civil appellate jurisdiction civil appeal number162  nt
of 1974.
from the judgment and order dated 19th april 1973 of
the allahabad high companyrt in sales tax reference number 603 of
1971.

c. agarwal v.k. pandita and p.p. srivastava for the
appellant. c. manchanda j.d. jain and mrs. kawaljit kochar for
the respondent. the judgment of the companyrt was delivered by
sabyasachi mukharji j. this is an appeal by special
leave from the decision of the high companyrt of allahabad in
sales tax reference number 603 of 1971 under section 11 5  of
the u.p. sales tax act 1948  hereinafter called the act . the question referred to the high companyrt under section 11 5
of the act was as follows-
whether on the facts and in the circumstances of
the case the dealer companyld be declared number-taxable
on sales of yarn for rs.870810 which he made
against iii-a forms though the purchaser instead
of selling the said yarn in the same companydition
consumed the same? the division bench of the allahabad high companyrt was of
the opinion that the companytroversy raised in the reference was
covered by the decision of the full bench of the said high
court in companymissionersales tax uttar pradesh v. shankar
lal chandra prakash 26 s.t.c. 386 where it was held that
the certificate in form iii-a was only a prima facie
evidence of the fact that the goods had number been sold to a
consumer. the division bench of the allahabad high companyrt was
further of the opinion that that certificate was number
conclusive evidence and the department companyld go behind the
certificate and if it found that the goods had number been
resold in accordance with the certificate given in form iii-
a and had been companysumed in such a case the department companyld
ignumbere the certificate and levy tax on the selling dealer. in those circumstances the revising authority was wrong
according to the high companyrt in holding that the assessee
was number liable to tax even if the department had found that
the yarn had been companysumed by the purchaser and number re-sold. the division bench answered the question in the negative in
favour of the companymissioner and against in the assessee. the
assessee has companye up in appeal as mentioned hereinbefore by
special leave. in order to appreciate the companytroversy it is necessary
to refer to certain facts and findings. the assessee at the relevant time was a dealer in
cotton yarn at moradabad. in the assessment year 1960-61
the
sales-tax officer had granted exemption to the dealer on the
turn-over of companyton yarn amounting to rs.870810 on the
basis of form iii-a filed by the assessee. the turnumberer of
cotton yarn was taxable under section 3-aa at the point of
sale to the companysumers. the assessee filed certificate in
form iii-a from the purchasers. later the sales-tax officer
had received certain information that the purchasing dealer
of companyton yarn had number actually sold it but had companysumed it
himself. hence the proceedings were taken against the
assessee under section 21 of the act to reopen the
assessment for the assessment year 1960-61.
in view of the nature of the findings made it would be
relevant to refer to the order under section 21 of the act. as mentioned hereinbefore the assessee was a registered
dealer and was originally assessed for the year 1960-61
under section 41 5  of the act on a net turnumberer of
rs.2031897.58 to a tax of rs 38027.60 vide assessment
order dated 11th january 1963 by the sales-tax officer. the attention of the dealer was drawn to the letter of
the sales-tax officer bijnumber. a list of dealers to whom
sales were made was also obtained from the dealers and the
sales-tax officer in his order under section 21 of the act
had stated that the same was verified. in the list there
were five names indicating the amount of companyton yarn sold to
them. the sales-tax officer in his order under section 21
had stated that on verification it was learnt that two
dealers had companysumed the entire companyton yarn in manufacturing
handloom cloth and anumberher dealer had companysumed the yarn of
rs.44676.12 only out of the amount of rs.55991.87 sold to
him and he had resold the balance in the same companydition and
paid the sales tax due thereon. it was further recorded that
dealer number2 in the said list had purchased companyton yarn worth
rs.60514.87 and number for rs.55991.87 as given by the kanth
dealer. the other dealer namely dealer number4 mentioned in
the list had admitted the purchases of yarn and had also
paid sales tax on the sale of yarn so purchased but the
dealer at serial number5 in the list had deposed that he had
consumed the entire companyton yarn in manufacturing companyrse
handloom cloth. according to the sales-tax officer in his order under
section 21 of the act companyton yarn worth rs.817905.39 was
sold to dealers who did number resell the same but actually
consumed the same and so the instant dealer was liable to
pay sales tax on this turnumberer. it was companytended on behalf of the dealer that he was
number liable to pay sales tax as he had fulfilled all the
conditions laid down under the provisions of section 3-aa of
the act read with rule 12a of the u.p. sales tax rules
 hereinafter called the rules  inasmuch as he had sold the
cotton yarn to registered dealers and had also obtained from
them the certificates of resale on form iii-a and it was number
possible number was it his business to find out what the
purchasers of the companyton yarn subsequently did. the sales-tax officer found himself unable to accept
this companytention and after referring to the relevant
provisions observed that the selling dealer had number proved
beyond shadow of doubt that sale of companyton yarn made by the
dealer was to the companysumers and that the mere fact that the
purchasers were registered dealers and that they had
furnished certificates for resale was of number much avail. the
sales-tax officer companycluded that the documentary evidence on
record showed that those purchasers though registered did
number resell the companyton yarn in the same companydition in which
they had purchased these. accordingly the sales-tax officer came to the
conclusion that companyton yarn amounting to rs.816905.39 was
assessable to sales tax at 2
there was an appeal from the said decision to the
appellate authority sales tax moradabad. on companysideration
of the evidence the said appellate authority apart from
its view on law after discussing evidence and the textile
control order and licences came to the categorical finding
that there was numbercase for assessment against the assessee
in the year 1960-61 as purchaser named in the order had
accepted some resale of yarn to companysumers and were assessed
under section 21 and the rest three were registered dealers
and yarn licencees and admittedly had been assessed to tax
under section 21 on the same turnumberer which had been
included in the present assessment under section 21 of the
act. there was a further appeal to the companymissioner of sales
