Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11
CASE NO.:
Appeal (civil) 3326 of 2008
PETITIONER:
R & B Falcon (A) Pty Ltd.
RESPONDENT:
Commissioner of Income Tax
DATE OF JUDGMENT: 06/05/2008@
S.B. Sinha & V.S. Sirpurkar
&
J U D G M E N T
REPORTABLE
CIVIL APPEAL NO. 3326 OF 2008
(Arising out of SLP (C) No.10451 of 2007)
S.B. Sinha, J.
1. Leave granted.
2. Interpretation and/or application of the provisions of Section 115WB
of the Income Tax Act, 1961 (for short, ’the Act’) providing for imposition
of tax on ’fringe benefits’ is in question herein.
3. Before embarking upon the said question, however, we may notice the
basic fact of the matter.
Appellant is incorporated under the laws of the Commonwealth of
Australia. It is engaged in the business of providing Mobile Offshore
Drilling Rig (MODR) along with crew on a day rate charter hire basis to
drill offshore wells. The MODR operates offshore (upto 200 nautical miles
off the coast of India). Allegedly, having regard to the harsh working
environment and purported to be in line with global practices typical to such
industry, the employees who may be residents of various countries including
Australia, USA, UK, France etc. work on the MODR on a ’commuter basis’.
They come to India, stay in the Rig for 28 days and go back to their own
country being their place of residence for a further period of 28 days. The
crew or the employees are transported from their home country to the
MODR in two laps :
- first is from the nearest designated base city at
the place of residence in the home country to a
designated city in India for which the petitioner
provides free air tickets of economy class and;
- second is from that city in India to the MODR
through helicopter especially hired by the
petitioner for this purpose.
4. Allegedly, on completion of 28 days, they go back from the Rig to the
designated base city in their home country in the same manner. Appellant
states that no conveyance/transport allowance is paid to them.
Appellant entered into a contract of supplying MODR along with
equipment and offshore crew on charter hire basis with Oil and Natural Gas
Commission, a public sector undertaking, on or about 10.10.2003. It filed an
application under Section 245Q(1) of the Income Tax Act, 1961 before the
Authority for Advance Ruling (AAR) on the following question :
"Whether transportation cost incurred by the
petitioner in providing transportation facility for
movement of offshore employees from their
residence in home country to the place of work and
back is liable to Fringe Benefit Tax?"
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11
5. Chapter XII of the Act providing for income tax on fringe benefits
was inserted by the Finance Act, 2005. It came into force with effect from
1.4.2006.
6. Section 115W defines "employer" and "fringe benefit tax". "Fringe
Benefit Tax" (FBT) has been defined as a tax chargeable under Section
115WA.
Section 115 WA(1) provides for the basis for charge of fringe benefit
tax in the following terms :
"115WA.(1) In addition to the income-tax charged
under this Act, there shall be charged for levy
assessment year commencing on or after the 1st
day of April, 2006, additional income-tax (in this
Act referred to as fringe benefit tax) in respect of
the fringe benefits provided or deemed to have
been provided by an employer to his employees
during the previous year at the rate of thirty per
cent on the value of such fringe benefits.
(2) Notwithstanding that no income-tax is payable
by an employer on his total income computed in
accordance with the provisions of this Act, the tax
on fringe benefits shall be payable by such
employer."
