LexNAVINCHANDRA MAFATLAL versus THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY
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.. S.C.R. SUPREME COURT REPORTS 829 could have been reached. But in the absence of such a finding, we are unable to see any ground on which the order of the Tribunal could be upset in a reference under section 66 ( 1). Vvhen once it is found that there was no proper determination of the profits as required under Rule 2(a)-and that was indeed conceded-and there was no justification for it such as the High Court thought there was, the only order that could properly be made was to remand the case for further enquiry and fresh disposal in accordance with law. That was the order which was passed by the Tribunal, and that, in our opinion, was right. This appeal will accordingly be allowed, and the second question referred by the Tribunal answered in the negative. The result of this will be that the Income-tax Officer will proceed to enquire into the profits of the appellant Company for the years in question in accordance with the requirements of Rule 2. Under the circumstances, we direct that the parties do bear their respective costs both here and in the High Court. Appeal allowed. NAVINCHANDRA MAFATLAL THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY. [MEHR CHAND MAHAJAN C.J., s. R. DAS, GHULAM HASAN, BHAGWATI and VENKATARAMA AYYAR JJ.] Indian Income-tax Act (XI of 1922) s. 12-B-Government of India Act, 1935 (26 Geo. 5 CH. 2) Seventh Schedule, List I, Item 54-Tax on capital gains, if ultra vires-Capital gains, if income -Legislative practice-Interpretation of words-Words used in Constitution Act. Section 12-B of the Indian Income-tax Act, 1922 (inserted by Act XXII of 1947) which imposed tax on 'Capital gains' is not ultra vires the Government of India Act, 1935. The term 'Capital 1954 General Family Pension Fund v. The Commissionr of Income-tax, West Bengal Vmkatarama 4vyar J. 1954 November 1. z954 Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City. 830 SUPREME COURT REPORTS [1955] gains co1nes well \Vithin the 1neaning of the word 'income' used in item No. 54 of List I of the Seventh Schedule to the Govern1nent of India .. A.ct, 1935. It is incorrect to say that income cannot signify 'Capital gains' and it is equally an incorrect approach to hold that there is a legislative practice which recognises a clear line of demarcation bet\veen income and capital. \Vhat is relied on here as a legisla- tive practice is nothing but the judicial interpretation given to the \Vord 'incon1e' as used in the income-tax and fiscal statutes. Such interpretation does not necessarily cut do\vn the ordinary natural meaning of the word 'inco1ne' as used in item No. 54 of List I of the Seventh Schedule to the Government of India Act, 1935. Cardinal rule of interpretation is that the words should be read in their ordinary natural and grammatical 1neaning.. But the words in a constitutional enact1ne11t conferring legislative powers should however be construed most liberally an<l in their widest an1plitude. Commissioner of Income-tax v. Shatv Wallace & Co. (L.R. 59 I.A. 206); Ryal/ v. Hoare and Ryal/ v. Honeywill (1923) 8 T.C. 521; Californian Copper Syndicate (Li1nited and Reduced) v. Ha"is (1904) 5 T.C. 159; Wallace Brothers & Co. Ltd." v. Commissioner of Income-tax [L.R. 75 I.A. 86: (1948) F.C.R. 1: 16 I.T.R. 240]; Croft v. Dunphy L.R. 1933 A.C. 156; Kamakshya Narain Singh v. Commissioner of Income-tax [L.R. 70 I.A. 180: (1943) 11 I.T.R. 513] ; In re The Central Provinces and Bei·ar Act No. XIV of 1938 ( 1939) F.C.R. 18; United Provinces v. Atiqa Begum (1940) F.C.R. 110; State of Bombay and Another v. F. N. Balsara (1951) S.C.R. 682; Eisner v. Macomber (252). U.S. 189: 64 L. Ed. 521); Merchant's Loan & Trust Co. v. Smietanka (2'.\5 U.S. 509: 65 L. Ed. 751) ; United States v. Stewart (311 U.S. 60: 85 L. Ed. 40) and Resch v. Federal Commissioner of Ta_xation (66 C.L:.R. 198), referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 194 of 1952. Appeal from the Judgment and Order, dated· the 7th day- of Septe_mber, 1951, of .the High Court of Judicature at Bombay in Income-tax Referenq.: No. 46 or 1950. S. Mitra (R. f. Kolah and I. N. Shroff, with him) for the appellant. M. C. Setalvad, ·Attorney-General for India (G. ,\[, foshi, with him) for the respondent. 1954. November 1. The Judgment of the Court was delivered by DAs J. • • • . .. ... L. S.C.R. SUPREME
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