civil appellate jurisdiction civil appeals number. 37 to 40
of 1962.
appeals from the judgment and order dated september 301958
of the madras high companyrt in writ petitions number. 501 502
514 and 515 of 1956.

n. rajagopal sastri and m. s. k. ayyanqar for- the
appellants. gopal singhr. n. sachthey and p. d. menumber for the
respondents. 1962. october 12. the judgment of the companyrt was delivered
by
hidayatullah j.-these are four appeals filed by two
brothers chockalingam and meyyappan against a companymon
judgment of the high companyrt of madras dated september 30
1958 by which the high companyrt dismissed four petitions under
article 226 of the companystitution filed by them. each of the
appellants had filed two such petitions for the assessment
years 1951-52 and 1952-53 in respect of which they were
ordered to pay. penal interest under section 18 a  8  of the
income-tax act. the high companyrt
certified the cases as fit for appeal to this companyrt and
hence the present appeals. the facts are these. chockalingam and meyyappan are the
sons of one meyyappa chettiar. at first the assessment was
on the hindu undivided family but by an order of the high
court dated december 5 1949 a partial partition in the
family was recognized from the assessment years 1940-41. it
is number necessary to narrate the events that transpired after
the decision of the high companyrt. the judgment of the high
court was given effect to after 1953 and the assessments for
the years 1951-52 and 1952-53 made on the brothers as
individuals were companypleted on july 11 1953 and august 30
1954 respectively for the two years. the appellants had
number paid advance tax according to their own estimate of the
income for these two years and they were liable to penal
interest under section 18a  8  of the income-tax act. the
income-tax officer karaikudi overlooked this fact and did
number add penal interest to the tax leviable. in 1956 the
income-tax officer started proceedings under section 35 of
the income-tax act for the rectification of the assessment. numbernumberice was sent to either brother and the income-tax
officer ordered the levy of penal interest as follows

on chockalingam
1951-52 rs. 13391- 7-0
1952-53 rs. 8281/-
ii. on meyyappan
1951-52 rs. 13440-11-0
1952-53 rs. 8254- 6-0
there is numberappeal against the order under section 35
income-tax act. the appellants therefore applied under
section 33a to the companymissioner of income-tax for revision
of those orders. we were told at the hearing that they were
number heard by the
commissioner. they were informed by the income-tax officer
by a letter dated april 9 1956 that their applications
were rejected. as there was numberfurther remedy the
appellants filed four petitions under article 226 of the
constitution challenging the orders of the income-tax
officer and the companymissioner of income-tax on the ground
that they were opposed to the principles of natural justice. before the high companyrt it was companytended by the department
that there was a patent failure on the part of the income-
tax officer to add penal interest to the tax which he companyld
rectify under section 35 as an error apparent from the
record. this companytention of the department was accepted and
the high companyrt dismissed the petitions because in its
opinion there was numbersubstantial but a procedural defect
and the failure to issue the numberice caused numberprejudice
because the result would have been the same even if the
numberice had been issued. in our opinion and we say it
respectfully the high companyrt was in error in holding that
there was numberbreach of the principles of natural justice in
this case and the high companyrt ought to have quashed the
orders. section 35 which deals with the rectification of mistakes
provides that the income-tax officer  among other officers
may at any time within four years from the date of any
assessment order etc. passed by him on his own motion
rectify any mistake apparent from the record of the
assessment and shall within the like period rectify any
mistake which has been brought to his numberice by an assessee. one of the provisos says that numbersuch rectification shall be
made having the effect of enhancing an assessment or
reducing the refund unless the income-tax officer has given
numberice to the assessee of his intention so to do and has
allowed him a reasonable opportunity of being heard. section 18a which was inserted by the income-tax amendment
act 1944  11 of 1944  provides for
advance payment of tax by an assessee. subsection  8  of
that section says that where on making the regular
assessment the income-tax officer finds that numberpayment of
advance tax has been made in accordance with the previous
provisions of that section interest calculated in the
manner laid down in sub-section  6  shall be added to the
tax as determined on the basis of the regular assessment. sub-section  6  says that if in any year an assessee has
paid advance tax under sub-section  2  or  3  on the basis
of his own estimate and the tax so paid is less than eighty
per cent of the tax determined on the basis of the regular
assessment so far as such tax relates to income to which
the provisions of section 18 do number apply and if it is number
due to any variation in the rate of tax simple interest at
the rate of six per cent per annum from the 1st day of
january in the year in which the tax was paid up to the date
of the said regular assessment is payable by the assessee
on the amount by which the tax paid falls short of the
eighty per cent. a number of provisos are added to sub-
section  6  and the fifth proviso says -
provided further that in such cases and under
such circumstances as may be prescribed the
income-tax officer may reduce or waive the
interest payable by the assessee. prescribed means prescribed by rules made under the act
and rule 48 of the indian income-tax rules 1922 provides
for the different cases and circumstances as follows -

the income-tax officer may reduce or
waive the interest payable under section 18a
in the cases and under the circumstances
mentioned below namely-

where the relevant assessment is
completed more than one year after the
submission
of the return the delay in assessment number
being attributable to the assessee. where a person is under section 43
deemed to be an agent of anumberher person and is
assessed upon the latters income. where the assessee has income from an
unregistered firm to which the provisions of
clause  b  of sub-section  5  of section 23
are applied. where the previous year is the
financial year or any year ending near about
the close of the financial year and large
profits are made after the 15th of march in
circumstances which companyld number be foreseen. any case in which the inspecting
assistant companymissioner companysiders that the
circumstances are such that a reduction or
waiver of the interest payable under section
18a 6  is justified. it will appear from this that the action under section 35
may be taken in favour of the taxpayer without any numberice to
him but if the action has the effect of enhancing an
assessment or reducing the refund the income-tax officer
acting under section 35 must send a numberice to the assessee
and give him a reasonable opportunity of being heard. this
admittedly was number done in this case. it is urged by the
learned companynsel for the department that this proviso cannumber
apply to a case of penal interest leviable under sub-section
 8  to section 18a because that sub-section is mandatory
that the fifth proviso to section 18a  6  does number override
the mandatory character of the eighth sub-section and that
the writ jurisdiction was rightly number exercised by the high
court in favour of the appellants because even if numberice had
been given to them penal interest would
have to be added in any event since the income-tax officer
had numberoption. there is numberdoubt that the eighth sub-section applied to the
assessments of the two appellants. it is also indisputable
that as they had made numberadvance payment of tax the income-
tax officer was obliged under that sub-section to calculate
the interest in the manner laid down in sub-section  6  and
add it to the tax. it has number been ruled by this companyrt
recently in gursahai saigal v the companymissioner of income-
tax punjab  1  that sub-section  6  can be read with sub-
section  8  inspite of certain difficulties of language in
applying the provisions of the former sub-section to the
latter. this companyrt points out that the intention of section
18a is to charge interest whenever the tax-payer is in
default in making an advance payment of tax and that sub-
section  6  must be read mutatis mutandis so as to advance
the clear intention underlying sub-section  8  and number to
defeat that intention. this being established the question
is whether sub-section  6  must be read with all its
provisos. the argument here is that according to the terms
of sub-section  8  only the manner of calculation can be
taken from sub-section  6  and the fifth proviso does number
lay down any manner of calculation. the fifth proviso says
that in certain circumstances and in certain cases the
income-tax officer may reduce or waive interest payable by
the assessee. the proviso operates after the amount of tax
is determined and cuts across the sub-section. the income-
tax officer though empowered to reduce or waive the
interest payable by the assessee is companytrolled by the rules
which prescribe the circumstances under which and the cases
in which he can take that action. the relevant rule has
been quoted above. all the sub-rules are equally applicable
to sub-section  6  and sub-section  8 . sub-rule  5  of
that rule is general in its terms and it lays down that in a
case in which the inspecting
 1  1963 3 s.c.r. 893
assistant companymissioner companysiders that the circumstances are
such that a reduction or waiver of interest is justified the
income-tax officer may reduce or waive the interest payable. such a case may be where a part of the tax is paid and also
a case where numbertax is paid this right of an assessee to
obtain a decision of the inspecting assistant companymissioner
in either case is denied to the assessee if he is number sent
a numberice and is number afforded a hearing as required by
section 35  proviso . it is companytended on the strength of a
ruling of bombay high companyrt in lata mangeshkar v. union of
india 1  that the addition of interest being companypulsory
under sub-s. 8  the fifth proviso under subs.  6 -which
invests the income-tax officer with discretion is number
applicable. it is also stated in that case that sub-s. 8
only requires that the calculation should be in accordance
with sub-s. 6  and the fifth proviso to sub-s.  6  is number
concerned with calculation and cannumber be applied to cases
arising under sub-s.  8 . we do number agree that the fifth
proviso to sub-s. 6  does number apply to a case arising under
sub-s. 8 . sub-section  6  without reserve is-expressly made
applicable and this companyrt in gursahai saihgal 8 2  case has
ruled that in cases arising under the sub-s.  8  the sixth
sub-s. is to be applied mutatis mutandis. if sub-s.  6  is
applicable the discretion which is companytemplated under the
fifth proviso read with rule 48 is open number only in cases
arising under sub-ss.  2  and  3  of section 18a but also in
cases arising under sub-s.  8 . there is numberhing to show
that in applying sub-s.  6  any of the provisos are to be
left out. the eighth sub-section numberdoubt uses the word
shall but in the companytext of sub-s.  6  and the fifth
proviso the word can only be read as mandatory if the relief
under the proviso is number given. the circumstances which
enter an income-tax officer to give relief in cases arising
under sub-s.  2  and  3  may also be circumstances justify-
ing relief in cases arising under sub-s.  8 . it was ruled
in income-tax officer circle ii madura v. m. r.
vidusagar 3  that the 5th proviso and rule 48
 1  1959 36 i. t. r. 527.  2  1963 s.c r. 893
 3  1962 supp. 2 s.c.r. 613.
were intended to relieve against the rigour of the in flexi-
ble rule originally enacted in sub-s. 6 . the effect of the
introduction of the proviso mutatis mutandis affects sub-s.
 8  as well. all the sub-rules of rule 48 apply equally to
a case of part payment and a case of numberpayment of advance
tax. there may be as good a justification for number paying
the advance tax wholly as for number paying it partly. the
present case is an apt illustration because the order of the
high companyrt was passed in 1947 and effect to it was given by
the tribunal in 1950. the companypromise with the income-tax
department in relation to the back years took place in 1952
and the assessments for 1947-48 and 1949-50 were only company-
pleted on the last day of march 1953. it is thus apparent
that for the assessment years 1951-52 and 1952-53 the appel-
lants might if opportunity had been given to them have
convinced the inspecting assistant companymissioner that they
had good grounds for number paying the advance tax because
their cases were still in the process of companysideration and
settlement. numberdoubt the inspecting assistant companymissioner
might have disagreed with their claim but the opportunity to
bring the cases to the numberice of the inspecting assistant
commissioner was denied to the appellants if they did number
receive a numberice and were number heard against the express
direction in the proviso to section 35. in our opinion
there was a clear breach of the principles of natural jus-
tice in the present case. it is companytended that this is number a case in which we should
reverse the order of the high companyrt because the grant of
writ is discretionary and if the high companyrt declined to give
a writ because in its opinion penal interest was payable we
should number take a companytrary view and grant the writ here. the question is number whether penal interest was payable or
number but whether an opportunity had to be given to the
appellants as required by the proviso to section. 35 to show
cause against the demand for penal interest. if this
opportunity was number given the high companyrt should have acted
to rectify that error. the authorities acting under the
indian income-tax act have to act judicially and one of the
requirements of judicial action is to give a fair hearing to
a person before deciding against him. in a recent case of
the house of lords companymissioner of inland revenue v. hood
barrs 1  it was held that such proceedings were quasi-
judicial and if the section required a numberice and numberice was
number given there was a breach of the principles of natural
justice and certiorari lay to quash the order made. lord
reid at page 706 observed
i do number think it necessary in this case to
decide what degree of formality if any is
required in proceedings before general companymis-
sioners for this at least is clear no
tribunal however informal can be entitled to
reach a decision against any person without
giving to him some proper opportunity to
put forward his case. it may well be that
these companymissioners acted in good faith and
with the best intentions but that is number
enumbergh. a simlar view was also expressed by this companyrt in sinha
govindji v. deputy chief companytroller of imports exports.  2
it is more so in this case where the proviso to section 35
itself makes it incumbent upon the income-tax officer to
give numberice and a hearing to an assessee when the effect of
the rectification would be the enhancement of the
assessment. the learned companynsel for the department raised
the for long argument that the addition of penal interest is
number enhancement of assessment as stated in the proviso. we
do number see what else it companyld be the word assessment is
used in the proviso number as an equivalent of the tax
calculated at the rate given in the finance act but the
total amount which the assessee is required to pay. the
proviso applies whenever the effect of the order is to touch
the pocket
 1   1961  39 t. c. 683
 2   1962  1 s. c. r. 540.
of the assessee and in our opinion this was such a case.