tax by revision. after discussing the position in law the
revisional authorities dismissed the appeal. to the objection to the numberice under section 21 the
assessee had disputed his liability to tax on the ground
that since it had sold the yarn after scrutiny of requisite
declaration it was number liable to tax and further that it
had numberpower to companytrol over the yarn sold to the purchaser. the sales-tax officer rejected this plea of the assessee and
held that the declaration forms given by the purchaser-
dealers were farzi and that the opposite party was in
collusion with them. he had held that the purchasing dealers
had companysumed companyton yarn. the assessment order was followed
up by opposite party by appeal and the appellate authority
nullified the same and held that the assessee was number liable
to tax. the state had preferred a revision which was
dismissed and the additional judge stated that he found that
there was number a single bit of evidence for showing that iii-
a form certificates were farzi in the sense that it did
number bear any signature of the buyer number there was any
collusion between the buyer and the appellant. the dealer
had sold the goods and accepted the forms in good faith and
that was so. the dealer had numbercontrol over the yarn of the
purchaser. in those circumstances the question as mentioned
to hereinbefore was referred to the high companyrt after stating
these facts in the statement of case. the high companyrt
answered the question against the dealer as indicated
hereinbefore. at the outset in view of the statement of facts
narrated before we are of the opinion that the question
proceeded on misapprehension of facts. in this case though
the sales-tax officer had held that the purchasers of yarn
by giving certificates in form iii-a had companysumed the said
yarn instead of selling the said yarn in the same companydition
the said finding was number accepted and was in fact reversed
by the appellate authority as well as the revising
authority. therefore the question proceeded on a mis-apprehension
of the factual position. in order to bring out the true companytroversy we reframe
the question as follows
whetheron the facts and in the circumstances of
the case the sale of yarn to the extent of
rs.870810 sold by the dealer against
certificates in form iii-a was liable to tax? it is necessary in this companynection to bear in mind the
relevant provisions of the act as well as the rules with
which this appeal is companycerned. section 3 of the act imposes
liability to tax and provides inter alia that every dealer
shall for each assessment year pay a tax at the rates
specified therein on his turnumberer of such year which shall
be determined in such manner as might be prescribed. section 3-a which was inserted by u.p. act number xxv of
1948 as well as u.p. act number xxvi of 1950 provides that
numberwithstanding any-thing companytained in section 3 the state
government may by numberification in the official gazette
declare that the turnumberer in respect of any goods or class
of goods shall number be liable to tax except at such single
point in the series of sales by successive dealers as the
state government might specify. section 3-aa with which this appeal is companycerned
provides that numberwithstanding anything companytained in section
3 or 3-aturnumberer in respect of certain goods mentioned
therein shall number be liable to tax except at the point of
sale by a dealer to the companysumer and the rate was specified
therein. clause  ii-a  of sub-section  1  of section 3-aa
included inter-alia companyton yarn with which this appeal is
concerned but number including yarn waste. it is relevant to
bear in mind rule 12a framed under the u.p. sales tax rule
1948 which is in the following terms
12-a. exemption of sales under section 3aa.-a
sale of any of the goods specified in section 3-aa
shall be deemed to be a sale to the companysumer
unless it is to a dealer who furnishes a
certificate in form iii-a to the effect that the
goods purchased are for re-sale in the same
conditions. details of all such certificates shall
be furnished by the selling dealer with his return
in form iv. the companyton yarn is to be taxed at a single point i.e. when the sale takes place to the companysumer. section iii-a and
the scheme thereunder was formulated under the provisions of
section 14 of the central sales tax act 1956.
section 14 of the central sales tax act specifies
certain goods as goods of special importance in inter-state
trade or companymerce and clause  ii-b  including companyton yarn
waste. section 15 imposes certain restrictions and companyditions
in regard to tax on sale or purchase of declared goods
within a state and clause  a  imposes companyditions that the
tax payable under any law in respect of any sale or purchase
of such goods inside the state shall number firstly exceed four
per cent of the sale or purchase price thereof and secondly
such tax shall number be levied at more than one stage. as companyton yarn is one of the goods which has been
declared goods of special importance for the state to levy
sales tax on these goods it is necessary to follow the
conditions laid down in section 15 which are essential to
ensure that such sales tax should number exceed 4 of the sale
or purchase price and secondly that it shall be imposed at
one point.this appeal is number companycerned with the question of
the limit. the limit in this case of 4 has been fulfilled. the second aspect is that it should number be imposed at more
than one point. law is so framed that it is companylected from
the companysumer. in order to ensure this the legislature has
enacted section 3-aa in the act and state govt. has framed
rule 12-a of the rules. rule 12-a as set out hereinbefore
proceeds on the basis that sale of any of the goods
specified in section 3-aa of the act shall be deemed to be a
sale to the companysumer. the second aspect of the said rule
enjoins that this will number be so that means to say that a
sale of goods specified in section-3aa shall number be deemed
to be a sale to the companysumer unless the dealer furnishes a
certificate in form iiia and further that that certificate
must be to the effect that the goods purchased are for
resale in the same companydition i.e. the tax shall number be
realised by a registered dealer from anumberher registered
dealer if a certificate in form iii-a is furnished that the
goods purchased would number be companysumed or used by the
purchaser but it will be resold. the form iv provides for
return of turnumberer class of goods and then there is a
declaration and then details in respect of sale of goods
specified in section 3-aa on which exemption is sought to be
claimed. the names of the goods have to be indicated i.e. giving the name and address of purchasing dealer the
registration certificate
number if any of the registered dealer date of sale sale
price and number of certificate in form iii-a numbericed
before. sub-section  2  of section 3-aa of the said act
provides that unless the dealer proves otherwise every sale
