Supreme Court Order on Sahara India Real Estate Contempt Petition: Arrest of Subrata Roy

Supreme Court of India has decided to send 3 Directors of Sahara India Real Estate which includes Sahara Chief Mr. Subrata Roy Founder and chairman of the Sahara India Pariwar to Judicial Custody in Delhi till next hearing, but has granted the Concession to women director Mr. Vandana Bhargava from detention and asked her to remain present on next hearing.

Grounds of Decision

Sufficient opportunities have been given to the contemnors to fully comply with those orders and purge the contempt committed by them but, rather than availing of the same, they have adopted various dilatory tactics to delay the implementation of the orders of this Court.  Non-compliance of the orders passed by this Court shakes the very foundation of our judicial system and undermines the rule of law, which we are bound to honour and protect.  This is essential to maintain faith and confidence of the people of this country in the judiciary. We have found that the contemnors have maintained an unreasonable stand throughout the proceedings before SEBI, SAT, High Court and even before this Court.  Reports/analysis filed by SEBI on 18.02.2014 make detailed reference to the submissions, documents, etc. furnished by the contemnors, which indicates that they are filing and making unacceptable statements and affidavits all through and even in the contempt proceedings.  Documents and affidavits produced by the contemnors themselves would apparently falsify their refund theory and cast serious doubts about the existence of the so-called investors.  All the fact finding authorities have opined that majority of investors do not exist. Preservation of market integrity is extremely important for economic growth of this country and for national interest. Maintaining investors’ confidence requires market integrity and control of market abuse.  Market abuse is a serious financial crime which undermines the very financial structure of this country and will make imbalance in wealth between haves and have nots.

Opportunity for Sahara for settlement Proposal

This concession is being extended towards the fourth respondent because she is a woman Director, and also, to enable the contemnors to be in a position to propose an acceptable solution for execution of our orders, by coordinating with the detenues.  Mrs. Vandana Bhargava, who herself is one of the Directors, is permitted to be in touch with the rest of the contemnors and submit an acceptable proposal arrived at during their detention, so that the Court can pass appropriate orders.

Next Date of Hearing for Sahara Case for Repayment Plan

List on March 11, 2014 at 2.00 p.m.  All the contemnors be produced in Court on that date.  Mrs. Vandana Bhargava, the fourth respondent, to appear on her own.  However, liberty is granted for mentioning the matters for preponement of the date, if a concrete and acceptable proposal can be offered in the meantime.

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ALLAHABAD BANK HOME LOAN INTEREST RATES

ALLAHABAD BANK HOME LOAN INTEREST RATES

Housing Loan

Eligibility :

Salaried persons, Professionals & Self-Employed and Businessmen having regular income to liquidate the loans

Age

Minimum : 21 years
Maximum : Age of retirement for salaried class & 70 years for others.

Purpose :

  • For construction of residential house on land already owned.
  • For purchase of New / Old / Unfinished house/flat and renovation /extension /repair of the same.
  • For purchase of plot and construction of house thereon
  • For renovation / extension / repair of residential house already owned.

Loan amount :

For salaried persons : Up to 60 times of monthly gross salary (Maximum: Rs. 500 Lac)

For others : Up to 5 times of gross annual Income (Maximum: Rs. 500 Lac)

Nature of Loan : Term Loan 

Margin : 

For loans up to Rs. 20.00 Lacs – 15% of Project cost.

For loans above Rs. 20.00 Lacs – 20% of Project cost.

Project cost consists of :

  • Purchase price of land/house/flat.
  • Cost of construction/renovation/extension (if applicable)
  • Accrued interest amount of moratorium period, if proposed to be capitalized
  • Premium of Loan Insurance.
S. N.ParticularsRate
1.Bank’s Base Rate (BR) w.e.f. 18.02.201310.20%
2.Bank’s Benchmark Prime Lending Rate (BPLR) w.e.f. 18.02.201314.45%

 

Rate of Interest under Retail Credit Products

Sl. No.SchemeRate of Interest
1.Housing Loan Schemes
1 a) AllBank Aashiana (Home Loan up to  Rs.  500 Lac)

Up to  Rs.  30 Lac

Above  Rs.  30 Lac and up to  Rs. 75 Lac

Above  Rs.  75 Lac and up to  Rs. 300 Lac

Above  Rs.  300 Lac and up to  Rs. 500 Lac

BR

BR + 0.25%

BR+0.50%

BR+0.75%


1 b) Housing Loan to NRI/PIO

Up to  Rs.  30 LacAbove  Rs.  30 Lac and up to  Rs. 75 LacAbove  Rs.  75 Lac and up to  Rs. 300 LacAbove  Rs.  300 Lac and up to  Rs. 500 Lac
BRBR + 0.25%BR+0.50%BR+0.75%

1 c) Housing Loan to High Net worth Individuals (HNIs)

Above  Rs.  500 Lac and up to  Rs.  2500 Lac
BR + 1.00%

1 d) House Furnishing Loan

Up to  Rs.  4 Lac
BR + 3.00%

 

Security :

Primary : Equitable / Registered Mortgage of the property
Or
Pari-Passu / Second charge over the property if the borrower (salaried person) has already availed loan from his/her organization.