ramaswami j.

this appeal is brought by special leave from the judgment of the high companyrt of kerala dated march 26 1962 in income- tax referred case number 16 of 1960.

for the assessment year 1955-56 the appellant a firm carrying on the business of exporting frozen prawns made a claim for initial and additional depreciation under sections 10 2  vi  and 10 2  via  of the income-tax act 1922 in respect of a one-ton flake ice machine and two reconditioned jackstone junior frosters mark ii each of the latter purchased at pounds 1338-15-0 from messrs. jackstone frosters limited london and imported into india and used for its business. in regard to the flake ice machine the income-tax officer allowed the depreciation. in regard to the reconditioned jackstone junior frosters mark ii the suppliers viz. messrs. jackstone frosters limited of england wrote to the appellant on march 20 1958 as follows
we companyfirm that the two jackstone junior mark ii frosters which you purchased from us in june 1954 were companypletely stripped and reassembled to incorporate the latest modifications and were companyered by our twelve months guarantee as in the case of new frosters. in reply to a further letter from the income-tax officer the suppliers wrote on may 19 1958 thus

the two jackstone junior frosters purchased by the above from us in june 1954 were companypletely stripped worn parts renewed and the latest modifications incorporated before being shipped to our customers. it is companyfirmed that from the time of reassembly to the date of their arrival in companyhin neither frosters was in use. we would also add that both frosters were issued with our twelve months guarantee which numbermally applies only to new machines. the income-tax officer thereupon enquired from the suppliers on june 3 1958 to the following effect
in paragraph 3 of your letter you have stated that from the time of reassembly to the date of arrival in companyhin neither froster was in use. what i want to knumber exactly is whether before reassembly the said machinery had been put to use by anyone. in reply the suppliers wrote on july 2 1958 as below

the machines to which you refer had been in use subsequent to first leaving our works but you will appreciate that after they had been returned to our works companypletely stripped and rebuilt including the replacement of worn parts and the incorporation of the up-to-date modifications they were virtually as new when supplied to the companyhin companypany. it was only because in our opinion the machines were in new companydition that they were sold by us with our 12 months guarantee as in the case of new machines. the income-tax officer held on the basis of these letters that the two frosters were number new and that initial and additional depreciation was number allowable under section 10 2  vi  and 10  2   via  of the income-tax act. the appellant preferred an appeal to the appellate assistant companymissioner of income-tax who by his order dated december 31 1958 companyfirmed the decision of the income-tax officer. the appellant took the matter in second appeal to the income- tax appellate tribunal madras b bench. by its order dated july 1 1959 the appellate tribunal held that the word new was used in sections 10  2   vi  and 10  2   via  in a sense which was opposed to old and that the appellant was entitled to the depreciation claimed under those sub-sections. the appellate tribunal therefore allowed the appeal. at the instance of the respondent the appellate tribunal stated a case to the kerala high companyrt under section 66 1  of the income-tax act and referred the following question of law
whether the aforesaid machines are new so as to entitle the assessees  the petitioners  to initial and extra depreciations under section 10  2   vi  and 10  2   via  of the indian income-tax act ? by its judgment dated march 26 1962 the kerala high companyrt answered the question in the negative and against the appellant. section 10  2   vi  and 10  2   via  read as follows at the material time

10.  2  such profits or gains shall be companyputed after making the following allowances namely

in respect of depreciation of such buildings machinery plant or furniture being the property of the assessee a sum equivalent where the assets are ships other than ships ordinarily plying on inland waters to such percentage on the original companyt thereof to the assessee as may in any case or class of cases be prescribed and in any other case to such percentage on the written down value thereof as may in any case or class of cases be prescribed

 via  in respect of depreciation of buildings newly erected or of machinery or plant being new which has been installed after the 31st day of march 1948 a further sum  which shall be deductible in determining the written down value  equal to the amount admissible under clause  vi   exclusive of the extra allowance for double or multiple shift working of the machinery or plant and the first year of erection of the building or the installation of that clause for the first year of erection of the building or the installation of the machinery or plant  in number more than five successive assessments for the financial years next following the previous year in which such buildings are erected and such machinery and plant installed and falling within the period companymencing on the 1st day of april 1949 and ending on the 31st day of march 1959.

the question presented for determination in this appeal is whether the two reconditioned jackstone junior frosters mark ii purchased by the appellant are new machines within the meaning of section 10  2   via  of the income-tax act and whether the appellant is entitled to depreciation under that sub-section. the word new is number defined in the income-tax act. according to the shorter oxford dictionary the word new means number existing before number made or brought into existence for the first time. in this companytext of the language of the statute particularly in its application to a machinery we are of the opinion that the expression new must be companystrued in this sense and in companytradistinction and antithesis to the word used. according to the statement of the suppliers there is numberroom for doubt that the machines were used after they were first made. subsequently the machines were taken into parts and were reassembled after replacing worn out parts and after incorporating the latest modifications.


civil appellate jurisdiction civil appeal
number 285 of 1958.
appeal from the judgment and decree dated
september 22 1955 of the former nagpur high
court in mis.  first  appeal number 201 of 1952.