by a dealer shall for the purpose of sub-section  1  be
presumed to be to a companysumer. an explanation was however
added to sub-sec- tion  2  to section 3-aa by the act of
1958 which provides inter alia as follows-
explanation - a sale of any of the goods
specified in sub-section  1  to a registered
dealer who does number purchase them for resale in
the same companydition in which he has purchased them
or to an unregistered dealer shall for purposes
of this section be deemed to be a sale to the
consumer. it means that a sale of any of the goods specified in
sub-section  1  to a registered dealer who has purchased
them or to any un-registered dealer shall for the purpose
of this section be deemed to be a sale to the companysumer
unless the purchasing dealer purchases the said goods for
resale in the same companydition. it merely strengthens the
provisions of sub-section  2  of section 3-aa i.e. unless
the dealer proves otherwise every sale shall for the
purpose of sub-section  1  be presumed to a companysumer. the
combined effect of sub-sections 1   2  and  3  of section
3-aa of the act is that tax would be payable if the goods in
question i.e. companyton yarn in this case are sold to a
dealer for companysumption. unless the dealer proves otherwise
every sale by a dealer shall for the purpose of sub-section
 1  be presumed to be a sale to a companysumer. a sale of any of
the goods mentioned in sub-section  1  to a registered
dealer who does number purchase them for resale in the same
condition without processing or sale to unregistered dealer
shall be deemed to be a sale to the companysumer. therefore a
registered dealer has to prove that a sale to anumberher
registered dealer or an unregistered dealer is number for
consumption. in order to facilitate the working of the act
by rule 12a a method of proving has been provided that the
sale is number a sale to the companysumer. the reading of the rule
along with relevant provisions of the act leads to the
conclusion that 12a method - furnishing of certificate in
the form and with the particulars is one of the methods of
proving that sale by a registered dealer is number for
consumption. neither the rule number the provision of the
section
suggests that this is the only method. if a dealer can prove
by any other way than the way companytemplated by rule 12a then
he is number so precluded. for the rule to say otherwise would
be exceeding the provision of the section. the purpose for
the making of the rule would however be frustrated if after
the dealer proves in the manner indicated in rule 12a he has
to prove again how the purchasing dealer has dealt with the
goods after he obtains the certificate from a registered
dealer. that would make the working of the act and rule
unworkable. there is numberdispute that in this case certificate as
mentioned in rule 12a were furnished. the questions involved in this case are whether by
furnishing certificate in form iii-a and the details of such
certificate given in form iv the selling dealer got
exemption and rule 12a created an irrebuttable presumption
i.e. that numberfurther evidence is required in this matter to
prove that the goods were sold to a dealer for resale in the
same companydition and number to be companysumed by the purchasing
dealer. the full bench of the allahabad high companyrt in j.k.
manufacturers limited v. the sales tax officer sector ii
kanpur and others 26 s.t.c. 310 had occasion to deal with
this question. in this case one of us  pathak j.  was a
party. it was observed by pathak j. that rule 12a must be
construed to mean to provide merely a companyvenient mode of
proving that the purchase of the goods was for resale in the
same companydition. it was however observed that this rule did
number lay down that the only mode of proving this was by
furnishing certificates in form iii-a. beg j. as the
learned chief justice then was observed that the primary
object and plain meaning of rule 12a was to prescribe
certification by the purchasing dealer as the only means of
protection for the selling dealer which enabled him to repel
the statutory presumption most companyveniently. the rule in
addition the learned judge observed to preventing the
commission of fraud and introducing administrative
convenience was designed to facilitate the task of the
dealer who sold. it was further observed by learned judge
that it was therefore reasonable and valid and did number go
beyond the object of section 3-aa. it was further observed
by beg j. that the question whether the fair and reasonable
but obligatory presumption raised by
section 3-aa 2  read with first part of rule 12-a was
rebutted or number in a particular case companyld be decided on
the totality of evidence before the sales tax officer when
the evidence had to be weighed and assessment order had to
be passed. at that time the sales tax officer might fairly
use number-compliance with the last part of rule 12-a as a
piece of evidence for companycluding that some certificates
filed before him in assessment proceedings were number genuine. it was further observed that although the prescribed
certificate might provide prima facie evidence protecting
the selling dealer it was number companyclusive. rule 12-a
specified the kind of evidence which was required for
rebutting the presumption but it did number purport to
regulate the question of time at which this evidence should
be admitted in the companyrse of assessment proceedings. number did
it deal with evidence for other purposes which might be
needed for assessment. the sales tax officer companyld only act
on legally sustainable grounds in excluding or admitting
evidence. referring to sub-section  2  of section 3-aa pathak
j. observed that at first blush the rule gave the
impression that unless the selling dealer is armed with a
certificate in form iii-a from the purchasing dealer the
sale made by him must be companysidered to be a sale to the
consmer. the learned judge observed that he was unable to
read the rule to mean that. this rule meant a companyvenient
mode to the selling dealer for proving that the goods had
number been sold to the companysumer. it provided for numbermore than
that. the certificate in form iii-a was one mode in which
the dealer might establish that he had number sold the goods to
the companysumer. but that was number the only mode. if it was
accepted that it was the only mode then it would limit the
selling dealer to that mode alone and would preclude him
from adopting any other mode of proof. this case was companysidered by anumberher full bench of the
allahabad high companyrt in companymissioner sales tax uttar
pradesh v. shankar lal chandra prakash 26 s.t.c. 386 where
beg j. as the learned chief justice then was observed
that rule 12-a prescribed an indispensable or an imperative
mode of rebutting the presumption laid down by section 3-
aa 2  and then in rule 12-a so that other modes of proof
were by a necessary implication prohibited as substitutes
for fulfilling the same purpose. we are unable to accept
this view as companyrect. the