Section 115WB consists of three sub-sections, the relevant clauses
whereof read as under:
"Section 115WB - Fringe benefits (1) For the
purposes of this Chapter, "fringe benefits" means
any consideration for employment provided by
way of-
(a) any privilege, service, facility or amenity,
directly or indirectly, provided by an
employer, whether by way of reimbursement
or otherwise, to his employees (including
former employee or employees);
(b) any free or concessional ticket provided by
the employer for private journeys of his
employees or their family members; and
xxx xxx xxx
(2) The fringe benefits shall be deemed to have
been provided by the employer to his employees, if
the employer has, in the course of his business or
profession (including any activity whether or not
such activity is carried on with the object of
deriving income, profits or gains) incurred any
expense on, or made any payment for, the
following purposes, namely:-
(A) entertainment;
xxx xxx xxx
(F) conveyance;
xxx xxx xxx
(Q) tour and travel (including foreign travel).;
(3) For the purposes of sub-section (1), the
privilege, service, facility or amenity does not
include perquisites in respect of which tax is paid
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11
or payable by the employee or any benefit or
amenity in the nature of free or subsidised
transport or any such allowance provided by the
employer to his employees for journeys by the
employees from their residence to the place of
work or such place of work to the place of
residence".
7. Before the AAR, a circular issued by the Central Board of Direct Tax
(CBDT) bearing No.8 of 2005, was relied upon by both the parties. We will
refer to a part of it. The circular provides for explanatory notes on
provisions relating to fringe benefit tax.
The object for imposition of the said tax is stated to be as under:
"The taxation of perquisites or fringe benefits is
justified both on grounds of equity and economic
efficiency. When fringe benefits are under-taxed,
it violates both horizontal and vertical equity. A
taxpayer receiving his entire income in cash bears
a higher tax burden in comparison to another
taxpayer who receives his income partly in cash
and partly in kind, thereby violating horizontal
equity. Further, fringe benefits are generally
provided to senior executives in the organization.
Therefore, under-taxation of fringe benefits also
violates vertical equity. It also discriminates
between companies which can provide fringe
benefits and those which cannot thereby adversely
affecting market structure. However, the taxation
of fringe benefits raises some problems primarily
because-
(a) all benefits cannot be individually attributed to
employees, particularly in cases where the
benefit is collectively enjoyed;
(b) of the present widespread practice of providing
perquisites, wherein many perquisites are
disguised as reimbursements or other
miscellaneous expenses so as to enable the
employees to escape/reduce their tax liability;
and
(c) of the difficulty in the valuation of the
benefits."
8. The heading of paragraph 11 of the said circular is "Frequently asked
questions". The questions which were posed and answered and in turn are
relevant for our purpose read as under :
"In terms of the provisions of sub-section (1) of
Section 115WA, an employer in India is liable to
FBT in respect of the value of fringe benefits\027
(a) Provided by him to his employees; and
(b) Deemed to have been provided by him to his
employees.
The scope of fringe benefits provided or deemed to
have been provided is defined in section 115WB.
Sub-section (1) of the said section defines the
scope of fringe benefits provided by the employer
to his employees. Similarly, sub-section (2) of the
said section defines the scope of fringe benefits
deemed to have been provided by the employer to
his employees. Therefore, sub-section (2) expands
the scope of sub-section (1) through a deeming
provision.
The provision relating to the computation of the
value of the fringe benefits is contained in section
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11
115WC. It is a settled principle of law that where
the computation provisions fail, the charging
section cannot be effectuated. Therefore, if there
is no provision for computing the value of any
particular fringe benefit, such fringe benefit, even
if it may fall within clause (a) of sub-section (1) of
section 115WB, is not liable to FBT.
XXX XXX XXX
19. FBT is payable in the year in which the
expenditure is incurred irrespective of whether the
expenditure is capitalized or not. However, the
same expenditure will not be liable to FBT again
in the year in which it is amortized and charged to
profit.
Is FBT payable by an Indian Company having
employees based both in and outside India on its
total (global) expenditure incurred by it for the
purposes referred to in clauses (A) to (P) of sub-
section (2) of section 115B?