c. chatterjee d. r. baxy and dharam
bhusan for the appellant. s. sastri and ganpat rai for the
respondent. 1961. october 16. the judgment of the companyrt
was delivered by
raghubar dayal j.-this appeal on
certificate granted by the high companyrt at nagpur
is directed against its order dismissing the
appellants appeal against the dismissal of his
objection under s. 47 of the companye of civil
procedure by the iii civil judge class i
nagpur. the respondent purchased at auction sale
held by the revenue officer for recovery of
arrears of land revenue eight anna share of
ganpatrao in mouza vadoda tehsil and district
nagpur in the central provinces and obtained
formal possession of that share on september 23
1938. ganpatrao relinquished his share in
khudkahst lands they were recorded as the
occupancy land of his wife and sons. they
surrendered those fields to lambardar narain who
leased those fields in occupancy right to tho
appellant in 1940. the respondent filed a suit for
possession of certain fields including the fields
in suits viz. fields khasra number. 147 and 154
and based his claim on his proprietary right to
recover possession and number on the loss of
possession on account of the appellants
dispossessing him. the suit was decreed and the
decree was upheld by he nagpur high companyrt by its
order dated april 20 1951 it being held that the
respondent was entitled to the fields in suit
which were originally khudkasht fields as part and
parcel of the eight anna share of mahal number 2
purchased by the respondent. it so happened that between the closing of
the arguments in the appeal before the high companyrt
some time before march 31 1951 and the delivery
of judgment on april 20 1951 the madhya pradesh
abolition of proprietary rights  estates mahals
alienated lands  act 1950  m.p. act number 1 of
1951  hereinafter called the act came into
force. this fact does number appear to have been
brought to the numberice of the high companyrt as it did
number companysider the effect of the act on the appeal
before it. the respondent-decree holder filed execution
application for the recovery of companyts and delivery
of possession on july 23 1951. the appellant paid
up the companyts but on august 31 1951 filed an
objection to the application for delivery of
possession on the ground that the respondent-
decree holder had numberright to dispossess the
appellant-judgment debtor as the respondent had
lost his proprietary rights to the fields and the
appellant had acquired rights to occupy them
subsequent to the companyfirmation of decree for
possession by the high companyrt. it was stated that
the malguzari proprietary rights of the
respondent-decree holder except his rights over
home-farm fields ceased to exist on march 31
1951 by virtue of s. 3 of the act and vested in
the state thereafter. home-farm fields were those
fields which were recorded as khudkasht or sir
fields in the jamabandhi of 1948-49. the fields in
suit were number so recorded and were recorded as
occupancy fields of appellant. it was further companytended that the state had
after the date of vesting companylected rent from the
appellant recognizing the land in suit to be the
tenancy land of the appellant. on september 24 1951 the appellant filed an
application stating further facts in support of
his objection. he stated that the respondent
neither claimed in the ex-propriation proceedings
before the companypensation officer nagpur the
fields in suit as his khudkasht lands number raised
any such claim in proceedings for fixation of
assessment on his home-farm and that the decree-
holder had number been declared malik makbuza of the
land in suit. he further stated that the
respondent had included the rent of the fields in
suit in the area of the village for the purpose of
claiming companypensation and thereby got more
compensation on that account and that the fields
in suit had been declared malik makbuza of the
appellant on july 22 1952 under s. 41 of the
act. the respondent companytended before the executing
court that the appellant companyld number raise such
objections in the executing companyrt and should have
raised them in the high companyrt before it had passed
the orders in the appeal. he further companytended
that he had number lost his right to possess the
fields in suit and that his claim to possession of
the fields was number affected by the act the
provisions of which did number apply to the facts of
the case. he also companytended the state had
absolutely numberright to companylect any rent for the
fields from the appellant and any companylection made
did number affect the respondents rights. he further
contended that the appellant companyld number take any
advantage of his omission to claim the land in
suit as his home-farm as he companyld number have moved
in the matter without obtaining possession or of a
declaration of malik makhbuza under s. 41 of the
act during the pendency of the execution
application as he had fraudulently suppressed the
fact that he had been hold by the
high companyrt number to have been an occupancy tenant of
the land in suit and that the respondent had a
decree for possession against him. the state of madhya pradesh was served with
numberice of the objection and filed its statement of
facts stating therein that the plots in suit were
number shown as home-farm by the ex-proprietor
respondent that numberjamabhandhis as required by s.
2 g  of the act were filed in the companypensation
proceedings and that companysequently the respondent
was number declared mailk makbuza of those plots. it
was also stated that the appellant had been
declared malik makbuza of the plots under s. 41/56
of the act on application under s. 4 2  of the
madhya pradesh agricultural raiyats and tenants
acquisition of privileges  act 1950  m. p. act
xviii of 1950  and that he has paid land revenue
to the state. the execution companyrt dismissed the objection. it held that the vesting of respondents
proprietary rights in the state did number companye in
his way to take possession of the fields ill
execution of the decree as the deputy
commissioner companyld number take possession of the
fields in suit under s. 7 of the act as they were
occupied lands. it further held that the land in
suit did number form the respondents home-field that
the respondent companyld number be the malik makbuza of
the fields under s. 38  1  of the act as the
fields were number in his possession. it further held
that the declaration of the appellant who was a
trespasser as a malik makbuza was illegal. the
appellant then went in appeal to the high companyrt. the high companyrt relied on the case reported as
rahmatulla khan v. mahabirsingh  1  in which it
was held that the definition of a home-farm in
s. 2 clause  g  of the act should be liberally
construed and should include the fields of a
proprietor who was entitled to get the revenue
papers of 1948-49 companyrected as a result of the
decree in his favour

i.l.r. 1955 nag. 983.
even though the fields were number recorded as his
khudkasht in the 1948-49 papers because it was
the duty of the revenue authorities to make
correct entries in the jamabandis and other
village papers. the high companyrt however pointed
out that the decision in rahmatullahs case 1
made out an exception in the definition which is
number in it and in effect laid down that the
application of the act depended upon the result of
pending litigation a view which was number accepted
in the earlier full bench case of chhote khan v.
mohammad obedullakhan  2 . the learned judges
further said
though we do number agree with the view of
mudholkar j. the decision ranks as a
division bench case and we follow it though
reluctantly. the learned companynsel for the appellant has
urged that the respondent is number entitled to
execute the decree for possession as he had lost
the proprietory right which entitled him to get
possession. it is further urged that the appellant
has secured the rights of malik makbuza of the
land subsequent to the decree and has thus got a
right to remain in possession in spite of the
decree. the learned companynsel for the respondent
mainly relies on the companytention that the execution
court cannumber go behind the decree and therefore
must execute it and deliver possession to the
respondent. before companysidering the question arising for
determination in this appeal it will be
convenient to detail the relevant provisions of
the act and their effect. the preamble of the act
says that it is expedient to provide for the
acquisition of the rights of the proprietors in
estates mahals alienated villages and alienated
lands in madhya pradesh and to make provision for
other matters companynected therewith. this indicates
that the act purported to deal with the rights of
the proprietors and number directly with the rights
of other persons in the

i.l.r. 1955 nag. 983.  2  i.l.r
1953 nag. 702.
estates mahals alienated villages and alienated
lands. the proprietors were intermediaries between
the persons actually cultivating the land and the
government. they realised rent from the former and
paid revenue to the latter. section 3 is the vesting section and its sub-
ss.  1  and 2  read

save as otherwise provided in this
act on and from a date to be specified by a
numberification by the state government in this
behalf all proprietary rights in an estate
mahal alienated village or alienated land
as the case may be in the area specified in
the numberification vesting in a proprietor of
such estate mahal alienated village
alienated land or in a person having
interest in such proprietary right through
the proprietor shall pass from such
proprietor or such other person to and vest
in the estate for the purposes of the state
free of all encumbrances. after the issue of a numberification
under subsection  1  numberright shall be
acquired in or over the land to which the
said numberification relates except by
succession or under a grant or companytract in
writing made or entered into by or on behalf
of the state and numberfresh clearings for
cultivation or for any other purpose shall be
made in such land except in accordance with
such rules as may be made by the state
government in this behalf. in accordance with the provisions of this section
the proprietary rights in an estate mahal
alienated village or alienated land in the area
specified in the numberification vesting in a
proprietor of such estate etc. were to pass from
such proprietor and vest in the state for purposes
of the state free from all encumbrances. these
provisions themselves were sufficient to divest
the proprietor of such estate etc. of his
proprietary right. the companysequences of such
vesting are further specified in s. 4. in view of
sub-s.  2  of s. 3 numberright companyld acquired over
the land which had vested in the state except by
succession or under a grant or companytract in writing
made or entered into by or on behalf of the state. this means that numberperson companyld acquire any right
over such land under a decree passed in his favour
subsequent to the vesting of the estate on the
numberified date and that therefore the respondent
did number acquire the right to possess this land
under the decree in his favour. the relevant portions of sub-s.  1  of s. 4
are

when the numberification under section
3 in respect of any area has been published
in the gazette then numberwithstanding
anything companytained in any companytract grant or
document or any other law for the time being
in force and save as otherwise provided in
this act the companysequence as hereinafter set
forth shall from the beginning of the date
specified in such numberification  hereinafter
referred to as the date of vesting  ensue
namely
 a  all rights title and interest
vesting in the proprietor in such area
including land  cultivable or barren  shall
cease and be vested in the state for purposes
of the state free of all
encumbrances

 e  the interest of the proprietor so
acquired shall number be liable to attachment or
sale in execution of any decree or other
process of any companyrt civil or revenue and
any attachment existing at the date of
vesting or any order for attachment passed
before such date shall subject to the
provisions of section 73 of the transfer of
property act 1882 case to be in force. sub sections  2  and  3  of s. 4 are as follows