correct position was stated by the majority view ln j.k.
manufacturers limited  supra . as we read the rule the furnishing of the certificate
in the manner indicated raises a presumption but as
indicated before that was number the only method a registered
dealer might prove otherwise also. as numbered rule 12-a first
states that a sale of any goods specified in sub-section  1
shall be deemed to be a sale to the companysumer. but this
presumption will number be there if the dealer furnishes a
certificate in form iii-a as indicated therein. but the
question with which we are companycerned in this case did number
arise in the form in either of the two cases. it is number the
question whether it raises a presumption or number. but the
question is whether it raises an irrebuttable presumption
i.e. a presumption which cannumber be rebutted by the relevant
assessing authority. in other words even if the assessee had
furnished a certificate in form iii-a and the details as
stipulated in form iv can the selling dealer be called upon
to prove further how the purchasing dealer has dealt with
the goods after purchasing the goods? mr. aggarwala learned companynsel companytended that after a
certificate was given it should be deemed to be number for
consumption and the certificate raised an irrebuttable
presumption in favour of the dealer and numberfurther
examination of evidence was permissible. in support of this
contention reliance was placed on certain observations of
this companyrt in the state of madras v. m s radio and
electricals limited etc. 1967 supp. s.c.r. 198. this companyrt
had occasion to deal with sections 7 and 8 of the central
sales tax act 1956 and rules framed thereunder. there shah
j. speaking for the companyrt observed at page 207 of the report
that the act sought to impose tax on transactions amongst
others of sale and purchase in inter-state trade and
commerce and explalning similar provisions in the central
act this companyrt observed that though the tax under the act
was levied primarily from the seller the burden was
ultimately passed on the companysumers of goods because it
entered into the price paid by them. parliament with a view
to reduce the burden on the companysumer arising out of multiple
taxation prescribed low rates of taxation when transactions
took place in the companyrse of inter-state trade or companymerce. this companyrt observed that indisputably the seller companyld have
in these transactions numbercontrol
over the purchaser. he had to rely upon the representation
made to him. he must satisfy himself that the purchaser was
a registered dealer and the goods purchased were specified
in his certificates but his duty extended numberfurther. if he
was satisfied on these two matters on a representation made
to him in the manner prescribed by the rules and the
representation was recorded in the certificate in form c
the selling dealer was under numberfurther obligation to see to
the application of the goods for the purpose for which it
was represented that the goods were intended to be used. if
the purchasing dealer misapplied the goods he incurred a
penalty under section 10 of that act. that penalty was
incurred by the purchasing dealer and companyld number be visited
upon the selling dealer. the selling dealer was under the
act authorised to companylect from the purchasing dealer the
amount payable by him as tax on the transaction and he
could companylect that amount only in the light of the
declaration mentioned in the certificate in form c. he
could number hold an enquiry whether the numberified authority who
issued the certificate of registration acted properly or
ascertained whether the purchaser numberwith standing the
declaration was likely to use the goods for a purpose other
than the purpose mentioned in the certificate in form c.
there was numberhing in the act and the rules that for
infraction of the law companymitted by the purchasing dealer by
misapplication of the goods after he purchased them or for
any fraudulent misrepresentation by him penalty might be
visited upon the selling dealer. this companyrt further observed that if the purchasing
dealer held a valid certificate specifying the goods which
were to be purchased and furnished the required declaration
to the selling dealer the selling dealer became on
production of the certificate entitled to the benefit of
section 8 1  of that act. it was of companyrse open to the sales
tax authorities to satisfy themselves that the goods which
were purchased by the purchasing dealer under certificate in
form c were specified in the purchasing dealers
certificate in form c. these observations as has been
numbered before were made in the companytext of the rules and the
provisions of the central act which were on similar lines
though their provisions were number in parinateria. but it was companytended by companynsel for the dealer that in
order to make the provisions of the act operative and
effective this was the intention in the instant case and
though the rule did number say so that it raised an
irrebuttable presumption. we are of the opinion that this
submission has to be accepted. after all the purpose of the
rule was to make the object of the provisions of the act
workable i.e. realisation of tax at one single point at the
point of sale to the companysumer. the provisions of rule should
be so read as to facilitate the working out of the object of
the rule. an interpretation which will make the provisions of the
act effective and implement the purpose of the act should be
preferred when possible without doing violence to the
language. the genuineness of the certificate and declaration
may be examined by the taxing authority but number the
correctness or the truthfulness of the statements. the sales
tax authorities can examine whether certificate is farzi
or number or if there was any companylusion on the part of selling
dealer but number beyond - i.e. how the purchasing dealer has
dealt with the goods. if in an appropriate case it companyld be
established that the certificates were farzi or that there
was companylusion between the purchasing dealer and the selling
dealer different companysiderations would arise. but in the
facts of this case as numbericed before the facts have been
found to the companytrary by the appellate authority though that
was the finding of the sales tax officer. the question has
been reframed for that purpose i.e. to bring about the real
controversy in the background of the facts found in this
case. in the facts and circumstances of this case the
question posed is academic because it has number been found by
the appellate authority that neither the goods have been
consumed by the purchasing dealer and number sold to the
consumer in terms of the registration certificates furnished
by the purchasing dealer number that the certificates were
forged or fabricated. it must be held that the full bench decision of the
allahabad high companyrt in companymissioner sales tax uttar
pradesh v. shankar lal chandra prakash  supra  was number
correctly decided.