20. FBT is payable on the value of fringe
benefits provided or deemed to have been provided
to employees based in India and determined on a
presumptive basis in accordance with the
provisions of Section 115WC of the Income-tax
Act. The value of such fringe benefits is
determined, inter alia, as a proportion of the total
amount of expenses incurred for some identified
purposes. In the case of an Indian company having
employees based both in India and in a foreign
country, FBT is payable on the proportion (50 per
cent, 20 per cent or 5 per cent, as the case may be)
of the total amount of expenses incurred for the
purposes referred to in clauses (A) to (P) of sub-
section (2) of section 115WB and attributable to
the operations in India. If the company maintains
separate books of account for its Indian and
foreign operations, FBT would be payable on the
amount of expenses reflected in the books of
account relating to the Indian operations. If
however, no separate accounts are maintained, the
amount of expenses attributable to Indian
operations would be the proportionate amount of
the global expenditure. Further, such
proportionate amount shall be determined by
applying to the global expenditure the proportion
which the number of employees based in India
bears to the total worldwide employees of the
company.
Whether an Indian company carrying on business
outside India would be liable to FBT even though
none of its employees in such business may be
liable to pay income tax in India?
21. An Indian company would be liable to the
FBT in India if it has employees based in India.
Therefore, if an Indian company carries on
business outside India but does not have any
employees based in India, such company would
not be liable to FBT in India.
Does FBT apply to foreign companies?
XXX XXX XXX
103. FBT is a liability qua employer. It is an
expenditure laid out or expended wholly and
exclusively for the purposes of the business or
profession of the employer. However, sub-clause
(ic) of clause (a) of section 40 of the Income-tax
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11
Act expressly prohibits the deduction of the
amount of FBT paid, for the purposes of
computing the income under the head profits and
gains of business or profession. This prohibition
does not apply to the computation of book profit
for the purposes of section 115JB. Accordingly,
the FBT is an allowable deduction in the
computation of book profit under section 115JB of
the Income-tax Act.
Whether expenditure incurred by the employer for
the purposes of providing free or subsidized
transport for journeys to employees from their
residence to the place of work or such place of
work to the place of residence would attract FBT?"
9. AAR by reason of its judgment and order dated 13.12.2006 holding
that the company is liable to pay fringe benefit tax for providing
transportation and movement of offshore employees for their residence and
home countries outside India to the place of rig and back, opined that
(1) The exemption provision contained in sub-section (3) of Section
115WB is restricted to sub-section (1) whereas the exemption falls
under the deeming provision contained in sub-section (2);
(2) Residence within the meaning of the said provision would mean
residence in India and as the employees concerned are residents of the
countries outside India, sub-section (3) of Section 115WB is not
applicable.
10. Mr. S. Ganesh, learned counsel appearing on behalf of the appellant,
would submit;
(1) The AAR committed an error of law insofar as it failed to consider
that sub-section (3) covers both the contingencies envisaged under
sub-sections (1) and (2);
(2) The distinction between sub-sections (1) and (2) is highly artificial
inasmuch as the exemption is provided for in clauses (F) and (Q) of
sub-section (2) of Section 115WB and unless the said provisions are
read into sub-section (3), the same would be rendered otiose;
(3) While granting exemption, the Parliament having not restricted the
operation of sub-section (3) only to the regular employees or the
transport provided by the employer, no restrictive meaning can be
given to sub-section (3).
(4) Residence of an employee being not restricted to the Territory of
India, the AAR committed a serious error of law in passing the
impugned judgment.
(5) CBDT itself, in its circular, having clarified that sub-section (2) is
merely an expansion of sub-section (1), it was impermissible for the
AAR to take the said factor into account.
(6) From the questions and answers contained in the said circular, it is
evident that fringe benefit tax would be applicable on the value of
fringe benefit provided or deemed to have been provided to
employees based in India and no fringe benefit tax would be payable
in respect of an expenditure incurred by the employer for an employee
who is not based in India and in any event if the employee is based in
a foreign country would also come within the purview thereof.
(7) The AAR is clearly wrong in holding that the word ’residence’ would
mean only residence in India.