Rate of Interest :

Up to Rs. 30 LacAbove Rs. 30 Lac and up to Rs. 75 LacAbove Rs. 75 Lac and up to Rs. 300 LacAbove Rs. 300 Lac and up to Rs. 500 Lac

BR

BR+0.25%

BR+0.50%

BR+0.75%

Repayment Period :

  • Salaried Persons : Length of remaining service, Maximum 25 years
  • Others : Remaining period in attaining the age of 70, Maximum 25 years
  • Repayment period will be exclusive of moratorium period.

Moratorium Period :

  • Maximum 18 months : In case of loan for construction of house where land is already owned or purchased.
  • Maximum 24 months : In case of loan for purchase of Flat under construction.

Special Features :

  • Repayment option for salaried persons – To extended repayment period up to 5 years after retirement
  • Bullet Payment – To deposit some Lump Sum amount from future cash flows and to amend repayment schedule accordingly
  • Progressive Monthly Installments (PMI) Options – Under this, the initial monthly installments for the first 5 years shall be kept lower i.e. @ 80% of normal EMI, for financial comfort which will be increased gradually/.
  • Take over of housing loans from other finance companies / financial institutions / banks.
  • For acquiring 2nd residential unit.
  • Supplementary Finance for carrying out alterations/ additions/repairs to the house/flat or for finishing
  • Supplementary / Additional finance to individuals who have availed housing loans from their employer on the basis of pari-passu charge / Second Charge
  • Insurance cover to the extent of loan liability for entire repayment.
  • 3rd Party Guarantee not required

 

Depreciation on Goodwill and Goodwill is treated as asset under section 32 of the Income Tax Act, 1961

Can assessee claim the depreciation on Goodwill or Can Goodwill is treated as asset under section 32 of the Income Tax Act, 1961.Supreme court in case of Commissioner of Income Tax, Kolkata Vs. Smifs Securities Ltd. has decided that goodwill arising post the amalgamation of two companies will be treated as Intangible asset under section 32 of Income Tax Act, 196. since one of the basic condition for finding the value of asset is “What’s the consideration paid for that asset”, So in given case assessee has taken assets & liability of other entity and issued the shares and in this whole process goodwill has arisen in the books of the company. Further explained by assessee that excess consideration paid by the assessee over the value of net assets acquired should be considered as goodwill arising on amalgamation. The assessee Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the market worth of the assessee Company stood increased. It was claimed that the extra consideration was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele

  As per Explanation 3 to Section 32(1) of the Act:

  • “Explanation 3.– For the purposes of this sub-section, the expressions `assets’ and `block of assets’ shall mean– [a] tangible assets, being buildings, machinery, plant or furniture;
  • [b] intangible assets, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature.”

Explanation 3 states that the expression `asset’ shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words ‘any other business or commercial rights of similar nature‘ in clause (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature’. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b).

In the circumstances, we are of the view that `Goodwill’ is an asset under Explanation 3(b) to Section 32(1) of the Act.

 