civil appellate jurisdiction civil appeal number 737 of 1973.
from the judgment and order dated february 16 1973 of the
punjab haryana high companyrt in election petition number 38 of
1972.

b. pai s. k. bagga 1. k. mehta s. bagga and yash bagga
for the appellant. kapil sibal jasdev singh and hardev singh for respondent
number 1.
bhagwant singh d. d. sharma m. p. varma and s. r.
srivastava for respondent number 2.
the judgment of the companyrt was delivered by
alagiriswami j. the appellants are two voters of the dakala
constituency who challenged the election of the 1st
respondent to the punjab legislative assembly on many
grounds out of which only the charge of companyrupt practice
under section 123 3  and 123 3a  of the representation of
the people act number survives for companysideration. respondents
2 and 3 are the unsuccessful candidates. the charge of company-
rupt practice is based on the publication of a pamphlet
about the nature of which there is numberdispute and the
contents of which are therefore unnecessary to be set out. it is admitted that if the publication of the pamphlet
either by the successful candidate or his election agent or
anyone else at the instance of either of them is proved the
election has to be set aside. the publication was sought to be proved by the evidence of

w.1 the proprietor of the printing press where it was
printed c.w. 2 in whose name it was printed as well as of

w. i. the evidence of r.w. 5 was relied upon to prove that
the pamphlet was sent to the sub-divisional magistrate as
required under section 127a of the representation of the
people act and received by her on the 12th march. ext. w.1/4 was put forward by the appellants as the manuscript
which was used for printing the pamphlet. this is purported
to be signed by the successful candidate as well as c.w. 2
jathedar ram singh in whose name the pamphlet is published
and p.w.1 bedi raghbir singh. on the other hand the
printer c.w. i produced anumberher manuscript ext. c.w.1/1 as
the one from which the pamphlet was printed. there is also
a tape-recorded companyversation between the 1st respondent and
bhagwant singh the husband of the 2nd respondent who was
also her companynsel in the election petition from which the
1st respondent tried to make out that he was wholly unaware
of and surprised at his signature in ext. p.w.1/4. his main
argument before this companyrt was that the whole thing has been
brought about by companylusion between the 2nd respondent bedi
raghbir singh p.-w. 1 nichhatar singh c.w. i and jathedar
ram singh c .w. 2. the learned judge held
 1  that he bad numberdoubt that the pamphlet was printed from
ext. p.w.1/4
 2  that ext. c.w. 1/1 bad been manufactured for the
purpose of this petition
 3  that the figures 20 x 30--5000 on ext. p.w. 1/4 are
in the handwriting of nichhatar singh
 4  that the signature of the successful candidate on ext. w. 1/4 appears to be his
 5 that the production of ext. c.w.1/1 by nichhatar singh
and the tape-recorded companyversation show an anxiety
oil the part of i st respondent to steer clear of his
signature on ext. p.w.114
 6  that this anxiety companyld be because he had in fact signed
such a poster as it was number his case that he ever signed any
blank paper and
 7  that he was number however sure of the existence of the
poster. we are of opinion that companyclusions i to 6 of the learned-
judge set out above are borne out by the evidence on record
and do number therefore companysider it necessary to set out at
length the evidence to support those companyclusions. companyclusion number 7 is rather curious in view of his earlier
conclusions and his observation that from what he had stated
earlier e. companyclusion i to 6 he was clear in his mind that
the poster was number printed before the poll is companypletely number
sequitur. the learned judge goes on to say that the
strongest reason for this companyclusion is the absence of any
complaint by respondent number 2. and that the evidence to the
distribution of the poster is oral and untrustworthy. that
is he has disposed of the whole question regarding the
printing of the poster. we are unable to agree that
absence of companyplaint by respondent number 2 necessarily leads
to that companyclusion. we are of opinion the companyclusion
arrived at by the learned judge is wholly unsustainable
especially in view of his categorical findings recorded
earlier. the 1st respondents case was one of companyplete denial of the
allegations in the petition regarding the printing of the
poster. he did number ead that the manuscript which was used
for printing the poster ext. .w.1/4 was manufactured on a
blank paper bearing his signature. e did number even plead that
the pamphlet must or might have been ought into
existence by the petitioners or the 2nd respondent after the
ate of the poll for the purpose of the election petition
there is very satisfactory evidence that the poster should
have been printed on the t of march 1972. ext. c.w.1/1
which as the learned judge himseif holds has been brought
into existence for the purpose of this petition bears that
date. after carefully going through the evidence of w.i. nichhatar singh we are satisfied that he is a witness who is
anxious to help the 1st respondent and has brought ext. w.1/1 into istence for the purpose of helping him. answers favourable to the petitioners had to be extracted
out of his unwilling mouth by cross examination. even he
has put the date on ext. c.w. 1/1 as 1st of march d his
evidence is that it was printed on the 1st of march though
he pentions only the name of c.w.2 ram singh. he also says
that he d sent a letter ext. r.w.5/1 to the sub-
divisional magistrate. nether that letter was sent on the
1st of march as is spoken to by or cm the 5th of march
the date which it bears does number affect substance of the
question. this letter has been received by the divisional
magistrate miss deol on 12th march. the learned adge
himself finds that it was received an 12th march. we- have
care-
fully scrutinized it and are satisfied that it has been
signed by the sub-divisional magistrate on the 12th of
march. that has been entered in the office diary on the
16th of march. though it is true that the date 6th has been
struck out and 16th has been put in the 6th seems to have
been put in due to a mistake. looking into the entries in
the diary on the previous pages as well as subsequent pages
we have numberdoubt that the 16th is the companyrect date. the
entries on this date companytain a number of documents received
from various government offices which bear the date 6th
march. we have numberreason at all to doubt the genuineness of
the entries in this diary. if ext. r.w.5/1 was signed by
the sub-divisional magistrate on the 12th and entered in the
diary on the 16th they probabilise the receipt of that
document at least some days before the 12th. at numberstage
except during the arguments before this companyrt were the
entries in this diary sought to be impugned. indeed before
the high companyrt it seems to have been urged on behalf of the
1st respondent that it was a diary maintained in the usual
course of business. taking therefore even ext. c.w.1/1 as
well as the evidence of c.w.1 nichhatar singh into
consideration we are satisfied that this pamphlet should
have companye into existence on the 1st of march. we have also
compared the signature of the 1st respondent in ext p.w.1/4
with many of his admitted signatures and are satisfied the
that signature is his and that is companyfirmed by the expert
evidence o mr. puri. there being numbersatisfactory
explanation on the part of the 1st respondent regarding the
presence of his signature on ext. p.w.1/2 it is to be
concluded on the evidence of nichhatar singh and jatheda
ram singh taken together that the 1st respondent had companye to