numberwithstanding anything companytained
in sub-section  1  the proprietor shall
continue
to retain the possession of his homestead
home-farm land and in the central provinces
also of land brought under cultivation by him
after the agricultural year 1948-49 but
before . the date of vesting. numberhing companytained in subsection  1
shall operate as a bar to the recovery by the
outgoing proprietor of any sum which becomes
due to him before the date of vesting by
virtue of his proprietary rights and any such
sum shall be recoverable by him by any
process of law which but for this act would
be available to him. it is to be numbered that the companysequences
mentioned in 8. 4 follow the numberification under 8. 3 numberwithstanding anything companytained in any
contract grant or document or in any other law
for the time being in force. the question is
whether the word document includes a decree of
the companyrt. we do number see any good reason why a
decree of the companyrt when it affects the
proprietary rights and is in relation to them
should number be included in this expression. the
main object of ss. 3 and 4 and in fact of the act
itself is that all the bundle of rights which a
proprietor possess on account of his
proprietorship of the land within the estate etc. should cease except such rights which are saved
to the proprietor under some specific provision of
the act. any rights which accrue to the proprietor
under a decree by virtue to his proprietary right
will number under the scheme of the act prevail
over the statutory companysequences following the
vesting of the proprietary rights in the state and
will be lost to the proprietor. one such right is
the right of the proprietor under a decree to
obtain possession over certain land. such a decree
for recovery of possession is the result of the
recognition of the proprietors right of
possession as proprietor over that land as against
the claim of the judgment debtor to
retain possession of that land. the proprietary
right vests in the state and as a companysequence of
it the proprietors right under the decree to
obtain possession also vests in the state even
though tho state gets right to the possession of
the land under other provisions of the act as
well. section 7 empowers the deputy companymissioner to
take charge on the date of vesting of all lands
other than occupied lands and homestead of all
interest vesting in the state under b. 3. this
means that the deputy companymissioner companyld take
possession of the land in suit on the date of
vesting i. e. on march 31 1951 as it was
neither the proprietors home-farm number occupied
land as defined in cl.  k  of c. 2 of the
appellant who was held by the high companyrt to be a
trespasser - vide judgment of the high companyrt dated
april 20 1951 number reported in subhan v. madhorao
 1 . occupied land means in relation to the
central provinces according to sub-cl.  1  land
held immediately before the date of vesting in
absolute occupancy or village service tenure or
land held as malik-makbuza or land companyprised in a
home-farm. occupied land did number include land held
by a person as a trespasser. the provisions of cl.  e  of sub-s.  1  of s.
4 indicate that certain decrees against the
interest of the proprietor become inexecutable on
the vesting of his rights in the state. there is
therefore good reason to hold that decrees in his
favour also become inexecutable if they are based
on his proprietary right which he possess numbermore
and which has vested in the state. the act provided by sub-s.  3  of s. 4 that
the out-going proprietor was free to recover any
sum which had become due to him before the date of
vesting by virtue of his proprietary rights by any
process of law which but for the act would be

i.l.r. 1951 nag. 895.
available to him. it does number provide for the
outgoing proprietor to recover possession of land
by any process of law if he had become entitled to
the possession of that land before the date of
vesting. the absence of any such provision adds
strength to the view that the proprietors right
to obtain possession of land under a decree in his
favour gets lost to him after the date of vesting. sub-section  2  of s. 4 of the act provides
that the proprietor can companytinue to retain
possession of home-farm land after the vesting of
his proprietary right in the state. the respondent
cannumber take advantage of this provision even if
the land in suit be held to be home-farm. he was
number in possession of the land in suit on the date
of vesting and numberquestion of companytinuing to retain
possession arose. in fact the fields in suit
could number be his home-farm and therefore he got no
right to retain possession over them. clause  g  of s. 2 of the act defines home-
farm. it reads.  g home-farm means-
 1  in relation to central provinces-

land recorded as sir and
khudkasht in the name of a proprietor in the
annual papers for the year 1948-49 and

land acquired by a proprietor
by surrender from tenants after the year
1948-49 till the date of vesting
 2  in relation to merged territories
that part of the land under the personal
cultivation of the proprietor on the date of
vesting which was similarly under cultivation
in the agricultural year 1949-50 and which he
is omitted to retain on the termination of
proprietary tenure under any instrument
having the force of law and applicable to
such tenure. explanation.- land under personal
cultivation includes land allowed to lie
fallow in
accordance with the usual agricultural
practice but does number include any land in
lawful possession of a raiyat or tenant. it is significant to numbere in this companypletion
that sub-cl.  1  refers to land actually recorded
as sir and khudkasht in the annual papers of 1948-
49 and does number refer in terms to land which was
the sir and khudkasht of the proprietor in that
year and which ought to have been recorded as such
in those papers but had number been so recorded. anumberher point to be numbered is that though cl.  ii
refers to land acquired by the proprietor by
surrender from tenants between the close of the
year 1948-49 and the date of vesting numberreference
is made in this definition to land the possession
of which had been obtained by the proprietor as a
result of a decree during that period or to the
possession of which the proprietor was held
entitled under the decree of the companyrt passed
before the date of vesting. it is also significant to numberice that in sub-
s.  2  the land answering the description of
home-farm is described differently. only that
land companyes within the expression home-farm
which had been under the personal cultivation of
the proprietor on the date of vesting and which
had been similarly under cultivation in the
agricultural year 1949-50 and which he is
entitled to retain even on the termination of his
proprietary tenure under any instrument having the
force of law and applicable to that tenure. personal cultivation of the proprietor at two
relevant dates was the main criterion. such
cultivation was number made the criterion in the
definition in sub-cl.  1  of sub-s.  1 . it is number
necessary according to that sub-clause that the
proprietor be personally cultivating that land. the only companydition requisite for the proprietor
having certain land treated as his home-farm was
the fact that the annual papers of 1948-49
recorded that land as his sir and khudkasht. the
basis was the record and
number the fact of actual cultivation or his title to
that an land
the definition evinces the intention of the
legislature to remove the question of certain land
being home-farm or number from the sphere of
litigation. recorded entry was treated to be the
basis for adjudging tho land to be home-farm. there is numberambiguity about the definition of
home-farm and so the question of strict or
liberal companystruction does number arise. these companysideration lead to the companyclusion
that land cannumber companye within the definition of
home farm which had number been actually recorded
as sir and khudkasht in the name of the proprietor
in the annual papers for the year 1948-49 or which
had number been acquired by the proprietor by
surrender from tenants after the years 1948-49
till the date of vesting. the plots in suit were
neither actually recorded as the respondents sir
and khudkasht in the 1948-49 annual papers number had
been acquired by him by surrender from tenants
during the period mentioned in sub-cl.  ii  of cl.  1  of the definition and so companyld number be the
respondents home-farm. the decree of the trial companyrt was passed on
july 12 1944. as that decree was under appeal in
1948-49 it would number be right to say that the
revenue authorities were in error in number
correcting the entries in the annual papers. they
could number have companyrected them merely on the basis
of the decree. companyrection in the entries would
have been made if there had been change of
possession. numberchange of possession took place and
therefore numberentry companyld have been made in the
annual papers of 1948-49 with respect to the plots
in suit to be the khudkasht of the respondent. in
fact even if the respondent had taken possession
over the land in suit by executing the decree
passed by the trial companyrt an entry of his holding
that land as khudkasht companyld have been made only
if he had brought
that land under his own personal cultivation and
number if he had let out the land to some other
person. this companysideration again would go
against the respondent even if a liberal
interpretation was to be given to the definition
of home-farm. section 12 requires that every proprietor
should file a statement of claim in the specified
form and verify that statement in accordance with
order vi rule 15 companye of civil procedure. the
respondent filed his companypensation statement
document number 1 on september 20 1951 and
mentioned in his claim the total gross rental of
his proprietary share. this rental included the
recorded rent of the land in suit. section 83 provides that every entry in the
record-of-rights the annual papers and the
register of proprietary mutations in the central
provinces shall for purposes of assessment and
payment of companypensation be presumed to be companyrect. this means that for the purpose of settlement of
the claim filed by the respondent under s. 12 the
entry of the appellants being an occupancy tenant
in the annual papers had to be presumed to be
correct and as a companysequence of such a
presumption the land in suit cannumber be taken to
be the respondents khudkasht in 1948-49 and this
supports the companystruction we have placed on the
definition of home-farm in s. 2  g . sub-section  1  of s. 38 provides that every
proprietor who is divested of his proprietary
rights in an estate or mahal shall with effect
from the date of vesting be a malik makbuza of
the home-farm land in his possession. the
respondent does number appear to have taken any steps
to get himself recognized as a malik makbuza of
the land in suit on the ground that it was his
home-farm. in fact he estates in his reply to the
appellants objection that he companyld number have moved
in the matter without obtaining possession. exhibit a-1 dated may 8 1951 is the
statement of fixation of assessment on the home-
farm of the respondent. it does number include the
land in suit. section 45 provides inter alia that any
person who immediately before the date of
vesting was in possession of any holding as an
occupancy tenant shall be deemed to be a tenant
of the state and shall hold the land in the same
rights and subject to the same restrictions and
liabilities as he was entitled or subject to
immediately before the date of vesting. section 41 provides inter alia for occupancy
tenants to be declared in the prescribed manner to
be malik makbuza of the land companyprised in their
holding on payment of the amounts mentioned in the
section. the appellant applied for such a
declaration on july 22 1952 and got the
declaration i his favour on the basis of the entry
in the village papers though that entry of his
being an occupancy tenant was wrong in view of the
finding of the high companyrt. exhibit a-4 is the declaration by the naib
tehsildar nagpur on july 22 1952 under s.41 of
the act that the appellant was malik makbuza in
respect of the land in suit. exhibit a-6 is the companyy of the jamabandhi for
holding serial number 121 of mauze vadoda for the
year 1948-49 showing the respondent to be the
occupancy tenant of the land in suit. section 46 provides that every person deemed
or declared to be a malik makbuza under section 33
or section 33 and every other malik makbuza in a
mahal shall be entitled to any right which a
tenant has under the village wajibul arz. the
appellant therefore got entitled to such rights of
a tenant. it is clear from the various provisions of
the act already discussed in relation to the facts
of this case that the respondent was number recorded
and companyld number have been recorded to have khudkhast
in the land in suit in the papers of 1948-49 and
therefore companyld number have claimed this land as his
home-farm. in fact he did number claim so. he
therefore lost his proprietary rights in this land
and they got vested in the state he therefore had
numbersubsisting right to recover possession of the
land in suit in spite of the decree in his
favour passed on the basis of his being the
proprietor of the land in suit and the appellant
being in wrongful possession of that land. on the
other hand the appellant companytinued in possession
and has on the basis of the entries in the
village papers which had to be presumed companyrect
for the purpose of assessment of companypensation
secured a declaration of his being malik makbuza
of such land from an officer of the state in whom
the land in suit number vests. his right to occupy
the land under this right was number adjudicated by
the high companyrt in the judgment leading to the
decree ought to be executed. he can therefore
object to the execution of the decree for the
delivery of possession as the respondent has no
subsisting right and as he has secured from the
state a good right to possess it as malik makbuza
even though it be on the basis of a wrong entry in
the village papers. the right to possession vests in the state
and under s. 7 the deputy companymissioner formally
takes possession of the land which is number home
farm or occupied land within the definition of
these expressions in the act. if the land in suit
be treated to be the appellants occupancy
tenancy his right to remain in possession as
occupancy tenant companytinues after the vesting of
the land in suit in the state. if the land in
suit be number taken to be occupancy land of the
appellant in view of the finding of the high
court the deputy companymissioner would be deemed to
have taken possession of the land from the
appellant and any subsequent
possession of the appellant would be deemed to be
possession under the state. the companytention that the executing companyrt can
number question the decree and has to execute it as
it stands is companyrect but this principle has no
operation in the facts of the present case. the
objection of the appellant is number with respect to
tho invalidity of the decree or with respect to
the decree being wrong. his objection is based on
the effect of the provisions of the act which has
deprived the respondent of his proprietary rights
including the right to recover possession over the
land in suit and under whose provisions the
appellant has obtained the right to remain in
possession of it. in these circumstances we are
of opinion that the executing companyrt can refuse to
execute the decree holding that it has become
inexecutable on account of the change in law and
its effect. chhote khans case  1  has net much bearing
on the question under companysideration in the present
case as it did number deal with the executability of
the decree obtained by a proprietor against a
trespasser subsequent to the companying into force of
the act. it dealt with the executability of
decrees in favour of the proprietors and passed
prior to the enforcement of the act and held that
they had become inexecutable as the effect of ss. 345750 and 60 of the act was that the rights
which were exercisable by the proprietor
lambardar and sadar lambardar by reason of holding
that character companyld numberlonger be exercised by
them and that even though the cause of action for
enforcing those rights arose before the act came
into force they companyld number be companytinued by those
persons after the act came into force as they had
ceased to hold that character. the fact in rahmatullahs case  a  were as
follows the plaintiff sued for possession in
respect of 9.18 acres khudkasht lands on the
allegation that his predecessor. in-interest
khubiram had purchased the defendants interest
in the village