Petition(s) for Special Leave to Appeal (Civil) No(s).35600/2009
(From the judgement and order dated 19/02/2008 in ITA No.642/2007
of The HIGH COURT OF CALCUTTA)
C.I.T., KOLKATA                                   Petitioner(s)
                 VERSUS
SMIFS SECURITIES LTD.                             Respondent(s)
(With prayer for interim relief and office report)
[For Final Disposal]
Date: 22/08/2012  This Petition was called on for hearing today.
CORAM :
        HON'BLE THE CHIEF JUSTICE
        HON'BLE MR. JUSTICE MADAN B. LOKUR
For Petitioner(s) Mr. A.S. Chandhiok,ASG.
                          Mr. R.P. Bhatt,Sr.Adv.
                          Mr. Gurpreet S. Parwanda,Adv.
                          Mr. Rahul Kaushik,Adv.
                          Ms. Sonia Mathur,Adv.
                          Ms. Anil Katiyar,Adv.
                          for Mr. B.V. Balaram Das,Adv.
For Respondent(s) Mr. Partha Sil,Adv. (N/P)
           UPON hearing counsel the Court made the following
                               O R D E R
                  None appears for the respondent, though served.
                  Heard learned counsel for the Department.
                  Leave granted.
                  The civil appeal filed by the Department stands dismissed
        with no order as to costs.
             [ T.I. Rajput ]                    [ Indu Satija ]
             A.R.-cum-P.S.                      Court Master
                  [Signed order is placed on the file]
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO.5961 OF 2012
                (Arising out of S.L.P. (C) No.35600 of 2009)
   Commissioner of Income Tax, Kolkata      ...Appellant(s)
                                   Versus
   Smifs Securities Ltd.          ...Respondent(s)
                                O  R  D  E  R
 None appears for the respondent, though served.
 Heard learned counsel for the Department.
Leave granted.
This civil appeal concerns the Assessment Year  2003-2004.
Three questions arise for determination by this Court.  They are as follows:
   Question No.[a]:
     "Whether Stock Exchange Membership Cards are assets eligible for depreciation under Section 32 of the Income Tax Act,1961? Whether, on the  facts and in  the  circumstances  of  the  case, deletion of Rs.53,84,766/- has been made correctly?"
   Answer:
         Learned Additional Solicitor General fairly concedes that the said question is covered by the decision of this Court in the case of  Techno shares and Stocks Limited vs. Commissioner of Income  Tax,reported in [2010] 327 I.T.R. 323, in favour of the assessee.
   Question No.[b]:
         "Whether goodwill is an asset within the meaning of Section 32  of the Income Tax Act, 1961, and whether depreciation  on  `goodwill'is allowable under the said Section?"
   Answer:
         In the  present  case,  the  assessee  had  claimed  deduction of Rs.54,85,430/- as depreciation on goodwill.  In the course  of hearing,the explanation regarding origin of such goodwill was given as under:
  "In accordance with Scheme of Amalgamation of YSN Shares & Securities (P) Ltd with Smifs Securities Ltd (duly  sanctioned  by Hon'ble High Courts of Bombay  and  Calcutta)  with  retrospective efect from 1st April, 1998, assets and liabilities of YSN Shares & Securities (P) Ltd were transferred to and vest  in  the  company.
         In the process goodwill has arisen in the books of the company."
         It was further explained that  excess  consideration  paid  by  the assessee over the value  of  net  assets  acquired  of  YSN  Shares  and Securities Private Limited [Amalgamating Company] should  be  considered as goodwill arising on amalgamation.  It  was  claimed  that  the  extra consideration was paid towards the  reputation  which  the  Amalgamating Company was enjoying in order to retain its existing clientele.
         The Assessing Officer held that goodwill was not an asset  falling under Explanation 3 to Section 32(1) of the Income Tax Act, 1961 [`Act',for short].
         We quote hereinbelow Explanation 3 to Section 32(1) of the Act: "Explanation 3.--  For  the  purposes  of  this  sub-section,  the expressions `assets' and `block of assets' shall mean--
[a]  tangible  assets,  being  buildings,  machinery,   plant   or furniture;
         [b]  intangible  assets,  being  know-how,  patents,   copyrights, trademarks,  licences,  franchises  or  any  other   business   or commercial rights of similar nature."
Explanation 3 states that the expression  `asset'  shall  mean  an
intangible asset, being  know-how,  patents,  copyrights,  trademarks, licences, franchises or any  other  business  or  commercialrights of similar nature.  A reading the words `any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates  that goodwill  would  fall  under  the  expression  `any  other  business  or commercial right of a similar nature'.The principle of ejusdem generis would strictly apply while interpreting the said expression which  finds place in Explanation 3(b).
In the circumstances, we are of the  view that `Goodwill'  is  an asset under Explanation 3(b) to Section 32(1) of the Act.
One more aspect needs to be highlighted. In the present case,  the Assessing Officer, as a matter of fact, came to the conclusion  that  no amount was actually paid on account of  goodwill.   This  is  a  factual finding.  The Commissioner of Income Tax (Appeals) [`CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High  Court  ordering  amalgamation  of  the above two Companies; that the assets and liabilities of M/s. YSN  Shares and Securities Private Limited were transferred to the  assessee  for  a consideration; that the difference between the cost of an asset and  the amount paid constituted goodwill and that the  assessee-Company  in  the process of amalgamation had acquired a capital  right  in  the  form  of goodwill  because of  which the  market  worth of the
   assessee-Company stood increased.  This finding has also been upheld  by Income Tax Appellate Tribunal [`ITAT', for short]. We see no  reason  to interfere with the factual finding.
One more aspect which needs to be mentioned is  that,  against  the decision of ITAT, the Revenue had preferred an appeal to the High  Courtin which it had raised only the question as to whether  goodwill  is  an asset under Section 32 of the Act. In the circumstances, before the High Court, the Revenue did not  file  an  appealon  the  finding  of  fact referred to hereinabove.
For the afore-stated reasons, we answer Question  No.[b]  also  infavour of the assessee.
   Question No.[c]:
         The  last  question  raised  in  this  civil  appeal  is  regarding cancellation of disallowance of an amount of  Rs.83,02,976/-  as  a  bad debt.
   Answer:
         It has been stated on behalf of the Revenue that,  since  the  Tax Audit Report indicated the amount  to  have  been  incurred  on  capital account, the assessee was not entitled to deduction on  account  of  bad debt  Both the CIT(A) as well as the ITAT concluded  that  the  assessee has satisfied the provisions of Section 36(1)(vii)  of  the  Act. They have held that bad debt claimed by the  assessee  was  incurred  in  the normal course of business and, therefore, the assessee was  entitled  to deduction under Section 36(1)(vii) of the Act.  It is  well-settled  now by a catena of decisions that the manner in which the assessee maintains its accounts is not conclusive for deciding the nature of expenditure. In the present case, the concurrent finding of  facts  recorde by the  authorities below indicate that the assessee was entitled to claim deduction in the course of business under  Section 36(1)(vii) of the Act.
For the afore-stated reasons, we answer all the three questions infavour of the assessee and against the Revenue.The civil appeal filed by the Department stands dismissed with  no order as to costs
                                               .........................CJI.
                                       [S.H. KAPADIA]
                                               ...........................J.
                                       [MADAN B. LOKUR]
   New Delhi,
   August 22, 2012.
   -tir-

