Bose, J. This is an appeal by an assessee against a judgment and order of the High Court at Bombay delivered on a reference made by the Income-tax Appellate Tribunal. The Bombay High Court refused leave to appeal but the assessee obtained special leave from this Court. The appellant deals in silver and shares and a substantial part of his holding is kept in silver bullion and shares. His business is run and owned by himself. His accounts are maintained according to the mercantile system. It is admitted that under this system stocks can be valued in one of two ways and provided there is no variation in the method from year to year without the sanction of the Income-tax authorities an assessee can choose whichever method, that is to say, the cost price of the stock was wnterred at the beginning of the year and not its market value and similarly the cost price was again entered at the close of the year of any stock which was not disposed of during the yeaar.
The entries on the one side of the accounts at the beginning of the year thus balance those on the other in respect of these items with the result that so far as they are concerned the books show neither a profit nor a loss on them. This was the method regularly employed and it is admitted on all hands that this was permissible under this system of accounting. The accounting year with which we are concerned is the calendar year 1942. The silver bars and shares lying with the appellant at the beginning of the year were valued at cost price. In the course of the year the appellant withdrew some bars and shares from the business and settled them on certain trusts, three in number. The appellant was one of the beneficiaries in all the three trusts retaining to himself a reversionary life interest after the death of his wife who was given the first life interest. After certain other life interests the ultimate beneficiaries were charities. The appellant was the managing trustee expressly so created in two of the trusts and virtually so in the third. In this books the appellant credited the business with the cost price of the bars and shares so withdrawn and there lies the crux of the issue which we have to determine. There is no suggestion in this case that the bars and shares were withdrawn from the business otherwise than in good faith. According to the appellant, the act of withdrawl resulted in neither income nor profit nor gain either to himself or to his business, nor was it a business transcation, accordingly it was not taxable. The learned Attorney-General raised two contentions.
First, he said that as the bars and shares were brought into the business any withdrawl of them from the business must be dealt with along ordinary and well-known business lines, namely, that if a person withdraws an asset from a business he must account for it to the business at the marlet rate prevailing at the date of the withdrawl. He said that the mere fact that the appellant was the sole owner of the business can make no difference, for under the Act income is assessable under distinct heads and when we are working out the income of a business the rules applicable to business incomes must be applied whoever is the owner. His second contention was that if the act of withdrawl is at a time when the market price is higher than the cost price, then the State is deprived of a potential profit. He conceded that had the market rate been lower than the cost price, then the appellant would have been entitled to set off the loss on those transactions against his overall profit on the other transcations and thus obtain the advantage of a lower tax on the overall picture. We are of opinion that the learned Attorney-Generals secound contention is unsound because, for income-tax purposes, each year is a self contained accounting period and we can only take into consideration income, profits and gains made in that year and are not concerned with potential profits which may be made in another year any more than we are with losses which may occur in the future. As regards the first contention, we are of opinion that the appellant was right in entering the cost value of the silver and shares at the date of the withdrawl, because it was not a business transcation and by that act the business made no profit or gain, nor did it sustain a loss, and the appellant derived no immediate pecuniary gain the State cannot tax them, for under the Income-tax Act the State has no power to tax a potential future advantage. All it acn tax is income, profits and gains made in the relevant accounting year. It was conceded that if these assets had been sold at cost price the State could have claimed nothing, for a man cannot be compelled to make a profit out of any particular transcation. It was also conceded that if the silver and stocks had lain where they were, then again there would have been no advantage to the State because the appellant would have been entitled to enter their closing vlaues at cost at the end of the year. The learned Attorney-General even conceded that if they had been sold at a loss the appellant would have been entitled to set that off agianst his other gains, but he said that is because all those are business transactions and that is the way the law deals with such matters when they occur in the ordinary course of business. But, he urged, when there is a withdrawl and no sale or its equivalent, the matter is different. As this is a business, any wihtdrawl of the assets is a business matter and the only feasible way of regarding it in a business light is to enter the market price at the date of the withdrawl and whether that happens to favour the assessee or the State is immaterial. We do not agree. It is well recognised that in revenue cases regard must be had to the substance of the transaction rather than to tis mere form.
In the present case disregarding technicalities it is impossible to get away from the fact that the business is owned and run by the assessee himself. In a such circumstances we are of opinion that it is wholly unreal and artificial to separate the business from its owner and treat them as if they were separate entities trading with each other and then by means of a fictional sale introduce a fictional profit which in truth and in fact is non-existent. Cut away the fictions and you reach the position that the man is supposed to be selling to himself and thereby making a profit out of himself which on the lace of it is not only absurd but against all canons of mercantile and income-tax law. And worse. He may keep it and not show a profit. He may sell it to another at a loss and cannot be taxed because he cannot be compelled to sell at a fictional profit when the market rises in order that he may be compelled to pay to Government a tax which is anything but fictional. Consider this simple illustration. A man trades in rice and also uses rice for his family consumption. the bags are all stored in one godown and he draws upon his stock as and when he finds it necessary to do so, now for his business, now for his own use. what he keeps for his own personal use cannot be taxed however much the market rises nor can he be taxed on what he gives away from his own personal stock, nor, so far as his shop is concerned, can he be compelled to sell at a profit. If he keeps two sets of books and enters in one all the bags which go into his personal godown and in the other the rice which is withdrawn from the godown into his customers so that only a negligible quantity is left over in the shop after each days sales, his private and personal dealings with the bags in his personal godown could not be taxed unless he sells them at a profit. What he chooses to do with the rice in his godown is no concern of the Income-tax department provided always that he does not sell it or otherwise make a profit out of it. He can consume it, or give it away, or just left it rot. why should it make a difference if instead of keeping two sets of books he keeps only one ? How cah he be said to have made an income personally or his business a profit, because he uses ten bags out of his godown for a feast for the marriage of his daughter? How can it make any difference whether the bags are shifted directly from the godown to the kitchen or from the godown to the shop and from the shop to the kitchen? And yet, when the reasoning of the learned Attorney- General is pushed to tis logical conclusion, the form of the transcation is of its essence and its taxable or not according to the route the rice takes from the godown to the wedding feast. In our opinion, it would make no difference if the man instead of giving the feast himself hands over the rice to his daughter as a gift for the marriage festivities of her son. The appellants mehtod of book-keeping reflects the true position. As he makes his purchases he enters his stock at the cost price on one side of the accounts. At the close of the year he enters the value of any unsold stock at cost on the other side of the accounts thus cancelling out the entries relating to the same unsold stock earlier in the accounts and then that is carried forward as the opening balance in the next years accounts. This cancelling out of the unsold stock from both sides of the accounts leaves only the transactions on which there have been actual sales and gives the true and actual profits or loss on his years dealings. In the same way, the appellant has reflected the true state of his finances and given a truthful picture of the profit and loss in his business by entering the bullion and silver at cost when he withdrew them for a purely non-business purpose and utilised them in a transaction which brought him neither income nor profit nor gain. There is no case quite in point.
The learned Attorney-General relied on Gold Coast Selection Trust Limited v. Humphrey (H. M. Inspector of Taxes) (1949) 30 Tax Cas. 209 17 ITR Suppl. 19, but there the assessee received a new and valuable asset in exchange for another in the ordianry course of his trade. It was held that he was bound to account for the receipt was not money it was capable of being valued in terms of money. In the present case, the assessees business received nothing in exchange for the withdrawl of the assets, neither money nor moneys worth, therefore the only fair way of treating the matter was to do just what the appellant did, namely to enter the price at which the assets were valued at the beginning of the year so that the entries would cancel each other out and level the business with neither a gain or a loss on those transcations. The learned Attorney-General contended that if that was allowed great loss would ensue to the State because all a man need do at the end of the year would be to withdraw all assets which had risen in value and leave only those which had depreciated and thus either show a loss or reduce his taxable profits. This arguments can only prevail on the assumption that the State can tax potential profits because, except for that, the State would neither gain nor loss in a case of this kind. Had the assets been left where they were, they would have been valued at the end of the year as they were at the beginning, at the cost price and we would be a gain at some future indefinite date is mere guess work, for equal there might be loss. Apart, however, from that the learned Attorney- Generals rule is equally capable of abuse. A man could as easily withdrawn from the business assets which had depreciated and enter in his books the deprecated market value and leave at cost price the assets which had risen. There are two cases which bear a superficial resemblance to this case.
They are In the matter of Messrs. Chouthmal Golapchand (1938 6 ITR 733). and In re Spanish Prospecting company Limited (1911 I ch 92). We refrain from expressing any opinion about them, especially as they appear to reach different conclusions, the facts are not the same and the questions which arose on the facts there were not argued here. they raise matters of wider arose on the facts there were not argued here. They raise matters of wider import which will require consideration in s suitable case. These cases were not cases of a business owned and run by a single owner and so the fiction of treating the business as a separate entity from its owner actually trading with him, which we are asked to apply here, does not arise. In the next place, the business there were not continuing as here. In the Calcutta case, a partnership was wound up and the question related to the valuation of assets consisting of stocks and shares, on the dissolution. In the English case, a company with no fixed capital was under liquidation and the question was whether the market value of certain debentures which the company had purchased ought to be brought into the profit and loss account so as to augment the profits actually shown in the balance-sheet. the company wished to treat those debentures as of no value and thus show a much smaller profit than would otherwise have been the case. On the answer to that question hung the fate of two servants of the company who, under the terms of their agreement with the company, could only be paid their salaries out of the profits of the company. Neither case is in our opinion, apposite here. The question referred were -