11. Mr. G.E. Vahanavati, learned Solicitor General appearing on behalf of
the respondent, on the other hand, would urge:
(A) Fringe benefit tax is a new concept in terms whereof any
consideration for employees provided, inter alia, for facility or
amenity comes within the purview thereof; and
(B) The tax is payable only when the employer incurs an expenditure
delineated in sub-section (2) and such exemption is to be granted only
on the tax leviable under sub-section (1).
(C) The terms ’residence’, ’transport’, ’conveyance’ etc. must be given a
broad meaning which would lead to the conclusion that only when
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11
employees are provided for transport on a regular basis for attending
to their work from the place of their residence to the place of work,
exemption should be granted.
(D) The Parliament, in its wisdom, having used the words ’employees,
journey, the same would only mean that on any journey undertaken by
the employees for regularly attending the works and not on a work on
periodic basis.
12. Fringe benefit tax is a new concept. The taxes to be levied on the
fringe benefit provided or deemed to have been provided by an employer to
employees during the previous year is at the rate of 30 per cent on the value
of such fringe benefits. The object for imposition of the said tax, as is
evident from the said circular dated 29.8.2005, was to bring about an equity.
The intention of the Parliament was to tax the employer who, on the one
hand, deducts the expenditure for the benefit of the employees including
entertainment, etc. and on the other when the employees getting the perks
are to be taxed, those who get direct or indirect benefits from the
expenditures incurred by the employer, no tax is leviable. As stated in the
objective, it is for bringing about a horizontal equity and not a vertical
equity.
13. Sub-section (1) of Section 115WB contains the interpretation section.
It is in two parts. It provides for a direct meaning, as also an expanded
meaning. Expanded meaning of the said provision is contained in sub-
section (2). Whereas sub-section (1) takes within its sweep any
consideration for employment, inter alia, by way of privilege service, facility
or amenity directly or indirectly, sub-section (2) thereof expands the said
definition stating as to when the fringe benefit would be deemed to have
been provided. The expansive meaning of the said term ’benefits’ by reason
of a legal fiction created also brings within its purview, benefits which
would be deemed to have been provided by the employer to his employees
during the previous year. Indisputably, sub-section (3) refers to sub-section
(1) only. Ex facie, it does not have any application in regard to the matters
which have been brought within the purview of the fringe benefit tax by
reason of application of the deeming provision. We are concerned here with
a question in regard to grant of exemption in respect of ’conveyance’ as
provided for in clause (F) of sub-section (2) and ’tour and travel’ which is
provided for in clause (Q) of sub-section (2) of Section 115WB.
14. CBDT categorically states in answer to question number 7 that sub-
section (2) provides for an expansive definition.
Does it mean that sub-section (2) is merely an extension of sub-
section (1) or it is an independent provision? If sub-section (2) is merely an
extension of sub-section (1), Mr. Ganesh may be right but we must notice
that Section 115WA provides for imposition of tax on expenditure incurred
by the employer or providing its employees certain benefits. Those benefits
which are directly provided are contained in sub-section (1). Some other
benefits, however, which the employer provides to the employees by
incurring any expenditure or making any payment for the purpose
enumerated therein in the course of his business or profession, irrespective
of the fact as to whether any such activity would be carried on a regular
basis or not, e.g., entertainment would, by reason of the legal fiction created,
also be deemed to have been provided by the employer for the purpose of
sub-section (2). Whereas sub-section (1) envisages any amount paid to the
employee by way of consideration for employment, what would be the limits
thereof are only enumerated in sub-Section (2). We, therefore, are of the
opinion that sub-sections (1) and (2), having regard to the provisions of
Section 115WA as also sub-section (3) of Section 115WB, must be held to
be operating in different fields.
15. We must test the submissions of Mr. Ganesh from another angle. The
learned counsel contended that any benefit or amenity in the nature of free or
subsidized transport provided by the employer to his employee for the
purposes mentioned in sub-section (3) are to be found only in clauses (F)
and (Q) of sub-section (2) and if that be so, the statute must be held to
envisage grant of exemption in respect of matters which do not form the
subject matter thereof.