Any property transferred to East Bengal by the Indian Independence (Rights, Property and Liabilities)

Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and CHANDRASEKHARA AIYAR JJ. (FAZL ALI J. concurrinG)–The suit was not one with respect to any property transferred to East Bengal by the Indian Independence (Rights, Property and Liabilities) Order, 1947, nor was it a suit in respect of any “rights” transferred by the said Order, inasmuch as the Province of East Bengal obtained the right to levy income tax not by means of any transfer under the said Order, but by virtue of sovereign rights which were preserved by s. 18 (3) of the Indian Independence Act, 1947, and Art. 12 (2) of the said Order had no application to the case. Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA AND CHANDRASEKHARA AIYAR J.J. (FAZL ALI J, dissenting.) (i)
Since the object of the Indian Independence (Rights, Property and Liabilities) Order, 1947, was to provide for the initial distribution of rights, properties and liabili-
ties as between the two Dominions and their Provinces, a wide and liberal construction, as far as the language used would admit, should be placed upon the Order, so as to leave no gap or lacuna in relation to the matters sought to be provided for. The words “liability in respect of an action- able wrong” should not therefore be understood in the restricted sense of liability for damages for completed acts, but so as to cover the liability to be restrained by injunction from completing what on the allegations in the plaint are illegal or unauthorised acts which have been commenced.As the Province of Bengal was, on the: allegations in the plaint, liable to be restrained from proceeding with an illegal assessment, that liability was, accordingly, a liability in respect of “an actionable wrong other than breach of contract” with in the meaning of Art. 10 (2) (a)
of the above said Order; and, as the cause of action arose wholly in Dacca within the Province of East Bengal, that liability passed to the province of East Bengal under Art.
10 (2) (a), the latter must be deemed to be substituted as a party to the suit and the suit must continue in the court of the Subordinate Judge of Alipore, under Art.4 of the Indian
Independence (Legal Proceedings) Order, 1947. (ii) Assuming that the cause of action did not wholly arise in Decca, Art. 10 (9.) (c) would apply and the Province of East Bengal would still be liable, though jointly with the Province of West Bengal. (iii) As the suit was not one “to set aside or modify any assessment made under the Act”, s. 65 of the Bengal Agricultural Income-tax Act, 1944, had no application and the suit was therefore one in respect of an “actionable” wrong within the moaning of Art. 10 (2) (a). Per FAZL ALI J.–The words “liability in respect of an actionable wrong other than breach of contract” in Art. 10 of the Indian Independence (Rights, Property and Liabilities) order 1947, refer to liability capable of being ascertained in terms of money such as liability for damages for tort and not liability in any abstract or academic sense.

PETITIONER: THE STATE OF TRIPURA Vs. RESPONDENT: THE PROVINCE OF EAST BENGALUNION OF INDIA–INTERVENER, DATE OF JUDGMENT: 04/12/1950

BENCH: SASTRI, M. PATANJALI, SASTRI, M. PATANJALI KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID MUKHERJEA, B.K. AIYAR, N. CHANDRASEKHARA

ACT:

Indian Independence Act, 1947, s. 9–Indian Independence (Legal Proceedings) Order, 1947, Art. 4–Indian Independence (Rights, Property and Liabilities) Order, 1947, Arts.
10 (2), 12 (2)-Notice on Ruler of State for return of income under Bengal Agricultural Income tax Act, 1944–Suit for declaration of invalidity of Act and injunction restraining
Income-tax Officer from proceeding with assessment–Partition of India pending suit–Property falling within Province of East Bengal–Jurisdiction of court in West Bengal to
proceed with suit against Province of East Bengal–Interpretation of Orders–“Liability”, “actionable wrong other than breach of contract”, meanings of–Torts and actionable
wrongs–Bengal Agricultural Income-tax Act, 1944, s. 65- Suit in civil court for declaration and injunction restraining assessment proceedings-Maintainability.