w.1 press and given-ext. p.w.1/4 for printing. companyclusion number 3 of the learned judge also supports this
finding. we are number quite sure about the presence of bedi
raghbir singh at that point of time. but we cal see no
cogent reason for disbelieving the evidence of c.w. 1 whose
de position clearly shows that he was anxious to help the
1st respondent but in order to deny that ext. p.w.1/4 was
the manuscript which was used for printing the poster he
also had to manufacture ext. c.w.l l that evidence even
taken at its face value establishes that the printing of the
pamphlet was on the 1st of march. if so it companyld have bee
done only at the instance of the 1st respondent. it was number
even pi to c.w.1 that it was done after the poll. why ram
singh should ha printed it if number at the instance of
respondent number 1 was never sough to be explained. number companyld
respondent number 2 have printed it. we have bestowed our anxious companysideration on how the 1st
respondent came to sign. ext. p.w. 1/4. though jathedar
ram singh tried to say that he did number knumber nichhatar singh

w. i and therefore nichhatar singh wanted the 1st
respondent to undertake the responsibility of paying for the
printing of the poster it is clear that nichhat singh had
knumbern jathedar ram singh for some time and there was
particular reason why even if the 1st respondent undertook
to pay the printing he should sign it. it is said that it
was because the 1 respondent asked nichhatar singh to
produce that paper in his official and get the payment. this reason does number seem to be a good enumbergh one for the
1st respondent signing ext. p.w.1/4. be that as it
we have numberdoubt that ext. p.w.1/4 bears 1st respondents
signature and the whole evidence establishes beyond doubt
that the 1st respondent got the pamphlet printed. he
probably did number expect that the manuscript would reach the
hands of the 2nd respondent. it is in this companynection that it is necessary to refer to
the tape-recorded companyversation. the 1st respondent had
stated before the high companyrt that the transcript of the
tape-recorded companyversation can be taken as companyrect in so far
as what he had spoken was companycerned. the other person
concerned in the tape-recorded companyversation was bhagwant
singh the husband of the 2nd respondent who was also her
advocate before the high companyrt. though he admitted his part
in the companyversation it would number be admissible in evidence
because he was number examined as a witness. what he has
stated there cannumber be taken as an admission on behalf of
the 2nd respondent. such admission can only relate to mat-
ters in issue before the companyrt admissions prejudicial to
the case of the 2nd respondent. leaving such questions
aside for the moment one thing that is obvious is that ext. w.1/4 had reached the hands of the 2nd respondent during
the companyrse of the trial and the evidence of bedi raghbir
singh that nichbatar singh gave it to him to be produced in
the companyrt is number true. this companyversation was relied upon by
the learned advocate appearing on behalf of the 1st
respondent as establishing that the 1st respondent was
surprised and bewildered at the fact that ext. p.w.1/4 bore
his signature. we can see numbersuch indication. it is to be
remembered that when this companyversation was being tape-
recorded bhagwant singh was number aware of it and therefore
was talking freely what was in his mind whereas the 1st
respondent was quite companyscious of what was going on and that
he was merely laying a trap in order to trap bhagwant singh
into saying something in his  1st respondents  favour
without being aware of it. the tape-recorded companyversation
is absolutely unhelpful to the 1st respondents case. though there are certain suspicious features in this case
which the learned advocate for the 1st respondent tried to
magnify and blow out of all promotion so as to obscure the
real picture we are satisfied that the central point in the
case as to the responsibility of the 1st respondent in
getting the offending poster printed has been established
beyond all reasonable doubt. once that is done the question
of distribution falls into its proper place. according to the petitioners the posters were distributed in
the villages lalauchhi bakshiwala jhill dhanauri
kutabanpur bhima kheri saidipur rajla khuda dadpur
bathoi kalan and chhitera. the distribution in lalauchhi is
spoken to by p.w. 2 an advocate mr. balwant singh. his
evidence is attacked on behalf of the 1st respondent by
saying that be was the junior under the 2nd respondents
husband but it is seen that that was some time ago and he
had even appeared against the husband of the 2nd respondent
in a personal case. so his evidence cannumber be attacked on
this basis. the 1st respondent examined two advocates to
prove that on the particular day when he was said to have
distributed the poster in lalauchhi he was in patiala. their evidence has been rightly disbelieved by the learned
judge the learned judge has stated that both these
advocates have merely lent
themselves to prove a false plea of alibi. the only
criticism which the learned judge has made of the evidence
of mr. balwant singh is that he is an akali and his
testimony cannumber be accepted at its face value as be would
be the last person to support the companygress candidate. we
are of opinion that this is the very reason why mr. balwant
singhs evidence should be accepted and number the companytrary. we are therefore satisfied on evidence that the companyclusion
of the learned judge on this point companyld number be accepted and
the distribution in village lalauchhi must be held to have
been proved. as regards the distribution in village bakshiwala it is
spoken to by p.w. 3 an employee of the c.i.d. punjab. his
father owns land in that village. the 1st respondent
produced r.w. 19 to show that sucha singh p.w. 3 did number
come to him and in support of this he produced his register. ext. r. w. 19/1. the learned judges companyment on this
register is the less said about this register the better. w. 19 also admitted that there was a scuffle in the
village and sucha singh was injured. the learned judge has
held that r.w. 19s evidence is such that much reliance
cannumber be placed on him. r.w. 21 also admits about the
injury to sucha singh. in this state of evidence the
learned judge has number recorded any finding about the
distribution of the poster in village bakshiwala. we are of
opinion that the distribution has been satisfactorily
established. we do number therefore feel it necessary to deal
with the question of distribution in the other villages. the 2nd respondent is a hindu lady married to a sikh
gentleman. such marriages between hindus and sikhs have
been very companymon. indeed it appears that till recent times
the first son of most hindu families in punjab became a
sikh. still politics has driven a wedge between brothers.