 Whether in the circumstances of the case any income arose to the assessee as a result of the transfer of hsres and silver bars to the trustees? If the answer to question (I) is in afirmative, whether the method employed by the Appellate Assistant Commissioner and upheld by the Appellate Tribunal in computing the assessees income from the transfer is the proper method for computing the income? Our answer to the first question is that in the circumstances of this case no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees. In view of that, the second question does not arise. The appeal is allowed with costs. Bhagwati, J. This appeal by special leave from a judgment of the High Court of Judicature at Bombay on a reference by the Income-tax Appellate Tribunal under Section 66 (I) of the Indian Income-tax Act (XI of 1922) raises an interesting question as to the valuation of an asset withdrawn from the stock-in-trade of a running business. The assessee was in the year of account (calendar year 1942) a dealer in shares and silver. On the 21st January, 1942, he withdrew from the business certain shares and silver bars and executed two deeds of trust and on the 19th October, 1942, he withdrew further shares and silver bars and executed a third deed of trust. The terms and conditions of the deeds of trust are not material for the purpose of this appeal. The assessee kept his books of account on the mercantile basis and the method employed by him in the past for valuing the closing stock of his stock-in-trade was valuation at the cost price thereof. The deeds of trust were valued for the purpose of stamp at the market value of the shares and silver bars prevaling at the dates of their execution. The assessee however showed the transfer of these shares and silver bars to trustees in the books of account at the cost price thereof thus setting off the debit shown in respect of the same at the beginning of the year of account. He contended that the market value of the said shares and silver bars on which the stamp duty was based could not be basis for computing his income from stock-in-trade thus transferred. The Income-tax authorities did not accept this contention and assessed the profit at the difference between the cost price of the said shares and silver bars and the market value thereof at the date of their withdrawal from the business. the Income-tax Officer, the Appellate Assistant Commissioner as also the income-tax Appellate Tribunal rejected this contention of the assessee and the income-tax Appellate tribunal submitted at the instance of the assessee a case under Section 66 (I) of the Act referring the following two questions for the decision of the High Court -
 Wether in the circumstances of the case any income arose to the petitioner as a result of the transfer of shares and silver bars to the trustees? If the answer to the question (I) is in the affirmative, wether the method employed by the Appellate Assistant Commissioner and upheld by the Appellate Tribunal in computing the petitioners income from the transfer is the purpose method for computing the income? The High Court answered both the question in the affirmative. It was not disputed before the Income-tax Act Appellate Tribunal that the shares transferred were the stock-in-trade of the business. As regards the silver bars the Tribunal found that the assessee had been making purchases and sales frequently and that the silver also was stock-in-trade and not a capital investment. Both the shares and the silver bars were thus part of the stock-in-trade of the business. they had been purchased by the assessee from time to time and formed part of the stock-intrade of the business and had been shown at the cost price thereof in the books of account of the previous years and also at the opening of the year of account. If the shares and the silver bars which were thus withdrawn from the stock-in-trade at the closing of the year of account, the value of these shares and silver bars would also have been shown at the cost price in accordance with the system of accounts maintained by the assessee. The question however which falls to be determined is what is the effect of these assets having been withdrawn from the stock-in- trade of the business. So far as the business itself is concerned the asset which has been brought in is of a particular value at the date when it has been so brought in and it is then valued in the books of account at its cost. In the course of the business however the asset appreciates or depreciates in value in accordance with the fluctuations of the market. If the cost price basis is adopted for the valuation of stock- in-trade at the close of the year this appreciation or depreciation in the value as the case may be would not be reflected in the accounts.
 If however the market valued at the market value basis is adopted for such valuation, the asset on being valued at the market rate thereof at the close of the year might show a loss and this loss would be allowed by the Income-tax authorities in computing the profit or loss of the business. In either event, the assessee would have to carry over the asset in the books of account of the subsequent year at the valuation adopted at the close of the previous year and the valuation adopted at the close of the previous year and the assessee would not be allowed to change the basis valuation thus adopted unless he close to adopt at the end of the subsequent year or years valuation at the cost price thus realised and the profit or loss as the case may be, in regard to that asset and that profit or loss would be allowed by the Income-tax authorities in the computation of profit or loss of valuation would not however make any difference in the ultimate reslu. On the cost price basis of valuation all intermediate fluctuation of price during the interval between the bringing of the asset in the business and the realisation of it would be eliminated and the only thing considered in the accounts would be the difference and the price of the asset when it was brought into the business and the price thereof when the asset as at the close of every the fluctuation in the market value of the asset as at the close of every year of account a rectification would have to be made in the result of the trading of the previous year which was not correctly reflected in the accounts by reason of the assessee having adopted the market value obtaining at the close of the previous year as the value of the asset. This process of rectification would continue from year to year until the asset was realised on the sale of the asset would be brought into account in that year. the ultimate result of these operations so fas as the asset itself is concerned would be no different.
 Because if regard be had to the various fluctuations in the market value which have been reflected in the accounts of the intermediate period, what the business actually realised. The only advantage which the assessee obtains would be that he would be able to anticipate in a particular year the loss that may be made on the asset in the following year or years if the prices rose again. Is there any difference in the position when instead of the asset being realised it is withdrawn from the stock-intrade of the business? So far as the business is concerned the asset ceases to be a aprt of the stock-in-trade whether it is realised or is withdrawn from the stock-in-trade. the asset after it has been brought into the business appreciates or depreciates in value in accordance with the fluctuations of the market and that appreciated or depreciated asset continues to be a part of the stock-in-trade of the business until it is realised or withdrawn. This appreciation or depreciation in value is not reflected for the valuation of the stock-in-trade at the close of theyear of account, but is certainly reflected as above indicated in the books of account when the market value basis is adopted. In each case however the actual profit or loss to the business as the case may ne in relation to the price at which the asset was brought into the business would be determined at the date when the asset is realised. That would be the measure of the appreciation or depreciation in value of the asset which till then formed a aprt of the stock-in-trade of the business, and would also be the measure of the ultimate profit or loss as the case may be of the business in regard to that particular asset. When the asset is withdrawn from the stock-in-trade of the business the position in my opinion would be no different. So far as the business is concerned the asset would go out and cease to be a aprt of its stock-in-trade and this again would be the measure of the profit or loss as the case may be of the business qua that particular asset. To my mind it makes not the slightest difference whether an asset is realised in the course of the business or withdrawn from the stock-in-trade of the business. An asset which has appreciated or depreciated in value as the case may be in accordance with the fluctuation of the market ceases to be a aprt of the business, by the one process or the other. So far as the business is concerned it is entitled to credit in its goods account the price of that asset as ahs been realised by the sale thereof or the market value of that asset as at the date of its withdrawal. Looking at the matter from the assessees point of view also, it does not make any the slightest difference whether he realises the asset in the course of the business and utilises it in any manner he chooses. Having brought into the business an asset which was of a particular value at that time, he withdraws from the business that asset at time when it has appreciated or depreciated in value. The business would be entitled to the appreciation or depreciation in value of that asset in so far as the asset had become a part of the stock-in-trade of the business. When the asset is withdrawn by the assessee, the assessee obtains in his hands by reason of such withdrawal an asset which at the time of the withdrawal has appreciated or depreciated in values as the case may be in comparison with its vlaue at the time when it was brought into the business and the assessee on such withdrawal would be able to deal with or dispose of an asset which had thus appreciated or depreciated in value.
 In my opinion the manner of his dealing with the asset after he withdraws it from the stock-in-trade of the business is really immmaterial. What is material from the stock-in-trade of the business and that vlaue can only be determine by the market value of the asset as at the date of its withdrawal. It was urged that the withdrawal of the asset from the stock-in-trade of the business was not a business operation and that an entry on the credit side crediting the cost price of the particular asset would therefore be enough. This argument however does not take into account the appreciation or the deprciation in the value of the asset on the date of the withdrawal as compared to its value when it was intially brought into business. It also doesnot take into account the fact that the assessee might have adopted the market value basis for valuation of stock-in-trade on hand at the close of the previous year or years of account. The entry on the debit side at the beginning of the year of account would not then represent the cost price of the asset but would represent the market valu of the asset at the close of previous year account. What would then be the rational basis on which the credit entry should be made at the date of withdrawal? Should it be the cost price of the asset which was not at all reflected in the accounts except at the intial stage when the asset was brought into the business or the market value of the asset when it was withdrawn? surely the method of account keeping cannot make any differences to actual position, whether an asset has apperciated or depreciated in value and what pofit or loss if any accrued to the business when tje asset was withdrawn from the stock-in-trade of the business. There is also a further fact to be considered and it is that when the asset is withdrawn from the stock-in-trade of the business there would be of necessity an entry in the account of the person withdrawing it debiting the price of that asset to him. If the assessee withdraws from the stock-in-trade of the business an asset which has thus appreciated or depreciated in value is there any justification whatever for debiting him with the cost price of that asset and not the market value of the asset as at the date of withdrawal? In the event of the asset having appreciated in value the assessee should be debited in his account with the appreciated market value of the asset inasmuch as he withdraws from the stock-in-trade of the business an asset has depreciated in value the assessee should certainly not be mulcted. He withdraws from the stock-in-trade of the business an asset which is of a depreciated value as compared with its value when it was brought inhto the business and he should not certainly be debited with a higher price even though it may be the cost price as appearing in the books of account according to the particular system of accounting adopted by the assessee. I am therefore definitely of the opinion that even in the case of withdrawal as in the case of the realisation of the asset the business is entitled to credit the goods account the market value of the asset as at the date of its withdrawl whatever be the method adopted by it for valuation of its stock-in-trade on hand at the close of a year of account. Shri R. J. Kolah appearing for the appellant particularly relied upon a decision of the Calcutta High Court, In the matter of Messrs.
 Chouthmal Golapchand constituted by four partners with equal shares, and they had at the beginning of the accounting year 1935-36 an opening stock of shares valued at cost price of Rs. 85,331. On the 8th January, 1936, the partners resolved to dissolve the firm with effect from the 30th March, 1936, and in view of the pending dissolution they divided amongst themselves on the 9th March, 1936, there shares which were then valued at the rates prevailing in the market at an aggregate sum of Rs. 51,966. There was a difference was claimed by the assessees as a loss in the assessment. This claim of the assessees was negatived on the ground that there was nothing to show that loss had occurred in the year of account. The assessees having adopted the system of valuing the shares at cost price at the end of every year and the opening of the next year, the cost price of shares was taken to have been their value at the beginning of the year of account and the partition was taken as not amounting to a sale of the shares with the result that there was no evidence of any loss. With great respect to the learned Judges I do not see my way to agree with the reasoning of this judgment does not take count of the fact that at the date of the partition the assets which had been brought into the business at the earlier dates had depreciated in value and it was these depreciated assets which were the subject-matter of partition between the partners. Even if the partition be not treated as a sale it was a transer of property, the property of the firm being transferred to the individual partners thereof and each partner obtaining an absolute interest in the shares thus transferred to him by the firm was concerned it was certainly a transfer of the property to the individual partners and even as regards the partners themselves it was transfer of the interests of the partners inter se in the shares respectively transferred absolutely to each of them. If it were necessary to do so I would certainly say that the case was erroneously decided. (See also the judgment of Fletcher Moulton L. J. in In re Spanish Prospecting Co., Ltd. (1911 1 Ch. 92 at p. 98.))
 DECISION ??