HEADNOTE:

The Income-tax officer, Dacca, acting under the Bengal Agricultural Income-tax Act, 1944, sent by registered post a notice to the Manager of an Estate belonging to the Tripu-
ra State but situated in Bengal, calling upon the latter to furnish a return of the agricultural income derived from the Estate during the previous year. The notice was received by the Manager in the Tripura State. The State, by its then Ruler, instituted a suit in June, 1946, against the Province of Bengal and the Income-tax Officer, in the court of the Subordinate Judge of Dacca for a declaration that the said Act in so far as it purported to impose a liability to pay agricultural income-tax on the plaintiff was ultra vires and void, and for a perpetual injunction to restrain the defendants from taking any steps to assess the plaintiff. The suit was subsequently transferred to the Court of the Subordinate Judge of Alipore. The partition of India under the Indian Independence Act took place on the 158h August 1947, and the Province of East Bengal in which the Estate was situated, was substituted as a defendant in the place of the Province of Bengal on an application made by it, and in its written statement it contended that the court of Alipore which was situated in West Bengal had no jurisdiction to proceed with the suit. The High Court of Calcutta, reversing the order of the Subordinate Judge of Alipore held that the provisions of the Indian Independence (Legal Proceedings) Order, 1947, and the Indian Independence (Rights, Property and Liabilities)Order, 1947, did not apply to the case and, as the matter was accordingly governed by the rules of international law, the court of Alipore had no jurisdiction to proceed with the suit:
Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA and CHANDRASEKHARA AIYAR JJ. (FAZL ALI J. concurrinG)–The suit was not one with respect to any property transferred to East Bengal by the Indian Independence (Rights, Property and
Liabilities) Order, 1947, nor was it a suit in respect of any “rights” transferred by the said Order, inasmuch as the Province of East Bengal obtained the right to levy income-
tax not by means of any transfer under the said Order, but by virtue of sovereign rights which were preserved by s. 18 (3) of the Indian Independence Act, 1947, and Art. 12 (2)
of the said Order had no application to the case. Held per KANIA C.J., PATANJALI SASTRI, MUKHERJEA AND CHANDRASEKHARA AIYAR J.J. (FAZL ALI J, dissenting.) (i)
Since the object of the Indian Independence (Rights, Property and Liabilities) Order, 1947, was to provide for the initial distribution of rights, properties and liabili-
ties as between the two Dominions and their Provinces, a wide and liberal construction, as far as the language used would admit, should be placed upon the Order, so as to leave no gap or lacuna in relation to the matters sought to be provided for. The words “liability in respect of an action- able wrong” should not therefore be understood in the restricted sense of liability for damages for completed acts, but so as to cover the liability to be restrained by injunction from completing what on the allegations in the plaint are illegal or unauthorised acts which have been commenced.As the Province of Bengal was, on the: allegations in the plaint, liable to be restrained from proceeding with an illegal assessment, that liability was, accordingly, a liability in respect of “an actionable wrong other than breach of contract” with in the meaning of Art. 10 (2) (a)
of the above said Order; and, as the cause of action arose wholly in Dacca within the Province of East Bengal, that liability passed to the province of East Bengal under Art.
10 (2) (a), the latter must be deemed to be substituted as a party to the suit and the suit must continue in the court of the Subordinate Judge of Alipore, under Art.4 of the Indian
Independence (Legal Proceedings) Order, 1947. (ii) Assuming that the cause of action did not wholly arise in Decca, Art. 10 (9.) (c) would apply and the Province of East Bengal would still be liable, though jointly with the Province of West Bengal. (iii) As the suit was not one “to set aside or modify any assessment made under the Act”, s. 65 of the Bengal Agricultural Income-tax Act, 1944, had no application and the suit was therefore one in respect of an “actionable” wrong within the moaning of Art. 10 (2) (a). Per FAZL ALI J.–The words “liability in respect of an actionable wrong other than breach of contract” in Art. 10 of the Indian Independence (Rights, Property and Liabilities) order 1947, refer to liability capable of being ascertained in terms of money such as liability for damages for tort and not liability in any abstract or academic sense.
Even if a meaning, as wide’ as they can bear in a legal context, is given to the words “actionable wrong” and “liability” two elements are necessary to constitute an
actionable wrong, namely, (i) an act or omission amounting to an infringement of a legal right of a person or breach of duty towards him, and (ii) damage or harm resulting there-
from.The mere issuing of a notice under s. 4 of the Bengal Agricultural Income-tax Act, 1944, by the Income-tax Officer is not an actionable wrong because no right known to law is infringed thereby and no action for damages can be maintained in respect of such an act, even assuming that the Income-tax Officer had exceeded his powers or acted under an invalid provision of law. No “liability for an actionable wrong” was thus involved in the suit and no liability in respect of such a wrong could therefore be said to have been transferred to the Province of East Bengal within the meaning of Art. 10 (2.) of the said Order so as to entitle the plaintiff to continue the suit against the Province of
East Bengal under Art. 10 (2).
For the purpose of understanding the full scope of s. 65 of the Bengal Agricultural Income-tax Act, 1944 it is necessary also to read the latter part which provides that
no suit or other proceeding shall lie against any officer of the Crown for anything in good faith done or intended to be done under the Act.” The latter part of the section clearly
excludes the jurisdiction of the courts to prevent the Income-tax Officer from proceeding with an assessment which has been started and the section must on a fair construction
be held to bar all suits in connection with such assessment whether against the State or an Income-tax Officer of the State. If, therefore, no suit or action lies, there cab be
no liability for an actionable wrong.
[The nature of actionable wrongs and torts discussed.]
Judgment of the Calcutta High Court reversed.