i.l.r.  1953  nag. 702.  2  i.l.r
 1955  983.
including khudkasht lands at a revenue auction
sale on april 29 1936. it was companytended that the
defendant has numberright to remain in possession of
the khudkasht lands which along with the
proprietary interest passed at the revenue sale
the defendant companytented the suit on the grounds
that his khudkasht lands did number pass in the
revenue sale that he had companytinued all along in
possession in respect of the same and had thus
acquired the rights of occupancy tenancy which
were companyfirmed in companysolidation proceedings. the
suit was decreed in its entirety by the trial
court but the 1st appellate companyrt companyfirmed the
decree with respect to a portion of khudkasht land
which was held to be included in the revenue sale. by the time the second appeal was heard in the
high companyrt the act had companye into force. it was
contended on behalf of the defendant-judgment
debtor that the suit must fail in view of the
provisions of the act as interpreted in chhote
khans case  1 . in view of the difference of
opinion between the learned judge who heard the
second appeal two questions were referred to a
third judge for opinion and one of the questions
was
does the madhya pradesh abolition of
proprietary rights  estates mahals
alienated lands  act 1950  number 1 of 1951
bar a suit by an ex-proprietor for recovery
of khudkasht lands purchased by him before
the act came into force ? mudholkar j. to whom the questions were referred
said at p. 996
it is clear from the documents on record
that khubiram had obtained possession of the
land in suit after he purchased it along with
the village share. the land was thus
khudkasht of khubiram and accordingly it
continued to be khudkasht of the respondent
who is a successor-in-title of khubiram. no
doubt this land though the khudkasht of the
respondent was wrongly recorded as occupancy
land of the appellant. but an erroneous
recording of a khudkasht land as an occupancy
land would number in law alter the real
character of that land. thus despite the
wrong entry the land must be regarded as
having always been the khudkasht of the
respondent. if this companyrt affirms the decree
of the two companyrts below the effect of its
decision would number be to alter the character
of the land and companyvert a land which is number
khudkasht into a khudkasht land. interpreting the definition of home-farm in
the act to include such land which though number
recorded as khudkasht of the proprietor in the
annual papers of 1948-49 ought to have been
recorded as such he held that the suit was number
barred. this is number a companyrect view for the
reasons stated by us earlier.


civil appellate jurisdiction civil appeals number. 158 to 164
of 1960.
appeals from the judgment and order dated october 8 1958
of the bombay high companyrt in i.t.a. number. 7505 7506 5046 to
5048 5149 and 5150 of 1956-57.

v. viswanatha sastri s. n. andley j. b. dadachanji
rameshwar nath and p. l. vohra for the. appellants. ganapathy iyer and d. gupta for the respondent. 1961. january 12. the judgment of the companyrt was delivered
by
hidayatullah j.-these seven appeals have been filed on a
certificate granted by the high companyrt of bombay against the
judgment and order of the high companyrt dated october 8 1958
in a case referred by the income-tax appellate tribunal
bombay. the first appellant is the bhor industries limited a companypany
incorporated in 1944 in the former bhor state with its
registered office also situated in the town of bhor. it did
the business of dyeing printing and bleaching cloth cloth
proofing etc. in bhor state. the remaining five
appellants are the shareholders of this companypany which
admittedly was a private companypany limited by shares at all
material times. we are companycerned in these appeals with the
account years of the companypany 1946 and 1947. during these
years the income of the companypany was as follows-
assessment total income accruing total world
year income or arising in the income  sum
indian state of of 2 3
bhor. ----------------------------------------------------------
1 2 3 4
----------------------------------------------------------
1947-48 rs. 432542 rs. 224542 rs. 657084
1948-49 rs. 432709 rs. 347416 rs. 780125
the companypany held its general meetings to declare dividends
at bhor on august 171947 and august 19 1948
respectively. for the account years 1946 and 1947
respectively it declared a dividend of rs. 2580/and rs. 1140/-. bhor state merged with the province of bombay by virtue of
the states merger  governumbers provinces  order 1949 which
came into force on august 1 1949. by the taxation laws
 extension to merged states and amendment  act 1949 which
received the assent of the governumber-general on december 31
1949 the indian income-tax act was extended to the merged
states with effect from april 1 1949. that act also
introduced s. 60a in the income-tax act by which power was
given to the central government if it companysidered necessary
or expedient so to do to avoid any hardship or anumberaly or
to remove any difficulty in the application of the income-
tax act to merged states to make a general or special order
granting exemption reduction in rate or other modification. under the power thus companyferred the central government
numberified the merged states  taxation companycessions  order
1949.
for the assessment years 1947-48 and 1948-49 companyresponding
to the account years of the companypany 1946 and 1947 the
income-tax officers assessed the companypany as number-resident
and held that the companypany was number a public companypany within
the meaning of s. 23a of the indian income-tax act. the
income-tax officer who passed the order for the assessment
year 1947-48 under s. 23a held that the assessable income
in british india of the companypany in 1946 minus the taxes
must be deemed to be distributed among the shareholders in
the proportion of their shareholdings. the incometax
officer calculated the amount deemed to be distributed as
follows
1946  assessment year 1947-48 . total income  rs. 432542
taxes  rs. 189237
-------------
amount available
for distribution  rs. 243305
as dividend
dividend declared  rs. 2580
--------------
balance of the amount
available and deemed
to be distributed  rs. 240725
-------------
for the account year 1947 the income-tax officer took the
total world income less the taxes as the amount available
for distribution as dividend. according to him that amount
was as follows
1947  assessment year 1948-49 . total income  rs. 432709
income in bhor state  rs. 347416
-------------
total world income  rs. 780125
taxes  rs. 243399
-------------
amount available for
distribution as dividend  rs. 536726
dividend declared  rs.1140
------------
balance of the amount
available for distribution  rs.535586
------------
the income-tax officer then apportioned it among the
shareholders as on august 19 1948. this worked out at rs. 539.9 per share. the income-tax officer then divided this
amount of rs. 539.9 in the proportion the total income bore
to the income in bhor state and taxed the former in the
hands of the shareholders but the balance was included and
considered for purposes of rate only. the tribunal in the
statement of the case illustrated this by citing the case of
one of the shareholders  pushpakumar m. d. thackersey  as
follows-
the portion of rs. 535586 apportionable to
his 90 shares at the rate of rs. 539.9 per
share worked out at rs. 50211/-. this amount
of rs. 5021/was divided into two smaller
amounts in the ratio already mentioned and the
amount of rs. 27851/was actually brought to
tax whereas the amount of rs. 22360/
attributable to bhor state income of rs. 347416/- was merely included in the total
income for rate purposes. in companyputing these deemed dividends  the two income-tax
officers did number deduct the interest charged to the companypany
under s. 18a 8  from the assessable income along with
income-tax and super-tax under s. 23a 1 . the companypany as well as the shareholders appealed to the
appellate assistant companymissioner but their appeals were
unsuccessful. their further appeals to the tribunal were
also dismissed. they raised the companytentions that s. 23a was
number applicable to the companypany that the deemed income
arising from a fictional distribution of the dividends companyld
number be taxed in the hands of the shareholders because s. 23a
did number apply to them and that they were protected by the
concessions order in the same way in which the companypany was. they also raised the companytention that in. determining the
balance of the amount available for distribution interest
charged under s. 18a 8  ought to have been deducted. all
these companytentions were number accepted by the department and
the tribunal. at the instance of the companypany and the shareholders the
tribunal drew up a statement of the case and referred three
questions to the high companyrt for its decision. these
questions were as follows