The question referred were -
 Whether in the circumstances of the case any income arose to the assessee as a result of the transfer of hsres and silver bars to the trustees?

Our answer to the first question is that in the circumstances of this case no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees.

As this is a business, any wihtdrawl of the assets is a business matter and the only feasible way of regarding it in a business light is to enter

This is an appeal by an assessee against a judgment and order of the High Court at Bombay delivered on a reference made by the Income-tax Appellate Tribunal. The Bombay High Court refused leave to appeal but the assessee obtained special leave from this Court.

In this books the appellant credited the business with the cost price of the bars and shares so withdrawn and there lies the crux of the issue which we have to determine.

According to the appellant, the act of withdrawl resulted in neither income nor profit nor gain either to himself or to his business, nor was it a business transcation, accordingly it was not taxable.

It is well recognised that in revenue cases regard must be had to the substance of the transaction rather than to tis mere form

He may sell it to another at a loss and cannot be taxed because he cannot be compelled to sell at a fictional profit when the market rises in order that he may be compelled to pay to Government a tax which is anything but fictional

He conceded that had the market rate been lower than the cost price, then the appellant would have been entitled to set off the loss on those transactions against his overall profit on the other transcations and thus obtain the advantage of a lower tax on the overall picture

A man could as easily withdrawn from the business assets which had depreciated and enter in his books the deprecated market value and leave at cost price the assets which had risen

The appellant deals in silver and shares and a substantial part of his holding is kept in silver bullion and shares. His business is run and owned by himself.

The accounting year with which we are concerned is the calendar year 1942

The silver bars and shares lying with the appellant at the beginning of the year were valued at cost price. In the course of the year the appellant withdrew some bars and shares from the business and settled them on certain trusts, three in number.

Our answer to the first question is that in the circumstances of this case no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees. In view of that, the second question does not arise.

This is an appeal by an assessee against a judgment and order of the High Court at Bombay delivered on a reference made by the Income-tax Appellate Tribunal.

Cut away the fictions and you reach the position that the man is supposed to be selling to himself and thereby making a profit out of himself which on the lace of it is not only absurd but against all canons of mercantile and income-tax law.

The question referred were -
 Whether in the circumstances of the case any income arose to the assessee as a result of the transfer of hsres and silver bars to the trustees?

If the answer to question (I) is in afirmative, whether the method employed by the Appellate Assistant Commissioner and upheld by the Appellate Tribunal in computing the assessees income from the transfer is the proper method for computing the income?

The silver bars and shares lying with the appellant at the beginning of the year were valued at cost price.

In this books the appellant credited the business with the cost price of the bars and shares so withdrawn and there lies the crux of the issue which we have to determine.

There is no suggestion in this case that the bars and shares were withdrawn from the business otherwise than in good faith.

It is well recognised that in revenue cases regard must be had to the substance of the transaction rather than to tis mere form.

The appellants mehtod of book-keeping reflects the true position. As he makes his purchases he enters his stock at the cost price on one side of the accounts.

At the close of the year he enters the value of any unsold stock at cost on the other side of the accounts thus cancelling out the entries relating to the same unsold stock earlier in the accounts and then that is carried forward as the opening balance in the next years accounts.

This cancelling out of the unsold stock from both sides of the accounts leaves only the transactions on which there have been actual sales and gives the true and actual profits or loss on his years dealings.

Had the assets been left where they were, they would have been valued at the end of the year as they were at the beginning, at the cost price and we would be a gain at some future indefinite date is mere guess work, for equal there might be loss.

When the asset is withdrawn from the stock-in-trade of the business the position in my opinion would be no different.

The appellant deals in silver and shares and a substantial part of his holding is kept in silver bullion and shares.

His business is run and owned by himself.

His accounts are maintained according to the mercantile system.

According to the appellant, the act of withdrawl resulted in neither income nor profit nor gain either to himself or to his business, nor was it a business transcation, accordingly it was not taxable.

His second contention was that if the act of withdrawl is at a time when the market price is higher than the cost price, then the State is deprived of a potential profit.

In our opinion, it would make no difference if the man instead of giving the feast himself hands over the rice to his daughter as a gift for the marriage festivities of her son.