We have noticed the factual matrix of the instant case. The
employees concerned are experts in their field. They are necessarily
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11
residents of other country. They are brought to the Rig by providing air
tickets for their coming from their place of residence to the Rig.
The employer incurs the said expenditure as of necessity. It,
therefore, clearly falls within the purview of the words ’consideration for
employment’. If fringe benefits are provided for consideration for
employment, which is given or provided to the employee by way of an
amenity, reimbursement or otherwise; clearly clause (a) of sub-section (1)
shall be attracted.
A statute, as is well known, must be read in its entirety. What would
be the subject matter of tax is contained in sub-sections (1) and (2). Sub-
section (3), therefore, provides for an exemption. There cannot be any doubt
or dispute that the latter part of the contents of sub-section (3) must be given
its logical meaning. What is sought to be excluded must be held to be
included first. If the submission of learned Solicitor General is accepted,
there would not be any provision for exclusion from payment of tax any
amenity in the nature of free or subsidized transport.
16. Thus, when the expenditure incurred by the employer so as to enable
the employee to undertake a journey from his place of residence to the place
of work or either reimbursement of the amount of journey or free tickets
therefor are provided by him, the same, in our opinion, would come within
the purview of the term ’by way of reimbursement or otherwise’.
The Advanced Law Lexicon defines "otherwise" as:
"By other like means; contrarily; different from
that to which it relates; in a different manner; in
another way; in any other way; differently in other
respects in different respects; in some other like
capacity."
"Otherwise" is defined by the Standard Dictionary as meaning ’in a
different manner, in another way; differently in other respects’; by Webster,
’in a different manner; in other respects’.
As a general rule, ’otherwise’ when following an enumeration, should
receive an ejusdem generis interpretation (per CLEASBY, B. Monck v.
Hilton, 46 LJMC 167, The words ’or otherwise’, in law, when used as a
general phrase following an enumeration of particulars, are commonly
interpreted in a restricted sense, as referring to such other matters as a are
kindred to the classes before mentioned, (Cent. Dict.)"
17. It is now a well settled principle of law that a statute should ordinarily
be given a purposive construction. {See New India Assurance Company
Ltd. v. Nusli Neville Wadia and Anr. [2007 (14) SCALE 556]; Tanna and
Modi v. C.I.T., Mumbai XXV and Ors. [2007 (8) SCALE 511] and Udai
Singh Dagar and Ors. v. Union of India (UOI) and Ors. [2007 (7) SCALE
278]}.
18. The Parliament, in introducing the concept of fringe benefits, was
clear in its mind in so for as on the one hand it avoided imposition of double
taxation, i.e., tax both on the hands of the employees and employers; on the
other, it intended to bring succour to the employers offering some privilege,
service, facility or amenity which was otherwise thought to be necessary or
expedient. If any other construction is put to sub-sections (1) and (3), the
purpose of grant of exemption shall be defeated. If the latter part of sub-
section (3) cannot be given any meaning, it will result in an anomaly or
absurdity. It is also now a well settled principle of law that the court shall
avoid such constructions which would render a part of the statutory
provision otiose or meaningless. [See Visitor and Ors. v. K.S. Misra [(2007)
8 SCC 593]; Commissioner of Sales Tax, Delhi and Ors. v. Shri Krishna
Engg. Company and Ors. [(2005) 2 SCC 692].
19. We, therefore, are of the opinion that AAR was right in its opinion
that the matters enumerated in sub-section (2) of Section 115WB are not
covered by sub-section (3) thereof, and the amenity in the nature of free or
subsidized transport is covered by sub-section (1).