JUDGMENT: APPELLATE JURISDICTION: Case No. IV of 1949.

Appeal from a judgment of the High Court of Judicature at Calcutta (Harries C.J. and Chakravarthi J. (dated 30th November, 1948, in Civil Revision Case No. 712 of 1948.
N.C. Sen Gupta (Ajit Kumar Dutta, with him) for the Appellant. Faiyaz Ali, Advocate-General of East Bengal (B. Sen and Noor-ud-din, with him) for the Respondent.
M. C, Setalvad, Attorney-General for India, (S. M. Sikri and V.N. Sethi, with him) for the Intervener.
1950. Dec. 4. The judgment of Kania C.J., Patanjali Sastri j. and Chandrasekhara Aiyar J. was delivered by Patanjali Sastri J. Fazl Ali and Mukherjea JJ. delivered separate judgments.
PATANJALI SASTRI J.–This is an appeal from a judgment of the High Court of Judicature in West Bengal reversing a finding of the Second Subordinate Judge of 24 Parganas at Alipore that he had jurisdiction to proceed with a suit after substituting the Province of East Bengal (in Pakistan)in the place of the old Province of Bengal against
which the suit had originally been brought. The facts leading to the institution of the suit are not in dispute. The Bengal Agricultural Income-tax Act was passed by the Provincial Legislature of Bengal in 1944. It applied to the whole of Bengal and purported to bring under charge the agricultural income of, inter alia, “every Ruler
of an Indian State.” Acting under the provisions of that Act, which came into force on 1st April, 1944, the Income tax Officer, Dacca Range, sent by registered post, a notice
to the Manager of the Zemindari Estate called Chakla Roshanabad belonging to the Tripura State but situated in Bengal outside the territories of that State, calling upon
him to furnish a return of the total income derived in the previous year from lands in the Estate used for agricultural purposes. The notice was received by the Manager at Agar-
talla in Tripura State. Thereupon, the State, by its then Ruler, Maharaja Sir Bir Bikram Bahadur, instituted the suit in question on 12th June, 1945, against the Province of
Bengal and the Agricultural Income-tax Officer, Dacca Range, in the Court of the First Subordinate Judge, Dacca, contesting the validity of the notice and the proposed assessment on the grounds that the “Provincial Legislature of Bengal
had no authority to impose tax on any income of an Indian State or its Ruler” and that, in any case, “the Income-tax Officer, Dacca Range, had no authority or jurisdiction to
issue the said notice to the Manager of the Estate outside British India.” The cause of action of the suit was alleged to have arisen in the town of Dacca within the jurisdiction
of the Court on 28th February, 1945, when the notice was issued. The reliefs sought were a declaration that the Bengal Agricultural Income-tax Act: 1944, in so far as it
purported to impose a liability to pay agricultural income tax on the plaintiff as a Ruler of an Indian State was ultra vires and void and that, in any case, the notice served by
the Agricultural Income-tax Officer, Dacca Range, was void and no assessment could be made on the basis of such notice, and a perpetual injunction to restrain the defendants from taking any steps to assess the plaintiff to agricultural income-tax. Before the defendants filed their written statements the suit was transferred by the High Court to the
Court of the District Judge, 24 Parganas, and was again transferred from that Court to the Court of the Subordinate Judge at Alipore. The ruler who brought the suit having
died, the plaint was amended by the substitution in his place of his son and heir in June 1947, and the suit was pending in that Court when the partition of India took effect on the 15th August, 1947 On 9th December, 1947, the Province of East Bengal filed
a petition stating that the Province of Bengal, the original defendant No. 1 in the suit, had ceased to exist with effect from 15th August, 1947, and in lieu thereof two new Provinces, namely, the Province of East Bengal and the Province of West Bengal had come into
existence and that, inasmuch as the Province of West Bengal was taking no interest in the suit, it was necessary in the interests of East Bengal that the suit should be contested
and that a written statement should be put in on its behalf for such contest. It was accordingly prayed that the’ delay should be condoned and the written statement which was filed with that petition should be accepted. In the written statement it was pleaded that inasmuch as the Province of East Bengal was a Province of the; Dominion of Pakistan and that defendant No. 2 was a Revenue officer of that Province,
the Court had no jurisdiction to hear the suit or make an order of injunction against the defendants. It was stated that the Province of East Bengal appeared only to contest
the jurisdiction of the Court. By another written statement filed on the same day defendant No. 2 raised also other pleas in defence but his name was struck off the record at the plaintiff’s instance as not being a necessary party to the suit. On the 10th December, 1947, the Province of East Bengal was substituted as the defendant in the place of the Province of Bengal which had ceased to exist, and the written statement filed on behalf of the former was accepted. Thereupon the Subordinate Judge framed a preliminary issue on the question of jurisdiction and, as stated already, found it for the plaintiff relying on s. 9 of the Indian Independence Act and article 4 of the Indian Independence (Legal Proceedings) Order, 1947. It may be mentioned in passing that the assessment of the plaintiff was proceeded with by the Agricultural Income-tax Officer, Comilla Range (East Bengal), who, by his order dated the 22nd December, 1947, imposed on the plaintiff a tax of Rs. 1,79,848-12-0 for 1944-45 and Rs. 1,34,326-7-0 for 1945-46, but the recovery of the amounts has been deferred under orders of the Court pending the decision on the preliminary issue.