These cases were not cases of a business owned and run by a single owner and so the fiction of treating the business as a separate entity from its owner actually trading with him, which we are asked to apply here, does not arise.

Neither case is in our opinion, apposite here.

in the circumstances of this case no income arose to the appellant as a result of the transfer of the shares and silver bars to the trustees. In view of that, the second question does not arise. The appeal is allowed with costs.

It is well recognised that in revenue cases regard must be had to the substance of the transaction rather than to tis mere form.

All it acn tax is income, profits and gains made in the relevant accounting year.

In the present case disregarding technicalities it is impossible to get away from the fact that the business is owned and run by the assessee himself.

Cut away the fictions and you reach the position that the man is supposed to be selling to himself and thereby making a profit out of himself which on the lace of it is not only absurd but against all canons of mercantile and income-tax law.

And yet, when the reasoning of the learned Attorney- General is pushed to tis logical conclusion, the form of the transcation is of its essence and its taxable or not according to the route the rice takes from the godown to the wedding feast.

the learned Attorney- Generals rule is equally capable of abuse. A man could as easily withdrawn from the business assets which had depreciated and enter in his books the deprecated market value and leave at cost price the assets which had risen.

He conceded that had the market rate been lower than the cost price, then the appellant would have been entitled to set off the loss on those transactions against his overall profit on the other transcations and thus obtain the advantage of a lower tax on the overall picture.

The learned Attorney-General even conceded that if they had been sold at a loss the appellant would have been entitled to set that off agianst his other gains

And worse. He may keep it and not show a profit. He may sell it to another at a loss and cannot be taxed because he cannot be compelled to sell at a fictional profit when the market rises in order that he may be compelled to pay to Government a tax which is anything but fictional.

In our opinion, it would make no difference if the man instead of giving the feast himself hands over the rice to his daughter as a gift for the marriage festivities of her son.


Mahajan, J. This is appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under Section 66(1) of the Indian Income-tax Act, 1922, whereby the High Court answered the first referred question in the negative. The assessment in question concern the year 1943-44. A Hindu undivided family was carrying on business in Bombay, Madras and the Mysore State. Its business was taken over by a registered firm on March 17, 1942. For the purpose of this appeal however this circumstance is not material. The case has been dealt with on the assumption that a single assessee carried on business from October 10, 1948, to November 8, 1942, the relevant accounting year. According to the accounts of the assessee, during this period the Mysore branch purchased goods from the Bombay head office and the Madras branch of the value of Rs. 2,45,455. The Income-tax Officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore. In view of the provisions of Section 42 of the Act half of this profit, i.e., to the extent of Rs. 37,500, was deemed to accrue or a rise in British India, because of the business connection of the non-resident branch in British India. It was contended that the assessee being a person resident in India, Section 42 could not be invoked in the case, because that section had application only to cases of non-resident.
The Income-tax Tribunal following the decision of the Bombay High Court in Commissioner of Income-tax v. Western India Life Assurance Co., Ltd., upheld this contention, and ruled that no part of the Mysore profit could be taxed in British India. At the instance of the Commissioner of Income-tax Excess Profits Tax, Bombay City, three question were referred to the High Court under Section 66(1), the first of these being - Whether in the circumstances of the case can the profits on the sale of goods in the Mysore State be deemed to accrue or arise in British India under Section 42(1) of the India Income-tax Act. The High Court returned an answer to the question in the negative after resettling it in these terms - Whether on the facts and the circumstances of the case the Income-tax Officer was right in applying the provision of Section 42(1) of the Income-tax Act and holding that Rs. 37,500 were profits deemed to accrue in British India and in including in the assessment a portion thereof.
This appeal is before us on a certificate granted by the High Court and the only question canvassed here is whether Section 42(1) of the India Income-tax Act has application to the case of a resident assessee or whether its scope be limited to non-resident assessee alone. It is common ground that if Section 42 of the Act has no application to the case of a resident assessee the whole of the Mysore profit, namely Rs. 75,000 cannot be included in the assessment of the year 1943-44. On the other hand, if such an assessee is within the ambit of the section, in that event the sum R s. 37,500 or any part of it would be liable to assessment during the assessment year in question. Section 42 of the Act is in these terms -
 All income, profits or gains accruing or arising, whether directly or indirectly, through or from any business connection in the taxable territories, or through or from any property in the taxable territories, or through or from any asset or source of income in the taxable territories, or through or from any money lent at interest and brought into the taxable territories in cash or in kind or through or from the sale, exchange or transfer of a capital asset in the taxable territories, shall be deemed to be income accruing or arising within the taxable territories, and were the person entitled to the income, profits or gains is not resident in the taxable territories, shall be chargeable to income-tax either in his name or in the name of his agent and in the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax
 Provided that where the person entitle to the income, profits or gains is not resident in the taxable territories, the income-tax so chargeable nay be recovered by deduction under any of the provisions of Section 18 and that any arrears of tax may be recovered also in accordance with the provision of this Act from any assets of the non- resident person which are, or may at any time come within the taxable territories
 Provided further that any such agent, or any person who apprehends that he may be assessed as such an agent, may retain out of any money payable by him to such non-resident person a sum equal to his estimated liability under this sub-section, and in the event of any disagreement between the non-resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income-tax Officer a certificate stating the amount to be so retained pending final settlement of the certificate so obtained shall be his warrant for retaining that amount
 Provided further that the amount recoverable from such agent or person at the time of final settlement shall not exceed the amount specified in such certificate except to the extent to which such agent or person may at such time have in his hands additional assets of such non- resident person. Where a person not resident or not ordinarily resident in the taxable territories carries on business with a person resident in the taxable territories, and it appears to the Income-tax Officer, that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person not resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom or which may reasonably be deemed to have been derived therefrom, shall be chargeable to income-tax in the purposes of this Act, the assessee in respect of such income-tax.
 In the case of a business of which all the operations are not carried out in the taxable territories the profits and gains of the business deemed under this section to accrue or arise in the taxable territories shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. Before its amendment in the year 1939 the first part of the section ran thus - 42. (1) In the case of any person residing out of British India, all profits or gains accruing or arising to such person, whether directly or indirectly, through or from any business connection or property in British India, shall be deemed to be income accruing or arising within British India, and shall be chargeable to income-tax in the name of the agent of any such person, and such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income- tax . The rest of the section was substantially in the same termes. In spite of its amendment in 1939 the marginal note to the section continued to refer to non-resident as before, though the words residing out of British India were deleted from the body of sub-section (1). The retention of this marginal note gave rise to conflicting decision on the question whether the section in spite of the chang made in its language in 1939 still continued to have application to cases of non- resident alone. In order to clarify this matter, by Act XXII of 1947 the magical note was amended and it now is in these terms - Income deemed to accrue or arise within British India. It is significant that the changes made in Section 42 in the year 1939 were consequential to the entire recasting of Section 4 of the Act. Section 4 as it stood prior to 1939 charged income-tax on all income, profits or gains, from whatever source derived, accruing or arising, or received in British India or deemed under the provisions of the Act to accrue, or arise, or to be received in British India. It further provided that the income, profits and gains accruing or arising without British India to a person resident in British India shall, if they are received in or brought into British India, be deemed to have accrued or arisen in British India and to be income, profits and gains of the year in which they are so received or brought, notwithstanding the fact that they did not so accrued or arise in that year. By the amendment in the year 1939, the total income of any previous year of any person was defined as including all income, profits and gains from whatever source derived which
 (a) are received or are deemed to be received in British India in such year by or on behalf of such person, or
 (b) if such person is resident in British India during such year, -
 accrue or arise or are deemed to accrue or arise to him in British India during such year or
 accrue or arise to him without British India during such year or
 (c) if such person in sot resident in British India during such year, accrue or arise or are deemed to accrue or arise to him in British India during such year
 This legislative change in the Act made all income accruing or arising or deemed to accrue or arise in British India during the previous year to a resident the subject to charge, apart from income accruing or arising without British India during the previous year. The term deemed brings within the net of chargeability income not actually accruing but which is supposed nationally to have accrued. It involves a number of concepts. By statutory fiction income which can in no sense be said to accrue at all may be considered as so accruing. Similarly, the fiction may relate to the place, the person or be in respect of the year of taxability. Section 42(1) defines what income is deemed to accrue within the taxable territories. It is only by application of this definition that one class of income deemed to accrue to a resident within the taxable territories within the meaning of Section 4(1)(b)(i) can be estimated. The words In the case of any person residing out of British India were deleted from Section 42(1) during the tendency of the amendment bill of 1939 in the Council of State presumably with the object of making the section application to any person who had any income which in a primary sense arose in British India, even though technically it had arisen abroad, irrespective of the circumstance whether that person was resident, ordinarily resident or not ordinarily resident. By Section 8 of Act XXIII of 1941, clause (c) was added to Section 14 of the Act. No effect was to be given to this amendment before the year ending March 31, 1943.
The relevant part of Section 14 after this amendment is in these terms - The tax shall not be payable by an assessee in respect of any income, profits or gains accruing or arising to him within a Part B State, unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under Section 12-B or Section 42. In view of these legislative changes in the provisions of Section 4, 14 and 42 of the Act, the conclusion is irresistible that the object or recasting Section 42(1) in general terms was to make the definition of deemed income given in the section generally applicable to all classes of assessees. This sub-section has been drafted in the widest terms and there is nothing whatsoever in its language to suggest that its operation is confined to non-residents only. Wherever the legislature intended to limit the operation of any part of this section to non-residents alone, it said so in express terms. Sub- section (2) and the latter portion of sub-section (1) expressly concern themselves with the case of non-residents, while sub-section (1) and (3) are so framed that they cover both residents and non- residents. A Bench to the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co., held that notwithstanding its amendment in 1939 the section applied only to non-residents. Reliance was placed, inter alia, on the circumstance that the marginal note appended to the section indicating that it applied to non-resident alone, had not been deleted. To avoid this criticism and to remove doubts the legislature by Act XXIII of 1947 changed the marginal note also. It seems to us that any other construction of the section would create an anomaly, inasmuch as the Part B State income falling under Section 42 would not be assessable in the hands of a resident, but it would be assessable in the hands of a non-resident, because the Income-tax Act, while it ropes in world income of a resident exempts income accruing within the Part B States from its ambit, except when such income is received or is brought into taxable territory or comes within the ambit of Section 42.
Such a construction would be contrary to the policy of the Act. It is unnecessary to dwell on this point at any great length in view of the circumstance that the decision in Commissioner of Income-tax v. Western India Life Insurance Co., has been dissented from and for good reasons, in subsequent cases. In Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal, a Bench of the Calcutta High Court considered this matter at some length and reached the decision the sub-sections (1) and (3) of Section 42 covered cases of both residents as well as non-residents. The same view was taken by a Bench of the Madras v. P arasuram Jethanand. Again the matter was discussed in this court in Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai Co., by Patanjali Sastri, J., as he then was, and also by Mukherjea, J., in the same case. This is what Patanjali Sastri, J., said on this point - It is noteworthy that the first part of sub-section (1) of Section 42 providing that certain classes of income are to be deemed to accrue or arise in British India is not confined in its application to non- residents, but is in general terms so as to be applicable to both residents and non-residents. Before its amendment in 1939 the sub- section began with the words in the case of any person residing out of British India which obviously restricted the application of the provision to non-resident persons, but in its amended form the sub- section has been recast into two distinct parts, the first of which is not so restricted, and the second part alone, which begins with the words and where the person entitled to the income, profits and gains is not resident in British India, is made applicable to non-resident persons, thereby showing that the former part applies to both residents and non-residents. The opening words of the first proviso also point to the same conclusion, for these words would be supplusage it the sub-section as a whole applied only to non-residents.
 A contrary view has, no doubt, been expressed by a Division Bench of the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co., Ltd. Though reference was made in that case to the alteration in the structure of sub-section (I) its significance, as it seems to me, was not properly appreciated. The facts that the marginal note to the whole section refers to non-residents and that the section itself finds a place in Chapter V headed Liability in special cases were relied upon as supporting the view that sub-section (I) as a whole applies only to non-residents. As pointed out by the Privy Council in Balraj Kunwar v. Jagatpal Singh, marginal notes in an Indian statute, as in an Act of Parliament, cannot be referred to for the purpose of construing the statute, and it may be mentioned in this connection that the marginal note relied on has since been replaced by the words Income deemed to accrue or arise within British India which makes it clear that the main object of sub-section (I) was to define that expression see Section 12(a) of Act XXII of 1947. Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment.
 The same view was expressed by Mukherjea, J. Nothing that has been said by Mr. Kolah before us justifies reconsideration of these opinions. Mr. Kolah argued that when the world income of a resident was brought within the net of chargeability by Section 4 in 1939 it was then wholly unnecessary to include such an assessee in the ambit of Section 42. In our judgment, this contention is fallacious. Whatever income arises in a primary sense to a resident in the taxable territories is chargeable under Section 4(1)(b)(i). Hence it was necessary to make Section 42 applicable to such a case. Whatever other consideration may arise in estimating the foreign income of a resident will not be applicable to income deemed to accrue within the taxable territory. Moreover, as above pointed out, in view of the provisions of Section 14(2)(c), resident assessees, but for Section 42(1), would not be liable to assessment regarding income accruing to them in Part B States, even if there is a business connection in the taxable territory.
 Mr. Kolan was unable to suggest any reasonable explanation for the deletion of the words any person residing out of British India from Section 42(1) as it stood before 1939. The only purpose in deleting these words could be to bring residents within the ambit of the section. There is no reason whatsoever for not giving to the palin words of the section the meaning that on the face of it they bear. For the reasons given above we are of the opinion that the answer re turned by the High Court of Bombay to the first question referred to it was wrong.
 DECISION ??