20. It brings us to the next question, namely, whether the employee
concerned should be a resident of India. The statute does not say so. Fringe
benefit tax being a tax on expenditure; the only concern of the revenue
wherefor should be as to whether such expenditure has been made.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11
Appellant has a permanent establishment in India. It pays income-tax in
India. It carries on business in India. It has for the purpose of carrying out
its business activities engaged persons from within India or outside India. If
it makes any expenditure for bringing any employee from abroad, the same
would also liable to be taken into consideration for the purpose of sub-
section (1) of Section 115WB.
21. AAR with respect was not correct in its view in reading the words ’in
India’ after the word residence in sub-section (3).
22. If the reasonings of the AAR are taken to its logical conclusion, the
CBDT circular would not be attracted. An employer cannot afford to loose
on both the fronts. Its right to claim exemptions either would be in respect
of the employees who are based in India or who are not. If the said
employees are required to be based in India, sub-section of Section 115WB
would not be attracted. However, if such expenditure incurred is found to be
as consideration for employment, the same would also bring within its
purview the employees who have been hired from outside the country. For
the purpose of obtaining the benefit of the said exemption, however, the
expenditure must be incurred on the employees directly for the purposes
mentioned therein, namely, they are to be provided transport from their
residence to the place of work or such place of work to the place of
residence. Any expenditure incurred for any other purpose, namely, other
than for their transport from their residence to the place of work or from the
place of work to the place of residence would not attract the exemption
provision. The Assessing Authority, therefore, must, in each case, would
have a right to scrutinize the claim.
CBDT has the requisite jurisdiction to interpret the provisions of
Income-tax Act. The interpretation of CBDT being in the realm of executive
construction, should ordinarily be held to be binding, save and except where
it violates any provisions of law or is contrary to any judgment rendered by
the courts. The reason for giving effect to such executive construction is not
only same as contemporaneous which would come within the purview of the
maxim temporania caste pesto, even in certain situation a representation
made by an authority like Minister presenting the Bill before the Parliament
may also be found bound thereby.
23. Rules of executive construction in a situation of this nature may also
be applied. Where a representation is made by the maker of legislation at
the time of introduction of the Bill or construction thereupon is put by the
executive upon its coming into force, the same carries a great weight.
24. In this regard, we may refer to the decision of the House of Lords in
the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956]
and its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on
the question of ’executive estoppel’. In the former decision, Lord Steyn
stated:-
"If exceptionally there is found in the Explanatory
Notes a clear assurance by the executive to
Parliament about the meaning of a clause, or the
circumstances in which a power will or will not be
used, that assurance may in principle be admitted
against the executive in proceedings in which the
executive places a contrary contention before a
court."
25. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:-
"As I understand it [Pepper v. Hart], it recognized
a limited exception to the general rule that resort to
’Hansard’ was inadmissible. Its purpose is to
prevent the Executive seeking to place a meaning
on words used in legislation which is different
from that which ministers attributed to whose
words when promoting the legislation in
Parliament\005"
For a detailed analysis of the rule of executive estoppel useful
reference may be to the article authored by Francis Bennion entitled
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11
"Executive Estoppel: Pepper v. Hart revisited", published in Public Law,
Spring 2007, pg. 1 which throws a new light on the subject matter.
26. We may notice a decision of this Court in Sedco Forex International
Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr.
[(2005) 12 SCC 717], the question which arose therein was as to the salary
paid to the employees of UK National Services for field breaks outside India
would be subjected to tax under Section 9(1)(ii) and explanation appended
thereto as inserted in 1983 w.e.f 1.4.1979. Appellant therein entered into
agreements which are executed in the United Kingdom with each of the said
employees who were residents of the said country. This Court, upon
noticing the explanation appended to Section 9(1)(ii), as regards its
retrospective operation, held:
"16. The departmental understanding of the effect
of the 1999 Amendment even if it were assumed
not to bind the respondents under Section 119 of
the Act, nevertheless affords a reasonable
construction of it, and there is no reason why we
should not adopt it.