As pointed out by the Federal Court in Midnapore Zemindary Co. Ltd. v. The Province of Bengal and ,Others (1), the orders promulgated on-the 14th August, 1947, by the Governor-General of India before the partition in exercise of the powers conferred under s. 9 of the Indian Independence Act, 1947, and containing provisions specially designed
to remove the difficulties arising in connection with the transition to the new situation created by the partition are binding on both the Dominion of India and the Dominion of
Pakistan. Among such Orders those relevant to the present controversy are the Indian Independence (Legal Proceedings) Order, 1947, and the Indian Independence (Rights, Property and Liabilities)Order, 1947. By article 4 of the former Order (1) All proceedings pending immediately before the appointed day in any of the special tribunals specified in col. 1 of the Schedule to this Order shall be continued in that tribunal as if the said Act had not been passed, and that tribunal shall continue to have for the purposes of the
said proceedings all the jurisdiction and powers which it had immediately before the appointed day; * * * *
(3) Effect shall be given within the territories of either of the two Dominions to any order or sentence of any such Special Tribunal as aforesaid and of any High Court in
appeal or revision therefrom as if the order or sentence had been passed by a court of competent jurisdiction in that Dominion; * * * *
and by article 12 (2) of the latter Order Where any Province from which property, rights or liabilities are transferred by this Order is, immediately before the transfer a party to legal proceedings with respect to that property or those rights or liabilities the Province which succeeds to the property, rights or liabilities in accordance with the provisions of this Order shall be deemed to be substituted for the other Province as a party to those proceedings and the proceedings may continue accordingly. (1) [1949] F.C.R. 309
On the effect of these provisions the learned Judges of the High Court observed: “If this provision [i.e., article 12 (2)] applies to the present case, there can be no doubt