Nothing that has been said by Mr. Kolah before us justifies reconsideration of these opinions.

In our judgment, this contention is fallacious.

For the reasons given above we are of the opinion that the answer re turned by the High Court of Bombay to the first question referred to it was wrong.

Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment.

Mr. Kolah argued that when the world income of a resident was brought within the net of chargeability by Section 4 in 1939 it was then wholly unnecessary to include such an assessee in the ambit of Section 42.

This is appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under Section 66(1) of the Indian Income-tax Act, 1922, whereby the High Court answered the first referred question in the negative

It was contended that the assessee being a person resident in India, Section 42 could not be invoked in the case, because that section had application only to cases of non-resident.

Section 42(1) of the India Income-tax Act has application to the case of a resident assessee or whether its scope be limited to non-resident assessee alone.

The term deemed brings within the net of chargeability income not actually accruing but which is supposed nationally to have accrued.

Sutlej Cotton Mills Ltd. v. Commissioner of Income-tax, West Bengal, a Bench of the Calcutta High Court considered this matter at some length and reached the decision the sub-sections (1) and (3) of Section 42 covered cases of both residents as well as non-residents.

notwithstanding its amendment in 1939 the section applied only to non-residents

reached the decision the sub-sections (1) and (3) of Section 42 covered cases of both residents as well as non-residents.

Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment

in view of the provisions of Section 14(2)(c), resident assessees, but for Section 42(1), would not be liable to assessment regarding income accruing to them in Part B States, even if there is a business connection in the taxable territory.

In view of the provisions of Section 42 of the Act half of this profit, i.e., to the extent of Rs. 37,500, was deemed to accrue or a rise in British India, because of the business connection of the non-resident branch in British India

In spite of its amendment in 1939 the marginal note to the section continued to refer to non-resident as before, though the words residing out of British India were deleted from the body of sub-section (1)

It is significant that the changes made in Section 42 in the year 1939 were consequential to the entire recasting of Section 4 of the Act.

The term deemed brings within the net of chargeability income not actually accruing but which is supposed nationally to have accrued.

By statutory fiction income which can in no sense be said to accrue at all may be considered as so accruing

Similarly, the fiction may relate to the place, the person or be in respect of the year of taxability. Section 42(1) defines what income is deemed to accrue within the taxable territories

It is only by application of this definition that one class of income deemed to accrue to a resident within the taxable territories within the meaning of Section 4(1)(b)(i) can be estimated

Sub- section (2) and the latter portion of sub-section (1) expressly concern themselves with the case of non-residents, while sub-section (1) and (3) are so framed that they cover both residents and non- residents

A Hindu undivided family was carrying on business in Bombay, Madras and the Mysore State. Its business was taken over by a registered firm on March 17, 1942

The Income-tax Officer estimated these purchases of the Mysore branch in British India at Rs. 3,00,000 and its profits at Rs. 75,000 on the sale of these goods in Mysore

This is appeal from the Judgment of the High Court of Judicature at Bombay delivered on a reference under Section 66(1) of the Indian Income-tax Act, 1922, whereby the High Court answered the first referred question in the negative.