17. As was affirmed by this Court in Goslino
Mario a cardinal principle of the tax law is that the
law to be applied is that which is in force in the
relevant assessment year unless otherwise
provided expressly or by necessary implication.
(See also Reliance Jute and Industries Ltd. v. CIT)
An Explanation to a statutory provision may fulfil
the purpose of clearing up an ambiguity in the
main provision or an Explanation can add to and
widen the scope of the main section. If it is in its
nature clarificatory then the Explanation must be
read into the main provision with effect from the
time that the main provision came into force. But if
it changes the law it is not presumed to be
retrospective, irrespective of the fact that the
phrases used are "it is declared" or "for the
removal of doubts"."
27. It was categorically held that as the explanation sought to give an
artificial meaning to "earned in India" and brings about a change effectively
in the existing law, it should not be held to have any retrospective operation.
Section 115WB does not contain such a provision. It must, therefore, be
given its natural meaning. It would, therefore, be difficult to accept the
contention of the learned Solicitor General that the employees must be based
in India.
28. However, it appears that the contention that such expenditure should
be paid on a regular basis or what would be the effect of the words
’employees journey’ did not fall for consideration of AAR. What, therefore,
is relevant would be the nature of expenses. The question as to whether the
nature of a travelling expenditure incurred by the appellant would attract the
benefits sought to be granted by the statute did not and could not fall for
consideration of the AAR. Its opinion was sought for only on one issue. It
necessarily had to confine itself to that one and no other. No material in this
behalf was brought on record by the parties. Whether the payments were
made to them on a regular basis or whether the expenditures incurred which
strictly come within the purview of Section 115WB or not must, therefore,
be answered having regard to the materials placed on records. If any
question arises as to whether the agreement entered into by and between the
appellant and the employees concerned would attract, in given cases, the
liability under FBT benefit tax would have, thus, to be determined by the
assessing authority.
29. The appeal is allowed to the aforementioned extent and with the
aforementioned observations. In the facts and circumstances of this case,
there shall be no order as to costs.
+
5 3322 2008
!
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11
Lachhman Singh (Deceased)through Legal Representatives & Ors
Vs.
Hazara Singh (Deceased) through Legal Representatives & Ors
@
May 6, 2008
BENCH:
S.B. Sinha & Lokeshwar Singh Panta
JUDGMENT:
J U D G M E N T
REPORTABLE
CIVIL APPEAL NO. 3322 OF 2008
(Arising out of SLP (C) No.1395 of 2007)
S.B. Sinha, J.
1. Leave granted.
2. What would be the period of limitation in a suit for redemption of
mortgage in the factual matrix involved in the present case is the question in
this appeal which arises out of a judgment and order dated 19.7.2006 passed
by the High Court of Punjab and Haryana in RSA No.1340 of 1980.
3. A transaction of mortgage in respect of the suit property admeasuring
58 kanals 11 marlas was entered into by and between the predecessors in the
interest of the parties herein. The actual date of execution of the deed of
mortgage was not known to the plaintiffs-respondents. However, the said
mortgaged properties were mutated in the name of the mortgagees on or
about 19.3.1913.
4. A suit for redemption of the said mortgage was filed by the
respondents on or about 30.12.1970. The learned trial court, as also the First
Appellate Court, dismissed the said suit as being barred by limitation
opining that the actual date of mortgage being not known, a decree for
redemption of mortgage could not be passed.
5. The High Court, however, in the second appeal preferred thereagainst
by the respondent herein, formulated the following substantial questions of
law :
"1. Whether the finding recorded by the learned
first Appellate Court regarding relationship
is sustainable?
2. Whether the suit for possession by way of
redemption is within the period of
limitation?"
6. It was held that in view of the fact that the relationship between the
parties as mortgagor and mortgagee was proved, the onus to prove that suit
was barred by limitation was on the defendants.
The said Second Appeal on the said finding was allowed.
