the pre-dissolution income of an association of persons is the same as that for assessment while it continues to exist. 'A notice under Section 22 or Section 34 to the appropriate person under Section 63(2) is, therefore, sufficient to enable the authority to assess an association of persons after its dissolution ; it is not necessary that all the members should be individually served with the notice of assessment. If notice is properly served on one of them the other members will be bound by the assessment and will be liable for the tax payable thereunder."
 18. It is a rule of interpretation well-settled that, in construing the scope of a legal fiction it would be proper and even necessary to assume all those facts on which alone the fiction can operate. (See Commissioner of Income-tux v. S. Teja Singh, ),


19. It emerges from the aforesaid discussion that, under the charging Section 3 of the Hyderabad Act, the Income-tax Officer has got an option either to assess the A.O.P., or its individual members in respect of the income of the A.O.P. If the Income-tax Officer was in possession of information that an A.O.P. existed, he is bound to make up his mind either to assess the A.O.P., or its individual members in respect of the income of the A.O.P. The Income-tax Officer cannot assess both the A.O.P. and its individual members in respect of the income of the A.O.P. Even after the dissolution of the A.O.P., the assessment has to be made on the A.O.P. as if it continued to exist and, in such a case, the same procedure for assessment which would be applicable to an existing A.O.P. would also be applicable to a dissolved A.O.P. In the case of an assessment on an A.O.P. after its dissolution, in respect of its pre-dissolution income, notices for assessment need not be served on all those persons, who were members of the A.O.P. at the time of its dissolution. It is sufficient to serve the notice of assessment on the appropriate member of the association. It is immaterial whether all the individual members of the A.O.P. are assessed to tax in respect of their share incomes of the A.O.P. or some of them. In either case, the Income-tax Officer will be considered to have elected to assess the individual members of the association, and that would be a bar to the making of assessment on the A.O.P. once again on the income of the A.O.P.


20. In the case before us, two of the members of the A..O.P., namely, D.D. Italia and Namchand, have been assessed to tax in respect of their share incomes from the A.O.P. for the assessment year 1358 F. Those assessments have remained valid and, we are told, that even taxes have been paid by them. Those individual assessments would, therefore, operate as a bar against the Income-tax Officer making an assessment on an A.O.P. once again in respect of the same income for the year 1358 F. provided the Income-tax Officer knew or had information in his possession that there was in existence an A.O.P. If the Income-tax Officer did not, at the time of making the assessment on individual members, know about the existence of the A.O.P., then it cannot be said that the Income-tax Officer had consciously elected to assess the individual members, and not the A.O.P.