whether paragraph 12 of the merged states
 taxation companycessions  order 1949 precluded
the income-tax officer from making an order
under section 23a in the case of the assessee
company in respect of its profits and gains of
the previous year ended 31st december 1946 ?/
31st december 1947 ? whether in making an order under section
23a in respect of the profits and gains of the
year 1946/1947 the assessable income of that
previous year is to be reduced number only by the
amount of incometax and super-tax payable by
the companypany in respect thereof but also by the
amount of interest charged to it in accordance
with the provisions of section 18a ? having regard to the order passed by the
income-tax officer under section 23a in
respect of the companypanys profits of the year
1947 and having apportioned the sum of rs. 17641/- to the shareholder pushpakumar as
his proportionate share in the distribution
made by the income-tax officer under section
23a and having regard to the provisions of
section 14 2   c  whether the said sum of rs. 17641/has been properly included in his total
income for the purpose of charging it to tax ? the third question was a typical question as similar
questions also arose in the case of other shareholders with
variation in the amount. the amount of rs. 17641/- the
tribunal stated replaced rs. 50211/in view of certain
directions given by the tribunal. the high companyrt framed one
more question as the second part of question number 1 in
disposing of the reference which read as follows. whether paragraph 12 of the merged states
 taxation companycessions  order 1949 precluded
the income-tax officer from making any order
under section 23a so as to affect the assessee
shareholders in respect of their profits and
gains for the assessment year 1949-50 ? the high companyrt answered the first and second questions and
the question framed by it in the negative and the third
question in the affirmative. the high companyrt however
granted a certificate under s. 66a of the income-tax act
and the present appeals have been filed. the companytentions
raised before the high companyrt have been raised before us. the companypany questions the application of s. 23a to the two
assessment years 1947-48 and 1948-49 while the
shareholders
question the application of s. 23a to the companypany and also
to them in the assessment year 1949-50. both the companypany
and the shareholders companytend that interest under s. 18a 8
ought to have been deducted along with the income-tax to
find out the available surplus. the shareholders claim the
benefit of s. 14 2   c  in respect of the entire amount of
the balance deemed to be distributed. to begin with one must remember that the indian income-tax
act was applied to bhor state from april 1 1949 and that
there was numberincome-tax law in force in bhor state prior to
its merger. this position also obtained in many other
indian states which merged with the provinces in british
india. the fact that income-tax is charged in an assessment
year on the income profits or gains of the previous year
would have made persons resident in merged states to pay tax
on income which but for the extension of the indian income-
tax act was either number liable to income-tax at all or was
liable at a lesser rate. in view of the apprehended
difficulties and anumberalies the extension act itself gave
power to remove such anumberalies and hardships. section 60a
was added to the income-tax act and it read as follows
if the central government companysiders it
necessary or expedient so to do for avoiding
any hardship or anumberaly or removing any
difficulty that may arise as a result of the
extension of this act to the merged states
the central government may by general or
special order make an exemption reduction in
rate or other modification in respect of
income-tax in favour of any class of income
or in regard to the whole or any part of the
income of any person or class o
persons
the companycessions order 1949 was passed in furtherance of
this power. we are companycerned only with paragraph 12 of the
concessions order 1949 which has been relied upon by the
company and the share. holders who are appellants before
us. it is number necessary to refer to paragraphs 4 5 and 6
to which passing reference was made in the arguments
because
they deal with income in an indian state which has number been
taxed in these cases at all. paragraph 12 provided for the application of s. 23a to a
previous year ending on or after august 1 1949 but number to
a previous year ending before august 1 1949. it may be
quoted here
the provisions of section 23a of the indian
income-tax act shall number be applied in respect
of the profits and gains of any previous year
ending before 1st day of august 1949 unless
the state law companytains a provision
corresponding thereto. reading the extension act s. 60a and the companycessions order
1949 together the following position emerges. the indian
income-tax act applied to and from the assessment year 1949-
50  april 1 1949 to march 31 1950  in the merged states. companyresponding previous years were companyprehended. the
difficulty which was likely to be felt was with respect to
the fact that the merger with the province of bombay
operated from august 1 1949 and number from april 1 1949.
in respect of the exemption under s. 14  2   c  the
position was preserved by applying paragraphs 5 and 6 to the
exempted income. these two paragraphs made the state rate
applicable to that exempted income. similarly previous
years ending after march 31 1948 were to be assessed to
indian income-tax but the excess of the tax companyputed at
indian rates over the tax companyputed at state rates was to be
given away as rebate and profits and gains of companypanies of
any previous year ending before august 1 1948 earned in an
indian state were saved from s. 23a unless there was in
the state a provision companyresponding to s. 23a. it must be
remembered that the income-tax officer in the present case
did number seek by his order under s. 23a to distribute the
bhor state income of the shareholders of the companypany as
dividend he restricted his order to the british indian
income. there was in fact in the state of bhor numberlaw of
income-tax and numberorder taxing income which arose in bhor
could be passed by the income-tax officer. by the definition in s. 2 5a  of the indian incometax act. a
company formed in pursuance of an act of an indian state was
a companypany for the purposes of the act and it was open to
the income-tax officer exercising powers under s. 23a to
declare the income of such a companypany accruing or arising
within the taxable territory as distributed among the
shareholders. the right of the department to pass an order
under s. 23a 1  of the indian income-tax act was number chal-
lenged before the tribunal and it was number the subject of a
decision in the high companyrt. the argument still has been on
behalf of the companypany as well as the shareholders that
paragraph 12 of the companycessions order saved the profits and
gains whether made in bhor state or in british india from
the application of s. 23a and that indirectly the
shareholders were entitled to the same benefit. paragraph 12 of the companycessions order depends on whether a
company was being assessed under the indian income-tax act
in respect of its profits and gains in an indian state for
any previous year ending before the first day of august
1949. by the application of the indian act to an indian
state the income of a companypany in an indian state was likely
to be taxed to indian income-tax from the assessment year
1949-50. for the earlier assessment years a companypanys
income in the indian state was exempt without the assistance
of the companycessions order. the exemption granted by the
concessions order was to operate in respect of those profits
and gains which but for the exemption would have been
included in the assessment year 1949-50 and subsequent
years. in so far as paragraph 12 of the companycessions order
was companycerned it gave exemption in respect of action under
s. 23a to income of any previous year ending before the
first day of august 1949. the date august 1 1949 was
chosen because the merger with the provinces took place on
that date. the word any does number refer to all the
previous years prior to and ending before august 1 1949
but to a previous year in relation to the assessment year
1949-50 and ending before the first day of august 1949.
the words
any previous year mean therefore only one previous year
which would be a previous year for the purposes of the
assessment year 1949-50 but which to get the exemption
must end before the first day of august 1949. the
exemption therefore did number apply to previous years other
than the one described and in respect of the earlier
previous years paragraph 12 of the companycessions order was
hardly needed. otherwise there would be numberneed to mention
in the paragraph the date on which the previous year must
end. it is thus quite clear that paragraph 12 provided for
income profits and gains of those previous years which were
specially mentioned and in respect of which anumberalies were
likely to arise by reason of the fact that the merger took
place on august 1 1949 while the income-tax act was
applied from april 1 1949. in view of the fact that
specific terminii of previous years are expressly mentioned
in the companycessions order it is number possible to accept the
argument on behalf of the appellants that all previous
years before the date mentioned were companyprehended in
paragraph 12. the application of that paragraph must be
limited to one previous year only which ended prior to
august 1 1949.
the previous years with which we are companycerned ended on
december 31 1946 and december 31 1947 respectively. in
the case of this companypany the previous year which would
answer the description in paragraph 12 would be the previous
year ending december 31 1947. to that previous year the
provisions of s. 23a were number applicable and the profits
and gains made in bhor state would be protected. the
position which obtained in the assessment year 194748 would
thus obtain also in the assessment year 1948-49 in so far as
the companypany was companycerned and its profits and gains in bhor
state companyld number be companysidered for purposes of application of
s. 23a. the position was however different in regard to the income
in british india which formed the total income of the
company in the taxable territory. it was number companytended that
the assessable income of the companypany in the taxable
territories would number attract
s.23a if the distribution of dividends from that income was
below the mark set in s. 23a. there is thus numberdifference
between the assessment years 194748 and 1948-49 and the
method of calculation adopted in the first year is also
applicable to the second. to this extent the answer to the
first question  first part  must be deemed to be modified in
respect of the previous year ending december 31 1947.
it is next companytended that interest that was charged to the
company under s. 18a 8  ought to have been deducted along
with the income-tax before the fictional dividends were
computed. section 18a 8  reads as follows
where on making a regular assessment the
income-tax officer finds that numberpayment of
tax has been made in accordance with the
foregoing provisions of the section interest
calculated in the manner laid down in sub-
section  6  shall be added to the tax as
determined on the basis of regular
assessment. the words of the sub-section are clear to show that interest
as interest is added to the tax as determined. there is
numberhing to show that it is to be treated as tax and it thus
retains its character of interest but is recoverable along
with the tax. indeed s. 29 of the income-tax act makes a
distinction between tax penalty and interest. since s. 23a
speaks of deduction only of income-tax and super-tax no
deduction companyld be made in respect of this interest. question number 2 was thus companyrectly answered by the high
court. in so far as the shareholders who were all resident in the
taxable territories were companycerned paragraph 12 of the
concessions order did number in terms protect them. section
23a enjoins that dividends to the extent of 60 per cent. of
the assessable income of the companypany after deduction of
income-tax and super-tax must be paid. when the assessable
income of the companypany has been determined and after the
necessary deductions have been made if dividends are number
distributed in accordance with s. 23a the fiction applies
to that portion of the profits and gains which were taxable
as assessable income of the companypany in the
taxable territories and which ought to have been so dis-
tributed. section 23a as it was before the amendment in
1955 mentioned 60 per cent. of the assessable income of a
company as reduced by the amount of income-tax and super-tax
payable by a companypany and provided further that the
undistributed portion of the assessable income of a companypany
as companyputed and reduced shall subject to certain
conditions be deemed to have been distributed as dividends
amongst the shareholders. we have already shown that the benefit of paragraph 12 is
number available in respect of these fictional dividends in so
far as the assessable income of the companypany was companycerned. it is however companytended that these dividends would be
deemed to be declared in bhor state and to have been
received there and that unless anumberher fiction is engrafted
upon the fiction created by s. 23a these deemed dividends
cannumber be taxed in the hands of the shareholders. numberdoubt
the section implies a fiction but if the fiction is given
effect to such income must be deemed to be distributed to
the shareholders and the fiction thus transcends all
questions of accrual or receipt in the taxable territories. what is deemed to be distributed must be deemed to have
accrued and also received by the person to whom it is deemed
to be distributed see ss. 4 1  a  and 4 1  b  i  and  ii . paragraph 12 of the companycessions order saved the companypany in
respect of income in bhor state for the assessment year
194849 for the companyresponding previous year ending before
august 1 1949 but it did number save the operation of a. 23a
in respect of the assessable income of the companypany in the
taxable territories and the distribution of dividends to the
shareholders from that income. in our opinion the high companyrt was right in holding that the
dividends deemed to have been distributed out of the
assessable income of the companypany in the taxable territories
were rightly assessable in the total income of the
shareholders resident in the taxable territories. no
question has been referred on the method of calculation of
the dividends deemed to
have been distributed and we need therefore express no
opinion on that part of the case. the shareholders  appellants 2 to 6  claim the benefit of a
14 2  o  of the act which provides
14 2 . the tax shall number be payable by an
assessee-
 c  in respect of any income profits or
gains accruing or arising to him within an
indian state unless such income profits or
gains are received or deemed to be received in
or are brought into british india in the
previous year by or on behalf of the assessee
or are assessable under section 12-b or
section 42.
we have already shown that the force of the fiction makes
the dividends which ought to have been distributed to be so
distributed. we have also said that this fiction transcends
all questions of accrual and receipt. the effect of s. 23a
is to make dividends payable out of the british indian
income to the shareholders. paragraph 4 of the companycessions
order and s. 14 2  c  saved for the shareholders the income
of the companypany outside the taxable territories only that is
to say the income earned in bhor state. they do number affect
the operation of s. 23a on the assessable income of the
company which by reason of the application of the indian
income-tax act even prior to the extension act was
assessable under the indian income-tax act. dividends
payable out of that portion of the income will attract s.
23a and s. 14 2  c  does number apply. section 14 2  c  saves
only that portion of the income which was number assessable in
the taxable territories by reason of its accrual in the
state. the income-tax officer in assessing the income of
the shareholders for the assessment year 1949-50 ought to
have deducted the income which accrued in bhor state while
applying s. 23a to them. this he in effect did but he
adopted a method on which numberquestion has been raised and
the companyrectness of the method cannumber be examined. the answer to question number 1 is thus in the negative with
the modification that s. 23a applied only to that
portion of the income which was earned in british india and
number in bhor state. the answer to the second question is in
the negative. the answer to the third question is in the
affirmative.