7. Mr. Shambhu Prasad Singh, learned counsel appearing on behalf of
the appellant, would submit that the question of limitation being one of
jurisdiction, the High Court committed a serious error in allowing the said
second appeal. It was submitted that as the date of mutation was not the date
of mortgage, the suit should have been held to be barred by limitation.
8. Mr. Manoj Swarup, learned counsel appearing on behalf of the
respondents, on the other hand, has drawn our attention to an application
filed by the respondent for adduction of additional evidence, as envisaged
under Order 41 Rule 27 of the Code of Civil Procedure and submitted that
the deed of mortgage which was registered in Village Pangota, Tehsil Taran
Taran in the District of Amritsar, now in Pakistan, could be procured by the
respondents which, if taken into consideration, would clearly establish that
the suit was within the prescribed period of limitation having been executed
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11
on 20.2.1913.
The relationship between the parties is not in dispute. Respondents
filed the aforementioned suit for a decree for redemption of mortgage on
payment of a sum as may be found due to the appellants herein. The details
of the mortgage were furnished but the actual date of mortgage being not
known could not be furnished.
Sohan Singh and Bahadur Singh were the original mortgagors. Sohan
Singh is said to have been not seen 10 years prior to the institution of the suit
and, thus, presumed to be dead. Respondents are said to have inherited the
properties of the said mortgagors and, thus, stepped into their shoes. In the
written statement, the respondent denied and disputed the relationship
between the parties, stating :
"1. Para No.1 of the plaint is wrong and
incorrect. The suit land is not of the plaintiffs.
Rather the total land is under the permanent
continuing possession of defendant No.1. The
land in dispute as mentioned in para No.1 of the
plaint filed by the plaintiffs never mortgaged with
the defendants and the facts mentioned in para
No.1 of the plaint regarding the alleged mortgaged
are forged and fictitious one and the plaint is not
with me."
9. The defendant claimed the ownership as also possession of the suit
land in himself. The courts below, as noticed hereinbefore, found that there
existed a relationship of mortgagor and mortgagee between the parties to the
lis. The suit was dismissed only on the ground of being barred by limitation.
The High Court was, in our opinion, entirely wrong in holding that the
onus to prove that the suit was beyond the period of limitation was on the
defendants. Limitation is a question of jurisdiction. Section 3 of the
Limitation Act puts an embargo on the court to entertain a suit if it is found
to be barred by limitation.
10. It appears that before the High Court also, an application for
adduction of additional evidence was filed. No order thereupon was passed.
Respondents, in our opinion, have made out a case for adduction of
additional evidence.
It was stated that the mortgage deed was registered in the year 1913 in
the District of Lahore. As it is a registered document, this Court in a
situation of this nature, keeping in view the findings of the courts below,
should allow the said application.
11. There cannot be any doubt whatsoever that the court should be
loathed to entertain such an application but the respondents have herein
made out adequate grounds therefor.
The jurisdiction of the Appellate Court is to be exercised not only
when clause (a) or clause (aa) of sub-rule (1) of Rule 27 of Order 41 of the
Code is attracted but also when such a document is required by the appellate
Court itself to pronounce judgment or for any other substantial cause. If
what the respondents contended is correct, namely, the mortgage was
executed in 1913, the period of limitation having been prescribed under the
old Limitation Act, namely, 60 years being the period of limitation having
regard to the provisions of the new Limitation Act, the suit could be filed
within a period of seven years from 1.1.1964, i.e. upto 1.1.1971. As the suit
was filed on 30.12.1970, it may be held to be within the prescribed period of
limitation.
12. We are of the opinion that keeping in view the peculiar facts and
circumstances of this case, the respondents should be permitted to adduce
evidence. We, therefore, set aside the impugned judgment and remit the
matter back to the High Court directing it to take the additional evidence on
record either allowing the parties to adduce evidence before it or to prove the
said documents by the trial judge in terms of Order 41 Rule 28 of the Code.
Appeal is allowed to the above extent. No costs.