Birla Jute Manufacturing Co. Ltd. Vs. Commissioner of Wealth Tax, West Bengal, Calcutta - Court Judgment

Excerpt:
- [s.k. dass, acting c.j.,; m. hidayatullah and; a.k. sarkar, jj.] by s. 13 of the delhi and ajmer rent control act, 1952 which came into force on june 9, 1952, courts were prohibited from directing eviction of a tenant at the suit of a landlord excepting in the cases mentioned in the proviso to it. clause (c) of the proviso permitted ejectment where the "tenant without obtaining the consent of landlord has before the commencement of this act sub-let. . . . the premises" relying on this clause the respondent landlord filed a suit against the appellant and respondent no. 2 for their ejectment from a shop room let to the latter alleging that it had been sub-let to the appellant without his consent. the appellant resisted the suit on the ground that the respondent land lord had acquiesced in the subletting. the trial judge decreed the suit holding that the respondent landlord had not done so. the appellant alone appealed to the additional senior sub-judge who set aside the order of the trial judge taking the view that the respondent landlord had acquiesced in the sub-letting. he also held that the subletting had commenced not later than november 1950. the landlord moved the high court in revision under s. 35 of the act. while the matter was pending in the high court, the delhi rent control act, 1958, came into force. section 57 of the act of 1958, provided; "(1) the delhi and ajmer rent control act, 1952, in so far as it is applicable to the union territory of delhi, is hereby repealed. (2) notwithstanding such repeal, all suits and other proceedings under the said act pending, at the commencement of this act, before any court or other authority shall be continued and disposed of in accordance with the provisions of the said act, as if the said act had continued in force and this act had not been passed: provided that in any such suit or proceeding for the fixation of standard rent or for the eviction of a tenant from any premises to which s. 54does not apply, the court or other authority shall have regard to the provisions of this act: provided further that the, provisions for under the said act shall continue in force in respect of suit,, and proceedings disposed of thereunder." the court held that by reason of the provisions of subs. (2) of s. 57 of the act of 1958 the revision case had to be dis- posed of in accordance with the provisions of the act of 1952. it also held that there was no evidence to justify the appellate court's findings that the respondent had acquiesced in the sub-letting by respondent no. 2 to the appellant. in that view of the matter the high court allowed the petition of revision. the appellant then appealed to this court. held: it was competent for the high court under s. 35 of the act of 1952 to interfere with the findings of the court below on the question of acquiescene on the ground that there was no evidence to support that finding. if a court had arrived at a finding without any evidence to support it, it can be legitimately said that it had not decided the case "according to law" within the meaning of that expression in s. 35. hari shankar v. rao girdhai lall chowdhury, 119621 supp. i s.c.r. 933, pooran chand v. motilal,119631 supp. 2 s.c.r. 906 and lala beni ram v. kundan lal, (1899) l.r. 26 i.a. 58, referred to. the right of' the appellant to challenge the decree of the trial judge by appeal could not be affected by the failure of the respondent no. 2 to file an appeal. per das, acting c. j., and hidaytullah, j. (sarkar, j. dissenting): the first proviso to s. 57(2) of the delhi rent control act, 1958 does not demand that a suit for the eviction of it tenant filed under the delhl and ajmer rent control act, 1952, must be governed entirely by the provisions of the new act. the provisions applicable continue to be the provisions of the old act with this addition that where the new act has slightly modified or clarified the previous provisions, those modifications and clarifications should iv applied. where entirely new rights and new liabilities have been created, the new provisions must not be allowed to override the provisions of the old act. if the expression "shall have regard to the provisions of this act" in the first proviso to s. 57(2) means that the provisions of the delhi rent control act, 1958, shall apply to ill such suits or proceedings as are referred to in s. 57(2) except in the matter of the jurisdiction of the civil court, then in reality the substantive provision of s. 57(2) will be denuded of its full effect for all practical purposes. moreover, that would be giving effect to the provisions of the rent control act of 1958 retrospectively though s. 57(2) states in clear terms that all suits and proceedings pending at the commencement of the new act will be dealt with in accordance with provisions of the old act. the correct approach is to read the first proviso harmoniusly with the substantive provision contained in s. 57(2). per sarkar, j. the expression "shall have regard to the provisions of the new act" in s. 57(2) of the act of 1958 gives to all the provisions of the act of 1958 a retrospective operation and not to, some of those provisions. those words do not mean that the intention was that some of the provisions of the new act only were to be applied and they cannot be given that meaning because otherwise the effect of the proviso would be to wipe out largely the first part of the sub-section. the words "suits and other proceedings" in sub-s. (2) of s.57 of the act of 