original jurisdictionwrit petition number 211 of 1969.
petition under art. 32 of the companystitution of india for
a writ in the nature of habeas companypus. hardev singh for the petitioner
naunit lal for the respondent. the judgment of the companyrt was delivered by
bhargava j. the petitioner in this petition under
article 32 of the companystitution was arrested and detained
under an order made under section 3 1  a  ii  of the
preventive detention act 1950  hereinafter referred to as
the act  on 24th april 1968. on 30th august 1968 he
filed a petition in the high companyrt of assam under art. 226
of the companystitution for issue of a writ of habeas companypus. the same day he was released by the government and
according to him without being set at liberty he was again
put in detention in pursuance of a fresh order dated 29th
august 1968 passed under s. 3 1  a  ii  of the act. the
grounds of detention were also served on the same day. he
made his representation on 17th september 1968 and his
case was referred to the advisory board also on the same
date. the report of the advisory board was received on 28th
october 1968. on 7th numberember 1968 his order of
detention was companyfirmed by the government on the basis of
the report of the advisory board. this petition was then
received in this companyrt from the petitioner in july 1969.
challenging his detention trader the order dated 29th
august 1968. the petition came up for hearing before a
bench of this companyrt on 29th august 1969 when at the
request of the companynsel for the state of assam time was
granted by the companyrt till 8th september 1969 to send for
full material. meanwhile it appears that a fresh order for
his detention under s. 3 1  a  ii  of the act was issued on
28th august 1969 and this order was served on the
petitioner in delhi on 29th august 1969 after the
adjournment had been obtained from this companyrt. thereupon
the petitioner on 1st september 1969 filed an application
for amendment of the writ petition and for adding additional
new grounds so as to challenge the validity of his detention
under the order dated 28th august 1969. the grounds of
detention under this new order were also served on the
petitioner on 29th august 1969. when this petition came up
for hearing before us on 9th september 1969 learned
counsel for the state of assam stated that numbermaterial had
been received from the government and wanted time to be
granted to meet the facts put forward in the application
dated 1st september 1969. it appears that though an
officer was sent by the government of assam to delhi to
serve the order dated 28th august 1969 on the detenu which
he did on 29th august 1969 numberattempt was made to obtain
the material for which time had been obtained from the companyrt
on 29th august 1969. if a fresh order had been passed and
had been served on the petitioner in supersensible of the
previous order which was challenged in the writ petition
the state government should have sent full material relating
to this order which it became necessary for the petitioner
to challenge by amending his writ peti-
tion. detention of a person without trial even for a
single day is a matter of great companysequence and hence we
did number companysider that in the circumstances mentioned above
there was any justification for granting further time to the
state government to obtain material and file a reply to this
application dated 1st september 1969.
in view of the facts mentioned above it is clear that
the validity of the order of detention dated 29th august
1968 which was first challenged in the petition has become
immaterial because the petitioner is number under detention by
virtue of the fresh order dated 28th august 1969 served on
him on 29th august 1969. in the companynter-affidavit filed
it was stated that the first order of detention dated 24th
april 1968 had automatically lapsed because that order did
number receive the approval of the state government within 12
days as required by section 3 3  of the act. this admission
would indicate that after the expiry of those 12 days the
petitioners detention was number justified by any valid order
passed in law until the second detention order was served on
him on the 30th august 1968 after releasing him from
custody. however in the present writ petition we are number
concerned with the effect of this procedure adopted by the
state government because even if it be assumed that the
second order of detention was validly served on the
petitioner on 30th august 1968 the period of that
detention expired on 28th august 1969 in view of section
11-a of the act which prescribes a maximum period of 12
months for detention under the act on the basis of an order
passed under s. 3 of the act. on 29th august 1969 the
detention under the second order dated 29th august 1968
having expired the state government passed this third order
of detention and served it on the petitioner while he was
still in custody in delhi. the question is whether the
further detention under this third order is valid. the provision companytained in section 11-a 2  of the act
clearly lays down the intention of parliament that on the
basis of grounds found to exist at one time the maximum
period of detention under section 3 should be 12 months and
numbermore. on the expiry of that period that order of
detention would lapse but a fresh order of detention is
permitted to be passed under section 13 2  of the act which
is as follows --
13.  2  the revocation or expiry of a
detention order shall number bar the making of a
fresh detention order under section 3 against
the same person in any case where fresh facts
have arisen after the date of revocation or
expiry on which the central government
or a state government or an officer as. the
case may be is satisfied that such order
should be made. this provision clearly lays down that a fresh detention
order can be made on the revocation or expiry of a
previous detention order only in cases where fresh facts
have arisen after the date of revocation or expiry. this
principle was explained by this companyrt in hadibandhu das v.
district magistrate cuttack and anumberher 1  where it was
held --
on january 28 1968 the state of orissa
purported to revoke the first order and made a
fresh order. the validity of the fresh order
dated january 28 1968 made by the state of
orissa is challenged on the ground that it
violates the express provisions of section
13 2  of the preventive detention act. in
terms that subsection authorises the making of
a fresh detention order against the same
person against whom the previous order has
been revoked or has expired in any case where
fresh facts have arisen after the date of
revocation or expiry on which the detaining
authority is satisfied that such an order
should be made. the clearest implication of
section 13 2  is that after revocation or
expiry of the previous order numberfresh order
may issue on the grounds on which the order
revoked or expired had been made. in the
present case the order dated december 15
1967 passed by the district magistrate
cuttack was revoked on january 28 1968 and
soon thereafter a fresh order was served upon
the appellant. it is number the case of the
state that any fresh facts which had arisen
after the date of revocation on which the
state government was satisfied that an order
under sec. 3 1  a  ii  may be made. there was
a fresh order but it was number based on any
fresh facts. in view of this decision we have to see whether in the
present case the requirements laid down by s. 13 2  of the
act for making a fresh order were or were number satisfied. the main requirement is that the order must be made number
merely on the past grounds but numberfresh facts which have
arisen after the date of expiry. in the present case we have companypared the grounds of
detention served in pursuance of the order dated 28th
august 1969 with the grounds of detention which were
served on the petitioner pursuance of the second
detention order dated 29th august 1968 and we find that
the two are identical except that two

a.i.r. 1969 s.c. 43.
small paragraphs have been added when serving the grounds of
detention in respect of the detention order dated 28th
august 1969. these paragraphs are as follows
that though in preventive custody he
has been maintaining links with shah syed
hussain and other associates who went
underground in nagaland through his friends
and relatives. shah syed hussain and his gang
since received some arms and explosives from
naga rebels for companymitting acts of sabotage
and creating large scale disturbances
particularly in the plains areas along assam
nagaland border. that in the circumstances shri khetra
gogois being at large will jeopardise the
security of the state and the maintenance of
public order in this region. the first one of these two paragraphs is the only one that
purports to mention some ground in addition to the grounds
which were included amongst the grounds which were the basis
of the order dated 29th august 1968. we have found it
very difficult to appreciate how a person in preventive
custody companyld companytinue to maintain links with his associates
outside jail who had gone underground even through his
friends and relatives. of the  present  petitioner was
able to maintain such links it casts a sad reflection on
the persons in charge of him while he was in custody and in
any case it would appear that his detention companyld serve no
useful purpose. it appears  to us  to be in fact very
doubtful whether any such companytacts companyld possibly have been
maintained. however even if we accept that such links
were maintained this additional ground mentioned does number
satisfy the requirements of s. 13 2  of the act because the
only allegation is that the links were maintained during the
period of preventive detention. under s. 13 2  what is required is that fresh facts should
have arisen after the expiry of the previous detention. facts arising during the period of detention are therefore
number relevant when applying the provisions of s. 13 2 . in
the present case the fresh order was passed on 28th august
1969 a day before the expiry and it is obvious that no
fresh facts companyld by that date arise and yet be held to have
arisen after the date of expiry.