that the Province of East Bengal was substituted in the suit for the Province of Bengal by operation of law, and by reason of the Legal Proceedings Order the suit shall
continue in the Court of the Second Subordinate Judge, 24 Parganas, as a suit against the substituted defendant.” With that statement of the position we entirely agree. The
learned Judges, however, proceeded to examine, laying stress on the words “by this Order” in article 12 (2), whether any property, rights or liabilities could be said to have been transferred by the Indian Independence (Rights, Property and Liabilities) Order, 1947, from the Province of Bengal to the Province of East Bengal, and they took the view that neither any property, nor rights, nor liabilities were so transferred under that Order and that, therefore, the continuation of the proceedings against the Province of East
Bengal, which was now part of an Independent Sovereign State, was governed by the principles of international law and comity of nations, and that, according to those principles, East Bengal, being a Province of a sovereign state, could not be sued against its will in the municipal courts of India, with the result that the suit pending in the Court
at Alipore must abate. They also negatived a further contention raised before them, apparently for the first time, to the effect that by reason of the petition filed on behalf
of the Province of East Bengal for acceptance of its written statement condoning the delay involved and also by reason of sundry other proceedings for interim relief sought by the plaintiff which were actively resisted by the Province of East Bengal, that Province must be taken to have submitted to the jurisdiction of the Court. On behalf of the appellant, Mr. Sen Gupta challenged the correctness of the decision on both points.
Before dealing with these contentions, it will be convenient to dispose of two preliminary points raised by Mr. Faiyaz Ali, Advocate-General of East Bengal.
In the first place, he submitted that the State of Tripura having since been merged in the Dominion of India and a Chief Commissioner having been appointed to administer its
territories, the appeal could no longer be prosecuted by the present Maharaja through his mother as his next friend. It was, however, represented to us on his behalf that under the agreement of merger the Estate of Chakla Roshanabad was left to the Maharaja as his personal property and it no longer formed part of the territories of the Tripura State.
The Attorney-General, appearing on behalf of the Dominion of India, the intervener, confirmed that position. There is thus no substance in the objection as any formal defect
in the proceeding could be set right by suitably amending the cause title.
Mr. Faiyaz Ali next drew our attention to the Pakistan (Indian Independence Legal Proceedings) Order, 1948, promulgated by the Governor-General of Pakistan on 13th November, 1948, with retrospective effect from the 15th August, 1947,and pointed out that in view of its provisions any decree that might eventually be passed by the Court at Alipore would receive no effect in Pakistan and that, therefore, it was unnecessary for this Court to decide the question of the jurisdiction of the Alipore Court to proceed with the suit.
We are unable to take that view. The effect of the Order referred to above on any decree that may eventually be  passed in the pending suit may have to be taken note of by
the Court trying that suit after hearing arguments on the validity of that Order which is challenged but we are at present concerned only with the question of the jurisdiction of that Court to try the suit and we cannot at this stage refuse to give our ruling on that question merely because any decree that might be passed in favour of the plaintiff might prove ineffectual. Turning now to the main question, it is clear that article 12 (2) of the Rights, Property and Liabilities Order applies only to property rights or liabilities which were transferred by the Order from a Province which was a party to legal proceedings “with respect to” that property or those rights or liabilities. As the suit in question cannot be said to have been instituted with respect to the property transferred, namely,
Chakla Roshanabad, the appellant cannot rely upon the transfer of that property from the Province of Bengal to the Province of East Bengal as part of the territories of
Pakistan under the scheme of partition. Nor was there any transfer of “rights”such as was contemplated under that article, for the only right with respect to which the Prov-
ince of Bengal could be said to have been a party to the pending proceeding on the facts of this case was the right to tax the agricultural income of the plaintiff under the
provisions of the Bengal Agricultural Income-tax Act, 1944, and that right was not derived by the Province of East Bengal by transfer under the Rights, Property and Liabili-
ties Order. As rightly pointed out by the High Court, the right of taxation under the Bengal Act of 1944 passed to the Province of East Bengal as part of the Sovereign Dominion of
Pakistan by virtue of the provisions of s. 18(3) of the Indian Independence Act, 1947, which provided that “the law of British India and of the several parts thereof immediate-
ly before the appointed day shall, so far as applicable and with the necessary adaptations, continue as the law of each of the new Dominions and the several parts thereof, until other provision is made by the laws of the legislature of the Dominion in question or by any other legislature or other authority having power in that behalf.”
The question next arises whether there was a transfer of any “liability” by the Order as contemplated in article 12(2). Mr. Sen Gupta relied in this connection on article 10
(2) (a) which provides that “where immediately before the appointed day the Province of Bengal is subject to any such liability (i.e., “any liability in respect of an actionable
wrong other than breach of contract”) referred to in sub 
section (1)that liability shall, where the cause of action arose wholly within the territories which, as from that day, are the territories of the Province of East Bengal, be a liability of that Province.” It was contended that the Province of Bengal was, according to the plaintiff’s case, liable to be restrained from proceeding with the illegal and unauthorised assessment on the basis of the notice issued under the Bengal Act of 1944, and that liability, in respect of which the cause of action arose wholly in Dacca (where the assessment proceeding had been initiated) within the territories of the Province of East Bengal, became a liability of that Province. The High Court rejected this contention on the ground “that article 10(2) is concerned with the liability for an actionable wrong other than breach of contract and it is impossible to say that by serving a notice on the plaintiff under the Bengal Agricultural Income-tax Act through one of its officers the Province of Bengal had committed an actionable wrong’. Assuming that it exceeded its power or acted under an invalid provision of law, the plaintiff may have a declaration to that effect but the Act complained of cannot be said to have been a tortious act. But even assuming that it was, it is to be remembered that the issue of the notice was an exercise of powers conferred by the Act in relation to the sovereign rights of the Crown and it is elementary that the Crown or the State is not answerable for even negligent or tortious acts of its officers done in the co
urse of their official duties imposed by 
a statute, except where the particular act was specifically directed and the Crown profited by performance ……. No liability for an actionable wrong is thus involved in the suit and Dr. Sen Gupta cannot establish a right to proceed against the Province of East Bengal on the basis that the liability was transferred to that Province under article 10(2) of the Order.”