bhagwati j.

this appeal with leave under section 66a of the indian income-tax act  xi of 1922  hereinafter referred to as the act arises out of the refusal of the income-tax authorities to register the appellant firm companystituted under a deed of partnership dated march 6 1946 under section 26a of the act. a reference was made by the income-tax appellate tribunal under section 66 1  of the act referring the following question of law to the high companyrt of assam
whether on the above facts and in the circumstances of the case the tribunal was right in refusing the claim for registration of the assessee firm under section 26a of the indian income-tax act. the high companyrt answered the question in the affirmative and hence the appeal. the deed of partnership dated march 5 1946 was entered into between nine partners two of whom were rameshwarlal ajitsaria son of kissendayal ajitsaria of number 43/44 companyton street calcutta representing the firm of ramswarup maliram  of the first part  and dwarkanath himatsingka son of mahadeolal himatsingka deceased representing the firm of ghasiram dwarkadas gauhati  of the seventh part . the shares of the partners in the profit and loss of the business were rs. 0-5-3 for the former and rs. 0-2-0 for the latter. the work of the partnership was to be supervised and looked after inter alia by rameshwarlal ajitsaria the partner of the first part and in the case of death of any of the of the partners his adult heirs if they so desired were entitled to be taken in as partners in place of the deceased and if they were number willing to join the business was to be carried on by the remaining partners and the deceased partners heirs were to be paid the amount due to them as on the date of the death of such

the appellant firm thereafter made an application under section 26a of the act for registration of the firm and this application also was signed amongst others by rameshwar ajitsaria for ramswarup maliram and d. n. himatsingka representing ghasiram dwarkadas. the original deed of partnership was enclosed along with the application. the income-tax officer by his order dated june 30 1951 held that in the larger partnership of the appellant firm the partners companystituting the companyponent firms should be taken as individual partners and their shares should therefore have been specified in the deed of partnership. he also pointed out that it was number knumbern what shares the individual partners of the companyponent firms had in the profits of the appellant firm and as the words of section 26a did number permit of any elasticity of companystruction rejected the application for registration. on appeal taken to the appellate assistant companymissioner the appellate assistant companymissioner by his order dated august 23 1951 relying upon the instructions of the central board of revenue which were in operation at the relevant period held that the registration should have been allowed by the income-tax officer since the two partner firms were also companystituted under the instruments of partnership specifying the individual shares of the partners but in so far as the application for registration had number been signed by all the partners personally the requirement of rule 2 of the income-tax rules made under section 59 of the act had number been companyplied with and the application was number in accordance with law. he therefore companyfirmed the order of the income-tax officer refusing registration. the income-tax appellate tribunal on further appeal companyfirmed the order of the appellate assistant companymissioner by its order dated february 26 1953. the tribunal stated that if it be held that a firm was capable of entering into partnership with anumberher firm then the individual shares of the partners of such firm must be specified under section 26a of the act and accordingly held that the department was right in refusing the registration of the firm. a reference was made by the tribunal at the instance of the appellant referring the question of law above-mentioned to the high companyrt for its decision under section 66 1  of the act. the high companyrt examined the larger question which was mooted before the tribunal viz. whether a firm is capable of entering into partnership with anumberher firm and after reviewing various decisions of the high companyrt and of the privy companyncil held that a firm as such was number capable of entering into a partnership with anumberher firm through a partner expressly authorised in that behalf. the high companyrt however after referring to the provisions companytained in section 26a of the act which are mandatory and to the provisions companytained in rule 2 of the income-tax rules observed that the application for registration did number also fulfil the essential requirements of the rules it was neither sighed by each of the partners of the companystituent firms number did it specify the individual shares of these partners either in the partnership or i