Mr. Kolah argued that when the world income of a resident was brought within the net of chargeability by Section 4 in 1939 it was then wholly unnecessary to include such an assessee in the ambit of Section 42. In our judgment, this contention is fallacious.

Sub- section (2) and the latter portion of sub-section (1) expressly concern themselves with the case of non-residents, while sub-section (1) and (3) are so framed that they cover both residents and non- residents.

A Bench to the Bombay High Court in Commissioner of Income-tax v. Western India Life Insurance Co., held that notwithstanding its amendment in 1939 the section applied only to non-residents.

Nor can the title of a chapter be legitimately used to restrict the plain terms of an enactment.

Wherever the legislature intended to limit the operation of any part of this section to non-residents alone, it said so in express terms.

The only purpose in deleting these words could be to bring residents within the ambit of the section. There is no reason whatsoever for not giving to the palin words of the section the meaning that on the face of it they bear.

Section 4 as it stood prior to 1939 charged income-tax on all income, profits or gains, from whatever source derived, accruing or arising, or received in British India or deemed under the provisions of the Act to accrue, or arise, or to be received in British India.

Again the matter was discussed in this court in Commissioner of Income-tax, Bombay v. Ahmedbhai Umarbhai Co., by Patanjali Sastri, J., as he then was, and also by Mukherjea, J., in the same case.

but is in general terms so as to be applicable to both residents and non-residents.

The opening words of the first proviso also point to the same conclusion, for these words would be supplusage it the sub-section as a whole applied only to non-residents.

In order to clarify this matter, by Act XXII of 1947 the magical note was amended and it now is in these terms - Income deemed to accrue or arise within British India.

The same view was taken by a Bench of the Madras v. P arasuram Jethanand.


CiviL APPELLATE JURISDICTION Civil Appeal No. 64 of 1953. Appeal by special leave from the Judgment and Decree, dated the 29th November, 1951, of the Court of the Judicial Commissioner for Himachal Pradesh at Simla in Civil Revision No. 52 of 1951. Gopal Singh for the appellants. C. Isaacs (Amar Nath Chona, with him) for the respondents. 1954. January 19. The Judgment of the Court was delivered by DAS J.-This is an appeal by special leave against the order made on the 20th November, 1951, by the Judicial Commissioner of Himachal Pradesh in proceedings instituted by the respondents under articles 226 and 227 of the Constitution of India. There is no substantial dispute as to the facts leading up to the present appeal. The appellants were tenants of a certain shop premises situate in Solan Bazar in the district of Mahasu in Himachal Pradesh. On the llth October, 1947, they had executed a rent deed by which they agreed to pay an annual rent of Rs. 175 payable as to Rs. 50 on the last of Baisakh and as to the balance of Rs. 125 in the month of October, in default of which payment, the respondents, as landlords, would be entitled to recover the whole of the said rent in one lump sum.
The tenancy created by the rent deed was only for one year in the first instance but it provided that if the tenants desired to continue in occupation they must execute a further rent deed before the expiration of the said term. The appellants never executed any further rent deed but held over and continued in occupation of the demised premises. The appellants fell into arrears with the payments of rents due for the years 1948 and 1949 and the respondents made applications to the Rent Controller for eviction of the appellants under section 13 (2) (i) of the East Punjab Urban Rent Restriction Act, 1949, as extended to Himachal Pradesh. The appellants, however, paid up the arrears of rent into court and claimed the benefit of the proviso to section 13 (2) (i). The claim was allowed and the said applications were dismissed accordingly on the 18th December, 1950. The appellants again fell into arrears with the pay- ment of rent due for the year 1950. On the 26th December, 1950, the respondents served on the appellants a notice c alling upon the latter to pay whole of the said rent forthwith but the appellants failed to do so. The respondents thereupon, on the 2nd January, 1951, filed an application under section 13 (2) (i) for the eviction of the appellants on the ground of nonpayment of rent. Thereafter, on the 10th January, 1951, the appellants made an application to the Rent Controller for the fixation of a fair rent under section 4 of the said Act. On the 25th January, 1951, the appellants filed their written statements in the proceedings under section 13 (2) (i) admitting the nonpayment of rent and the receipt of the notice but pleaded (i) that the respondents application was barred by reason of the rejection of the previous applications for eviction made by the respondents and (ii) that the present application could not be entertained in view of the pendency of their application for fixation of a fair rent under section 4 of the said Act. On the 20th February, 1951, the Rent Controller framed the following issues-
 Whether the application in question was not entertainable in view of the judgment of the District Judge, dated the 18th December, 1950 Onus on defendants. If issue No. I is not proved, had the opposite party (tenants) not paid the rent and as such were they liable to be ejected? Onus on plaintiffs. Have the opposite party already filed an application in the said court for the fixation of rent and are they, therefore, not liable for ejectment pending the decision on the application and what is its effect on the said application? Onus on defendants. By his judgment, dated the 29th May, 1951, the Rent Controller held that as the previous applications related to non-payment of rents for the years 1948 and 1949 the present application which was founded on non-payment of rent for 1950 was not barred under section 14 of the said Act but, although the fact of rent being in arrears was admitted, the Rent Controller did not think fit to make an order directing the appellants to put the respondents in possession of the demised premises. The reasons given by him were as follows- Regarding the non-payment of the rent when the plea of the tenant is only that he is waiting for the fixation of fair rent by the Rent Controller there is not enough ground for ejectment. A civil suit for the recovery of the rent would have been a more appropriate method of obtaining that rent.
 I therefore dismiss the suit. The parties should bear their own The respondents preferred an appeal to the District Judge of Mahasu under section 15 of the said Act. The learned District Judge dismissed the appeal observing- On behalf of the landlord it was urged that under section 13 (2) of the Punjab Urban Rent Restriction Act, as applied to Himachal Pradesh, the Controller, if it came to the finding that rent had not been paid, had no option but to direct the tenant to put the landlord in possession. Undoubtedly, that is the correct legal position, but in the present case the non-payment of rent was due to a misapprehension of the legal position created by the tenant filing an application for fixing fair rent. 1, therefore, think that this case can be distinguished and does not fall within section 13 (2), Punjab Urban Rent Restriction Act. The respondents moved the Judicial Commissioner, Himachal Pradesh, under articles 226 and 227 of the Constitution of India for setting aside the order of the District Judge. The learned Judicial Commissioner held that in view of the admitted failure to pay the rent as provided by the rent deed or at the first hearing of the court under the proviso to section 13 (2) (i) the courts below had acted arbitrarily in refusing to make an order for ejectment against the tenants who had not done what was incumbent on them to do under the law and that such a situation called for inter- ference by the court of the Judicial Commissioner in order to keep the subordinate courts within the bounds of their authority.
 He accordingly set aside the orders of the courts below and allowed the application for ejectment but gave the appelants three months time for vacating the premises. The appellants have now come up before this court on appeal by special leave obtained from this court. Learned advocate appearing in support of this appeal urges that the learned Judicial Commissioner acted wholly without jurisdiction inasmuch as (1) the Rent Controller or the District Judge exercising powers under the Act was not amenable to the jurisdiction of the High Court and, therefore, article 227 confers no power on the court of the Judicial Commissioner over the Rent Controller or the District Judge, and (2) that article 227 read with article 241 confers no power of judicial superintendence on the court of the Judicial Commissioner. Re. l.-The court of the Judicial Commissioner of Himachal Pradesh exercises jurisdiction in relation to the whole of the territories of Himachal Pradesh. The Rent Controller and the District Judge exercising jurisdiction under the Act are certainly tribunals, if not courts, and they function within the territories of Himachal Pradesh.
 Therefore, article 297 (1) read with article 241 confers on the court of the Judicial Commissioner power of superintendence over such tribunals. The words in relation to which obviously qualify the word territories and not the words courts and tribunals. Re. 2.The material part of article 227 substantially reproduces the provisions of section 107 of the Government of India Act, 1915, except that the power of superintendence has been extended by the article also to tribunals. That the Rent Controller and the District Judge exercising jurisdiction under the Act are tribunals cannot and has not been controverted. The only question raised is as to the nature of the power of superintendence conferred by the article. Reference is made to clause (2) of the article in support of the contention that this article only confers on the High Court administrative superintendence over the subordinate courts and tribunals. We are unable to accept this contention because clause ( 2) is, expressed to be without prejudice to the.generality of the provisions in clause (1). Further, the preponderance of judicial opinion in India was that section 107 which was similar in terms to section 15 of the High Courts Act, 1861, gave a power of judicial superintendence to the High Court apart from and independently of the provisions of other laws conferring revisional jurisdiction on the High Court.
 In this connection it has to be remembered that section 107 of the Government of India Act, 1915, was reproduced in the Government of India Act, 1935, as section 224. Section 224 of the 1935 Act, however, introduced sub-section (2), which was new, providing that nothing in the section should be construed as giving the High Court any jurisdiction to,question any judgment of any inferior court which was not otherwise subject to appeal or revision. The idea presumably was to nullify the effect of the decisions of the different High Courts referred to above. Section 224 of the 1935 Act has been reproduced with certain modifications in article 227 of the Constitution. It is significant to note that sub-section (2) to section 224, of the 1935 Act has been omitted from article 227. This significant omission has been regarded by all High Courts in India before whom this question has arisen As having restored to the High Court the power of judicial superintendence it had under section 15 of the High Courts Act, 186 1, and section 107 of the Government of India Act, 1915. See the cases referred to in -Moti Lal v. The State through Shrimati Sagrawati(1). Our attention has not been drawn to any case which has taken a different view and, as at present advised, we see no reason to take a different view. This power of superintendence conferred by article 227 is, as pointed out by Harries C. J., in Dalmia Jain Airways Ltd.
 Sukumar Mukherjee(2), to be exercised most sparingly and only in appropriate cases in order to keep the Subordinate Courts within the bounds of their authority and not for correcting mere errors.
 DECISION ??