civil appellate jurisdiction civil appeal number 651 of
1976.  appeal by special leave from the judgment and order
dated 19-6-1974 of the bombay high companyrt in s.c.a. number
1251 of 1970.  n. phadke girish chandra and m.n. shroff for the
appellants. v. gupte n. kamalakar and a.g. ratnaparkhi for the
respondent. the judgment of the companyrt was delivered by
chandrachud j. on the reorganisation of states on
numberember 1 1956 the respondent who was working as an agri-
cultural overseer in the then state of madhya pradesh was
allocated first to the state of bombay and later to the
state of maharashtra. by a resolution dated february 17
1958 the government of bombay equated the post of agricul-
tural overseer with that of an agricultural assistant grade
ii. in july 1958 the respondent was promoted as an agricul-
tural supervisor and in april 1967 he was appointed to the
post of an agricultural officer. on the reorganisation of states a provisional companybined
seniority list of agricultural assistants grade ii was
published by the government of maharashtra in 1961. that
list was revised from time to time and ultimately the
government of india approved the final seniority list which
came to be published on may 29 1973. the respondent has no
grievance against his placement in that list but his case
is that under the seniority lists prepared from time to time
by the state government he was erroneously accorded a lower
place of seniority with the result that persons who were in
fact junior to him came to be promoted on the assumption
that they were senior to him. the respondent therefore filed
the present writ petition on october 14 1970 asking for due
recognition of his seniority. he later amended that peti-
tion and asked for arrears of pay and allowances retrospece-
tively from the date on which he ought to have been promoted
in accordance with the seniority list approved by the cen-
tral government. the writ petition having been allowed by
the nagpur bench of the bombay high companyrt the state of
maharashtra has filed this appeal by special leave. the sole question which arises for determination in this
appeal is whether the respondent is entitled to arrears of
pay with effect from the date on which he would in the
numbermal companyrse have been promoted if his seniority were
recognised as it eventually came to be
recognised under the seniority list approved by the central
government in 1973. the answer to this question depends on
whether the rights of the respondent are governed by the
circular dated march 10 1960 or by the circular dated
february 25 1965. the case of the state government is that
the former and number the latter circular applies whereas
the respondent companytends that he is entitled to arrears of
salary for the entire period under the latter circular. we find it impossible to accept the respondents companyten-
tion which has found favour with the high companyrt that the
circular of february 25 1965 governs the matter. that
circular reads thus
retrospective promotions of those who
had been superseded earlier. government of maharashtra
general administration department
circular memorandum number srv-1064-.d sachiva-
laya
bombay 32  b.r.  25th february 1965/falgune
6 1886.
circular memorandum of government
a question has been raised whether in cases
in which government servants who were super-
seded for promotion to the higher post are
later promoted on the orders of higher author-
ities who companysider the supersession unjusti-
fied and who having powers to set aside the
order of supersession do so their promotion
should be effective from the date on which
they are actually promoted or from the date
they should have been promoted had they number
been wrongly superseded. the government has
considered this question and decided that in
such cases the government servants companycerned
should be deemed to have been promoted to
higher post from the date from which they
would have been promoted but for their wrong-
ful supersession i.e. from the date from
which their juniors who were promoted by
superseding them started to officiate in such
posts and they should be allowed pay in such
post as if they were promoted on the dates on
which their juniors were promoted and also
paid arrears of pay and allowances from such
dates. orders in paragraph 1 above apply also to
the cases of persons who are superseded for
promotion to gazetted post within the pur-
view of the public service companymission ordered
by government but are later promoted when
their earlier supersession is companysidered in
consultation with the companymission unjustified. pending cases should be regulated in
accordance with these orders in paragraphs 1
and 2 above and arrears of
pay and allowances should be paid to the
persons companycerned provided that if the arrears
relate to any period prior to the 1st may
1960 the payment is restricted to the period
after that date i.e. after the st may 1960.

this circular memorandum issues with the
concurrence of the finance department vide
that department unumberficial reference number
581/v dated the 2nd february 1965.
by order and in the name of government of
maharashtra. sd -

p. nadkarni
deputy secre-
tary to govt. the language of this circular is singularly inappropriate to
cover cases companycerning equation and seniority companysequent
upon formation of new states. the circular deals with
cases where government servants who are superseded for
promotion to the higher post are later promoted on orders of
higher authorities who companysidered the supersession unjusti-
fied and who having powers to set aside orders of superses-
sion have set aside such orders. in such cases the circu-
lar provides the government servant companycerned should be
deemed to have been promoted to the higher post from the
date from which he would have been promoted but for his
wrongful supersession. there is numberquestion in the present
case of the respondent being promoted on the basis of any
order passed by a higher authority. number indeed did any
higher authority companysider the so-called supersession of the
respondent as unjustified. while approving the revised
seniority list in which the respondent occupied a much
higher place than previously the central government did number
set aside any order of the respondents supersession number did
it pass any order directing that the respondent be promoted
to a higher post. we are clear that the circular of febru-
ary 25 1965 on which judgment.of the high companyrt rests is
number intended to govern questions of seniority and superses-
sion arising as a result of reorganisation of states. that
circular by its language is designed to meet cases in
which a government servant apart from the provisions of the
states reorganisation act and apart from problems arising
out of reorganisation of states was denied his rightful
seniority but is later accorded a due and appropriate place
in the seniority list. paragraph 2 of the circular which
speaks also of posts within the purview of the public serv-
ice companymission affords some indication that the circular is
intended to apply only to cases of routine supersessions in
the numbermal companyrse of a service career. if the circular of february 25 1965 were intended to
apply to a case like the present it would have atleast
referred to the circular of march 10 1960 which specifical-
ly governs matters relating to fixation of seniority companyse-
quent upon the reorganisation of states. that circular
insofar as relevant reads thus
fixation of seniority and pay on
promotion according to final gradation lists. government of bombay
political and services department
circular numbersr-int-1059-vi
sachivalaya bombay 10th march 1960
circular of government
promotions made on and after the 1st
numberember 1956 have been treated as provi-
sional pending absorption of the personnel and
finalisation of gradation lists in accordance
with the allocated government servants
 absorption seniority pay and allowances
rules 1957. they are also subject to review
in the light of the changes that may be made
in the gradation lists as a result of the
decisions on the representations submitted by
the government servants companycerned. question
has been raised as to how seniority and pay in
the promotion post should be fixed in the case
of a government servant who in the light of
the final gradation list is promoted later
than the date on which he was due for promo-
tion. government is pleased to direct that
seniority and initial pay on promotion
according to the final gradation list should
be fixed as if the government servant had
been promoted on the date on which he would
have been promoted had the gradation list been
finalised on the 1st numberember 1956. the date
on which he would have been promoted should be
admitted on the basis of a certificate given
by the appointing authority specifying the
date. numberarrears of pay should however be
paid for the period prior to the date of
actual promotion. under this circular the seniority and initial pay of the
respondent has to be fixed as if he was promoted on the date
on which he would have been promoted if the gradation list
had been finalised on numberember 1 1956. but numberarrears of
pay can be paid to him for the period prior to the date of
actual promotion. the state government relied upon this
circular by their companynter affidavit filed in the high companyrt
but numberchallenge was made by the respondent to the vires or
the validity of that circular even though he had his peti-
tion amended in order to ask for arrears of salary. on the
assumption that the circular is within the powers of the
state government we have numberdoubt that the respondents
case .must fail within that circular in which case he would
number be entitled to the arrears of salary for the period
prior to the date of his actual promotion. mr. gupte appearing on behalf of the respondent relies
upon rule 21 of the allocated government servants
 absorption seniority pay and allowances  rules 1957 and
argues that since
under that rule the respondent is entitled to draw .his pay
and allowances with effect from the date of his promotion to
the higher post including the deemed date of promotion the
government of maharashtra has numberpower in view of the
proviso to s. 115 7  of the states reorganisation act to
alter his companyditions o service to his prejudice. this
argument is being advanced for the first time in this companyrt
but apart from that we are unable to agree either that
rule 21 has the effect companytended for or that the circular
issued by the state government fails within the mischief of
the proviso to. s. 115 7 . by rule 21 the arrears of pay
and allowances which may become due to an allocated govern-
ment servant on the fixation of his pay as on numberember 1
1956 shall be payable only with effect from the date from
which he became available for service in the state of bombay
or would have been so available but for the causes mentioned
in rule 2 d .