the appellant firm has companytended before us that under section 19 2  h  of the partnership act a partner has numberpower to bind his firm by entering into a partnership on its behalf and if he does so he only becomes a partner in his individual capacity and number the firm. it was therefore urged that rameshwar lal ajitsaria and d. n. himatsingka only in their individual capacity should be deemed to have been the partners in the appellant firm and the rest of the description in the names of the parties as also in the signatures appended by them to the deed as well as the application for registration should be deemed to be a surplusage and both the deed of partnership as well as the application for registration should be treated as satisfying the requirements of law. whatever be the theoretical aspect of the matter the appellant firm is in our opinion companycluded by two circumstances which appear on the record. when the matter came before the appellate assistant companymissioner on appeal the learned advocate for the appellant firm submitted a written argument in which he companytended that the appellant firm had as its partners two partnership firms viz. messrs. ramswarup mahaliram and messrs. ghasiram dwarkanath represented by their managing partners respectively and seven individuals and that the shares of the partners of messrs. ramswarup mahaliram and messrs. ghasiram dwarkanath had number been shown individually but companylectively. it was further companytended that in the application for registration under section 26a of the act the shares of the partners of messrs. ramswarup mahaliram and messrs. ghasiram dwarkanath had also been companylectively shown. even if this companytention which was urged on behalf of the appellant firm by its learned advocate be held number to be companyclusive against it there was the further fact apparent in the record that profits of the accounting year under companysideration were number credited in the books of account of the appellant firm to the two individuals rameshwar lal ajitsaria and d. n. himatsingka but were credited to the two firms whom they were representing in the partnership and there had been numberallocation of profits to these two individuals as two individual partners of the appellant firm. this circumstance was in any event against the appellant firm and the position companyld number be saved by any theoretical argument based on section 19 2  h  of the partnership act or otherwise.


ramaswami j.

these appeals are brought by special lease by the companymissioner of income-tax kerala from the judgment of the kerala high companyrt dated september 2 1964 in i. t. r. number 69 of 1963.

the assessee is a member of an association for speculation in companyonut oil. the assessee also speculates on its own. it also receives orders from its companystituents who are number members of the association to speculate on their behalf. the procedure is as follows the assessee receives a phone instruction or telegram to buy or sell a certain quantity. immediately it enters it into its books and informs that party of the sale or purchase having been effected. but as only members can deal with the association actually numbersuch purchase or sale is made through the association in the name of that particular person though numberdoubt there are other purchases or sales in forward transactions by the assessee itself. the dates for settlement as also the rates at which the transactions are entered into are settled. on the relevant date as per the agreements entered into between the parties settlement is made profit either being paid to that party or received from it having regard to the rates obtaining on that day and the rate at which the transaction was entered into. on each such transaction the assessee also receives a companymission from the party on whose behalf the transaction was done. the assessee claimed that such companymission received should be set off against its speculation losses on the ground that the companymission received for placing forward companytracts of this kind should be taken as part of its income from speculation. the income-tax officer rejected this claim. the appellant assistant companymissioner on appeal held that the companymissioner received was profit arising out of speculation and was incident to the speculation business carried on by the assessee and accordingly deleted the additions from the assessment for three years. the income-tax department appealed to the appellate tribunal which upheld the order of the appellate assistant companymissioner and dismissed the appeal. the appellate tribunal thereafter referred the fallowing question of law to the high companyrt under section 66  1  of the indian income-tax act 1922
whether on the facts and circumstances of the case the appellate tribunal was companyrect in holding that companymission received by the companypany amounting to rs. 41197  for 1958-59  rs. 39730  for 1959- 60  and rs. 22652  for 1960-61  should be assessed under the head speculation business and number under regular business in th companypanys assessments for the years ended march 31 1959 march 31 1960 and march 31 1961 ? by its judgment dated september 2 1964 the high companyrt answered the question in the affirmative and in favour of the assessee. section 24  1  of the income-tax act 1922 hereinafter called the act provides as follows

24.  1  where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6 he shall be entitled to have the amount of the loss set off against his income profits or gains under any other head in that year

provided that in companyputing the profits and gains chargeable under the head profits and gains of business profession or vocation any loss sustained in speculative transactions which are in the nature of a business shall number be taken into account except to the extent of the amount of profits and gains if any in any other business companysisting of speculative transaction

explanation 1. - where the speculative transactions carried on are of such a nature as to companystitute a business the business shall be deemed to be distinct and separate from any other business. explanation 2. - a speculative transaction means a transaction in which a companytract for purchases and sale of any companymodity including stocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the companymodity or scrips -

provided that for the purposes of this section -

 a  a companytract in respect of raw materials or merchandise entered into by a person in the companyrse of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his companytracts for factual delivery of goods manufactured by him or merchandise sold by him or

 b  a companytract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holding of stocks and shares through price fluctuations or

 c  a companytract entered into by a member of a forward market or a stock exchange in the companyrse of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary companyrse of his business as such member

shall number be deemed to be a speculative transaction. it was companytended on behalf of the appellant that the view taken by the high companyrt is erroneous in law and the receipt of companymission was a receipt from the business of the assessee as a broker and was number a receipt of income from the business of speculation and therefore the companymission should number be assessed under the head speculation business. in our opinion the argument put forward on behalf of the appellant is well-founded and must be accepted as companyrect. the reason is that there is numberelement of speculation whatever in the companymission income received by the assessee. the companymission was earned and received by the assessee independently of any fluctuation in the market and numberrisk was involved in the earning of the companymission and so it must be treated as profit from the other business of the assessee and number as profit from speculation business. to put it differently the assessee carries on two kinds of business one in speculation and the other as a broker. on behalf of the respondent it was pointed out that the companymission earned by the assessee was incidental to his business in speculation and the companymission receipts arise out of the speculative transactions carried on by an the assessee and so the companymission receipts should be treated as profits arising out of speculation and number as profits from separate business. we are unable to accept this argument as right. in our opinion the receipt of companymissioner business is entirely of a different character from the profits and losses of the speculative transactions. the assessee does speculation business on his own account with the members of the association. the assessee also enterest into forward companytracts on behalf of his clients. this may result in a profit in which case he recovers the companymission from the clients and pays the profits to them. if it is a loss the clients are bound to bear it but the assessee still is entitled to charge the companymissioner from his clients. the point to be numbered it that the assessee carries on these speculative transaction on behalf of his client and number on his behalf.