1958 include appeals and revision cases. hari shankar v. rao giridhari lal choudhary [1962] supp. 1 s.c.r. 933, pooran chand v. motilal, [1963] supp. 2 s.c.r. 906 lala beni' ram v. kundan lal, (1899) l.r. 26 i.a. 58, mukesh chand v. jamboo parshad, (1963) lxv p.l.r. 285, shri kishore aggarwal v. satya dev, (1959) lxi p.l.r. 574, jhabar mal chokhani v. jinendra parshad (1963) lxv' p.l.r. 469, ryots of garbandho v. zamindar of parlakimedi (1943) l.r. 70 i.a. 129, mysore states electricity board v. the bangalore woollen cotton & silk mills ltd. [1963] supp. 2 s.c.r. 127, bulaqui das v. ram 42-2 s. c. india/64. saran, (1960) lxiii p.l.r. 231, jiva bhai purshottam v. chhagan karson, [1962] 1 s.c.r. 568, bimal parshad jain v. niadarmal, (1960) lxll p.l.r. 664 and man mohan lal v. b. d. gupta, (1962) lxiv p.l.r. 51, referred to. - it was pointed out that the conduct of the assessee was 'far from what was to be desired' because even in the successive balance sheets the revaluation figure appeared even after the assessee had failed to get the permission of the central government to issue bonus shares. if the assessee has shown the net value of the assets at a certain figure in the balance sheet the wealth tax officer would be entitled to accept it on the footing that the assessee knew best what the valuation of the assets was. it was, however, open to the assessee to satisfy the authorities that the said figure had been enhanced or increased or inflated 'for acceptable reasons'.it was equally open to the wealth tax officer not to accept the figure given by the assessee but to arrive at another figure if he was satisfied for good reasons that the valuation given in the balance sheet was wrong. the circumstances in which bonus shares are issued are well known. the wealth tax officer could reject the figure given by the assessee in the balance sheet if he was, for sufficient reasons, satisfied that that figure was wrong.a.n. grover, j.1. these appeals have been brought from a judgment of the calcutta high court by certificate in a wealth tax reference. civil appeal no. 1834 of 1968 is of the assessee and the other appeal has been filed by the commissioner of wealth tax, west bengal.2. it is necessary to deal with the appeal of the commissioner of wealth tax as the other appeal shall also stand disposed of once the question is answered in the commissioner's appeal. the assessee is a public limited company. in the assessment year 1948-49 the assessee revalued its assets enhancing the existing book value by rs. 1,45,00,000/-which was credited to the capital reserve account. in assessing the wealth tax payable by the assessee for the assessment year 1957-58 the relevant valuation date being march 31, 1957 the wealth tax officer proceeded under section 7(2) of the wealth tax act, hereinafter called the 'act' and took the valuation of the assets at rs. 5,10,40,897 as shown in the balance sheet on the relevant date. the assessee claimed that a sum of rs. 1,45,00,000/-by which the book value of the fixed assets was enhanced in 1948-49 should be deducted in the computation of the net value. it is not clear from the order of the wealth tax officer, who rejected the claim, as to what was the ground taken for claiming this deduction. before the appellate assistant commissioner it was contended on behalf of the assessee that the capital reserve was not out of profits and was only a notional reserve and therefore it should be excluded when global valuation of the assets was being made. it was urged that the figure of reserve was purely artificial and had no relation to the working of the company and should not be taken into account in the valuation of the net assets. the appellate assistant commissioner did not accede to the contention and confirmed the assessment. the appellate tribunal found that a similar point had come up for decision before a special bench of the tribunal consisting of three members in bombay and had been decided in favour of the assessee. following that decision the tribunal allowed the appeal and held that the department was not justified in valuing the assets at the enhanced figure for the purpose of computation of the net wealth of the assessee. the relevant question that was referred was as follows:whether on the facts and in the circumstances of the case the tribunal was justified in excluding the sum of rs. 1,45,00,000/-from the net valuation of the assets as shown in the balance sheet of the assessee as on 31-3-57.3. the high court was of the view that the revenue had taken the stand before the tribunal that the motive of the assessee in revaluing the assets at a higher figure was to declare the bonus share which, however, could not be so declared as the permission of the central government was withheld in that behalf. according to the high court there was a motive for revaluation of the assets and therefore the valuation in the balance-sheet could not furnish the correct basis. it was pointed out that the conduct of the assessee was 'far from what was to be desired' because even in the successive balance sheets the revaluation figure appeared even after the assessee had failed to get the permission of the central government to issue bonus shares. but according to the high court an erroneous figure did not become a correct figure by lapse of time. the following portion of the judgment of the high court may be reproduced:the tribunal was, therefore, in a sense right in excluding a sum of rs. 1,45,00,000/-from the net value of the assets as shown in the balance sheets of the assessee as on march 31, 1957. we, however, make it clear that in