The only question raised is as to the nature of the power of superintendence conferred by the article.

The respondents preferred an appeal to the District Judge of Mahasu under section 15 of the said Act.

The appellants have now come up before this court on appeal by special leave obtained from this court

The only question raised is as to the nature of the power of superintendence conferred by the article.

See the cases referred to in -Moti Lal v.

The State through Shrimati Sagrawati(1).

Moti Lal v. The State through Shrimati Sagrawati(1).

The words in relation to which obviously qualify the word territories and not the words courts and tribunals.

clause ( 2) is, expressed to be without prejudice to the.generality of the provisions in clause (1).

There is no substantial dispute as to the facts leading up to the present appeal.


CIVIL APPEAL JURISDICTION Civil Miscellaneous Petition No, 641 of 1954, Application for review of the Judgment of this Court in Civil Appeal No. 152 of 1954. C. Chatterjee (G. C. Mathur, with him) for the petitioner. Veda Vyas (S. K. Kapoor and Naunit Lal, with him) for the respondent. 1954. October 18. The Judgment of the Court was delivered by VENKATARAMA AYYAR J.-This is an application for review of the judgment of this Court in Civil Appeal No. 52 of 1954. That was an appeal against an order of the Election Tribunal, Himachal Pradesh (Simla), dismissing a petition to set aside the election of the respondent to the Legislative Assembly, Himachal Pradesh, from the Rohru Constituency.
Two points were raised at the hearing of the appeal before us One was that the respondent was disqualified for election to the Assembly under section 17 of Act No. XLIX of 1951, read with section 7(d) of Act No. XLIII of 195 1, by reason of the fact that he was interested in contracts for the supply of Ayurvedic Medicines to the Himachal Pradesh Government, and the other, that he had appointed Government servants as polling agents, and had thereby contravened section 123(8) of Act No. XLIII of 1951. On the first question, we held that, on a true construction of section 17, what would be a disqualification for election to either House of Parliament under article 102 would, under that section, be disqualification for election to the Legislatures of Part C States, and that the disqualification under section 7 (d) of Act No. XLIII of 1951 would accordingly be a disqualification under section 17 of Act No. XLIX of 195 1. A further contention was then raised on behalf of the respondent that even if section 7(d) were to be imported into section 17, that would not disqualify him, because under that section, the disqualification must be to being elected to either House of Parliament, and that under sections 7 and 9 of Act No. XLIII of 1951, a contract to operate as a disqualification to the election to either House of Parliament must be, with the Central Government, whereas the contracts of the respondent were with the Government of Himachal Pradesh. The answer of the petitioner to this contention was that under article 239 the administration of Part C States was vested in the President acting through the Chief Commissioner or the Lieutenant-Governor, and that the contracts of the respondent with the Chief Commissioner, Himachal Pradesh, must be held to be contracts with the Central Government. We, however, disagreed with this con- tention, and held that article 239 had not the effect of merging States with the Central Government, and converting contracts with the States into those with the Central Government.
In this application, Mr. Chatterjee appearing for the petitioner invites our attention to the definition of Central Government in section 3(8)(b)(ii) of the General Clauses Act. It is as follows Central Governmnet shall in relation to anything done or to be done after the commencement of the Constitution, mean the President and shall include in relation to the administration of a Part C State, the Chief Commissioner or Lieutenant-Governor or Government of a neighbouring State or other authority acting within the scope of the authority given to him or it under article 239 or article 243 of the Constitution, as the case may be. He argues that by force of this definition, contracts with the Chief Commissioner of Himachal Pradesh must be treated as contracts with the Central Government, and that in consequence, the respondent was disqualified for election under section 17 of Act No. XLIX of 1951, read along with section 7(d) of Act No. XLIII of 1951. As against this, Mr. Veda Vyas for the respondent relies on the definition of State in section 3(60)(b) of the General Clauses Act, which runs as follows State Government as respects anything done or to be done after the commencement of the Constitution, shall mean, in a Part A State, the Governor, in a Part B State the Rajpramukh, and in a Part C State the Central Government. His contention is that there being in the Constitution a fundamental distinction between the Government of the Union and Government of the States, section 3(8) of the General Clauses Act should be so construed as not to destroy that distinction, and that having regard to the definition of State in section 3(60), it must be held that to the extent the Central Government administers Part C States under article 239, its character is that of the State Governments. We are unable to agree that section 3(8) has the effect of putting an end to the status of Part C -States as independent units, distinct from the Union Government under the Constitution. It merely recognies that those States are centrally administered through the President under article 239, and enacts that the expression Central Government should include the Chief Commissioner administering a Part C State under the authority given to him under article 239. Section 3(8) does not affect the status of Part C States as distinct entities having their own Legislature and judiciary, as provided in articles 239 and 240. Its true scope will be clear if, adapting it, we substitute for the words Central Government in section 9 of Act No. XLIII of 195 1, the words the Chief commissioner acting within the scope of the authority given to him under article 239.
A contract with the Chief Commissioner would, therefore, under section 9 read with section 3(8) of the General Clauses Act, be a contract with the Central Government, and would operate as a disqualification for election to either House of Parliament under sections 7(d) and 9 of Act No. XLIII of 1951, and it would be a disqualification under section 17 of Act No. XLIX of 1951, for election to the Legislative Assembly of the State. It is argued for the respondent that this construction would lead to this anomaly that whereas in the States in Part A or Part B a contract with the State would operate as disqualification only for election to the State Legislatures, such a contract would in Part C States operate as a disqualification to be chosen, both to the State Legislature and to either House of Parliament. That anomaly is undoubtedly there. But the contrary conclusion also involves the anomaly already pointed out, that in Part C States a contract with the State Government is not a disqualification for election even to the State Legislature, as it is in Parts A and B States. Whatever the anomaly, in our view, the proper course is to give effect to the plain language of the statute. We must accordingly hold that in view of section 3(8) of the General Clauses Act, a contract with the Chief Commissioner in a Part C State is a contract with the Central Government, and that would be a disqualification for election to the Legislative Assembly under section 17 of Act No. XLIX of 1951 read with section 7(8) of Act No. XLIII of 1951. This conclusion, however, can result in no advantage to the petitioner, as the further finding of the Election Tribunal is that no contracts of the respondent with the Himachal Pradesh Government were proved to have been subsisting at the material period.
That finding is, for the reasons already given, not open to attack in this appeal, and is sufficient answer to the objection that the respondent was disqualified under section 17. The second point that was argued before us in appeal was that the respondent had appointed certain Government servants to act as polling agents, and had thereby committed a major corrupt practice under section 123(8) of Act No. XLIII of 1951. In rejecting this contention we observed that, as an abstract proposition of law, the mere appointment of a Government servant as a polling agent in itself and without more is not an infringement of section 123(8). The correctness of this conclusion is now challenged by Mr. Chatterjee. His contention is that having regard to the nature of the duties of a polling agent as laid down by the Rules and furtfier elucidated by the instructions contained in the Election Manual issued by the Government, the polling agent must be held to be interested in the candidate for whom he acts as polling agent, and that his employment would therefore be hit by section 123(8).
Examining closely the duties of a polling agent under the Rules and under the Election Manual, they can be grouped under three categories. The first category relates to the period of time antecedent to the recording of votes. The duties of the polling agent at this stage are to see that the ballot boxes are, to start with, empty, that the names of the candidates and their symbols are correctly set out thereon, that the slits in the boxes are in an open position, that the knobs of the slits are properly secured, and that the boxes are properly bolted and sealed. These are duties which are cast on the presiding officer and the polling officers as well, and as these are matters to be attended to before any recording or votes begins, it is difficult to see how they -can be said to assist in the furtherance of the election prospects of any one candidate more than of any other. The second stage is when the polling is actually in progress. The duty of the polling agent at this stage is to identify the voters. Rule 27 provides that when there is a doubt as to the identity of a voter, the presiding officer may interrogate the voter and that be should do so, if so required by a polling agent. Under rule 30, it is open to the polling agent to challenge any voter on the ground that he is not the person whose name is entered in the voters list, and when such objection is taken, it is the duty of the presiding officer to hold an enquiry and pass an order. The object of these Rules is to prevent personation, and that is a matter in which the duty is cast equally on the presiding officer. Rule 24 provides that, The presiding officer may employ at the polling station such persons as he thinks fit to assist him-or any polling officer in identifying the electors.
The work of the polling agent under rules 27 and 30 is of the same character, and it cannot in itself be said to further the election prospects of any particular candidate. The third stage is reached after the polling is over. Then the boxes are to be examined with. a view to find out whether the slits are open and the seals intact, the object of these provisions being to ensure that the ballot boxes had not been tampered with during the time of actual polling. Then the unused ballot papers, the tendered ballot papers and other material documents-are required to be put in separate packages, and the polling agents have the right to seal all of them. It cannot be said that in carrying out these duties the polling agent advances the election prospects of the candidate, as they admittedly relate to a stage after the completion of the polling. Indeed, the work of the polling agent both in the first stage and in the last stage is similar in character, and neither can be said to contravene section 123(8).
As regards the second stage, as already stated in our judgment, the duty of polling agent is merely to identify a voter, and that could not by itself and without more be said to further the election prospects of the candidate. Reliance was placed by Mr. Chatterjee on the following passage in Parkers Election Agent and Returning Officer, Fifth Edition, at page 20- The polling agents appointed for the same candidate to attend the several polling stations at any election, are engaged on the same duty and in the same interest, and it is generally very desirable that they should meet, under the presidency of the candidate or his election agent, before the opening of the poll for the purpose of mutual discussion and co-operation. What that passage means is that as the duty to be performed by the polling agents at the several booths is of the same character, it would be desirable that they should all be assembled and their duties explained to them. This has no bearing on the question whether those duties are such as must inherently promote the election prospects of the candidate. A passage which is more in point is the one at page 18, mentioning who could be appointed as polling agents. It is as follows Any competent person, whether an elector or not, may be appointed as polling agent, provided he be not the returning officer, the acting or deputy acting returning officer, or an officer or clerk appointed under P.E.R., r. 27, or a partner or clerk of any of them.
In this connection, it must be noted that while section 41 of Act No. XLIII of 1951 contains a prohibition against the appointment of certain persons as election agents, there is none such with, reference to the appointment of polling agents under section 46 of the Act. To hold that Government servants are, as such and as a class, disqualified to act as polling agents would be to engraft an exception to the statute, which is not there. Accordingly, we reaffirm the view taken by us that the appointment of a Government servant as polling agent does not, without more, contravene section 123(8). It is scarcely necessary to repeat our observation in the original judgment that if it is made out that the candidate or his agent had abused the right to appoint a Government servant as polling agent by exploiting the situation for furthering his election prospects, then the matter can be dealt with as an infringement of section 123(8).
DECISION ??

Accordingly, we reaffirm the view taken by us that the appointment of a Government servant as polling agent does not, without more, contravene section 123(8).

In rejecting this contention we observed that, as an abstract proposition of law, the mere appointment of a Government servant as a polling agent in itself and without more is not an infringement of section 123(8).

of any one candidate more than of any other. The second

stage is when the polling is actually in progress. The duty of the polling agent at this stage is to identify the voters.

We, however, disagreed with this con- tention, and held that article 239 had not the effect of merging States with the Central Government, and converting contracts with the States into those with the Central Government.

Section 3(8) does not affect the status of Part C States as distinct entities having their own Legislature and judiciary, as provided in articles 239 and 240.

Examining closely the duties of a polling agent under the Rules and under the Election Manual, they can be grouped under three categories

The duty of the polling agent at this stage is to identify the voters

The object of these Rules is to prevent personation, and that is a matter in which the duty is cast equally on the presiding officer.

The work of the polling agent under rules 27 and 30 is of the same character, and it cannot in itself be said to further the election prospects of any particular candidate

XLIII of 1951 would accordingly be a disqualification under section 17 of Act No. XLIX of 195 1

held that article 239 had not the effect of merging States with the Central Government, and converting contracts with the States into those with the Central Government

for election to the Legislative Assembly of the State

In rejecting this contention we observed that, as an abstract proposition of law, the mere appointment of a Government servant as a polling agent in itself and without more is not an infringement of section 123(8)

Rule 24 provides that, The presiding officer may employ at the polling station such persons as he thinks fit to assist him-or any polling officer in identifying the electors.

This is an application for review of the judgment of this Court in Civil Appeal No. 52 of 1954.

Accordingly, we reaffirm the view taken by us that the appointment of a Government servant as polling agent does not, without more, contravene section 123(8).

Section 3(8) does not affect the status of Part C States as distinct entities having their own Legislature and judiciary, as provided in articles 239 and 240.

Whatever the anomaly, in our view, the proper course is to give effect to the plain language of the statute.

In rejecting this contention we observed that, as an abstract proposition of law, the mere appointment of a Government servant as a polling agent in itself and without more is not an infringement of section 123(8).

To hold that Government servants are, as such and as a class, disqualified to act as polling agents would be to engraft an exception to the statute, which is not there.

Two points were raised at the hearing of the appeal before us One was that the respondent was disqualified for election to the Assembly under section 17 of Act No. XLIX of 1951, read with section 7(d) of Act No.

That finding is, for the reasons already given, not open to attack in this appeal, and is sufficient answer to the objection that the respondent was disqualified under section 17.

Examining closely the duties of a polling agent under the Rules and under the Election Manual, they can be grouped under three categories.

The first category relates to the period of time antecedent to the recording of votes.

The second stage is when the polling is actually in progress.

The duty of the polling agent at this stage is to identify the voters.

Rule 27 provides that when there is a doubt as to the identity of a voter, the presiding officer may interrogate the voter and that be should do so, if so required by a polling agent.

The work of the polling agent under rules 27 and 30 is of the same character, and it cannot in itself be said to further the election prospects of any particular candidate.

The third stage is reached after the polling is over.

A passage which is more in point is the one at page 18, mentioning who could be appointed as polling agents.

The correctness of this conclusion is now challenged

Reliance was placed by Mr. Chatterjee on the following passage in Parkers Election Agent and Returning Officer

This has no bearing on the question whether those duties are such as must inherently promote the election prospects of the candidate.

To hold that Government servants are, as such and as a class, disqualified to act as polling agents would be to engraft an exception to the statute, which is not there.

Whatever the anomaly, in our view, the proper course is to give effect to the plain language of the statute.

the mere appointment of a Government servant as a polling agent in itself and without more is not an infringement of section 123(8).

It cannot be said that in carrying out these duties the polling agent advances the election prospects of the candidate, as they admittedly relate to a stage after the completion of the polling.

Section 3(8) does not affect the status of Part C States as distinct entities having their own Legislature and judiciary, as provided in articles 239 and 240.