answering question no. 1 in the affirmative we did not mean that the net value of the assets should be taken at the figure as appearing in the balance sheet reduced by rs. 1,45,00,000/-. what we mean to say is that in valuing the assets the addition of rs. 1,45,00,000/-may not have been correctly made. this does not, however, mean that the net value of the assets must be the balance sheet figure reduced by rs. 1,45,00,000/-. that net value will have now to be ascertained under section 7(1) of the wealth tax act, now that we have expressed the opinion that the balance sheet in the instant case has not found the unequivocal approval both of the assessee and of the revenue authorities.4. it is quite clear that under section 7(2) of the act the wealth tax officer may determine the net value of the assets of the business as a whole having regard to the balance sheet of the business as on the valuation date. it must be remembered that under section 211 of the indian companies act, 1956, every balance sheet of a company must give a true and fair figure of the state of its affairs as at the end of the financial year. if the assessee has shown the net value of the assets at a certain figure in the balance sheet the wealth tax officer would be entitled to accept it on the footing that the assessee knew best what the valuation of the assets was. it was, however, open to the assessee to satisfy the authorities that the said figure had been enhanced or increased or inflated 'for acceptable reasons'. it was equally open to the wealth tax officer not to accept the figure given by the assessee but to arrive at another figure if he was satisfied for good reasons that the valuation given in the balance sheet was wrong. there can be no doubt that section 7(2)(a) of the act contemplates that the book value hi the balance sheet should be taken as the primary basis of valuation and if any adjustment is required it is open to the wealth tax officer to make such an adjustment in the valuation as given in the balance sheet as may be necessary in the circumstances of the case. (see kesoram industries and cotton mills ltd. v. commissioner of wealth tax (central) calcutta : [1966]59itr767(sc) .5. in the present case the sole reason which at the stage of the appeal before the tribunal came to be disclosed for inflating the valuation by rs. 1,45,00,000 in the assessment year 1948-49 was that the assessee contemplated issuing bonus shares for which the consent of the central government was necessary under section 3 of the capital issues (control) act, 1947. the same was not granted. the assessee, however, did not produce the order of the central government showing the reasons for which permission was declined to the issuance of bonus shares. it continued to show the enhanced or inflated valuation in the balance sheet throughout. the circumstances in which bonus shares are issued are well known. a company may not require any new money but it may reasonably wish to bring the nominal amount of its issued share capital more into line with the true excess of assets over liabilities. unless it takes this step its annual profits will appear to be disproportionately high in relation to its nominal capital. by means of issuing bonus shares the reserve or share premium account or some part of the same are capitalised or converted into share capital. the capitalisation of free i.e. voluntary reserves merely means that undistributed profits have been permanently ploughed back and converted into share capital which cannot be returned to the members by way of dividend. (vide modern company law by l.c.b. gower, p. 110).6. it is quite clear that the main idea underlying the issue of bonus shares is to bring the nominal amount of the issued share capital of the company into line with the true excess of assets over liabilities. this will involve a genuine and correct valuation of assets and not their under-valuation or inflation. it must be remembered that the power to issue shares for increasing the capital is of a fiduciary nature and must be exercised bona fide for the general advantage of the company. no evidence in the shape of an affidavit or any other material was placed before the wealth tax authorities by the assessee demonstrating how it became necessary to inflate the valuation by rs. 1,45,00,000 for the purpose of issuing bonus shares. it was not even the case of the assessee that the value was inflated under expert actuarial suggestion or under some misapprehension or mistaken advice. in this situation the only possible conclusion can be that the assessee could not advance any convincing and acceptable reasons for the alleged inflation. the wealth tax officer could reject the figure given by the assessee in the balance sheet if he was, for sufficient reasons, satisfied that that figure was wrong. the facts and circumstances which have been discussed above show that the wealth tax officer was fully justified in accepting the figure which the assessee himself had given in the balance sheet as the correct figure and proceed to make the assessment in accordance with that figure. the high court should have, therefore, answered the question in the negative and in favour of the commissioner of wealth tax7. the appeal of the commissioner of wealth tax i.e. c.a. 1169/68 is allowed and the question is answered accordingly. the appeal of the assessee i.e. c.a. 1834/68 consequently becomes infructuous and must be dismissed in view of the answer returned in the other appeal. the commissioner will be entitled to the costs incurred in this court (one hearing fee) as also in the high court.