Supreme Court Judgments — 2017

The Supreme Court held that the subsidy scheme was intended to promote the construction of new cinema houses and was therefore capital in nature. The fact that the subsidy was granted after commencement of operations did not alter its character.

The Supreme Court held that an assessee is not eligible for the deduction under Section 80 IB(3) if it loses its status as a 'small scale industrial undertaking' in any of the assessment years for which the deduction is claimed, even if it was initially eligible. The Court reasoned that the incentive is specifically meant for small-scale industrial undertakings, and permitting it to non-qualifying entities would be against the object of the law. The Court emphasized that the applicability of the incentive is directly related to the continued fulfillment of eligibility conditions. Each assessment year is a separate assessment year, and the benefit cannot be claimed irrespective of the continuation of eligibility. The Court distinguished the case of Bajaj Tempo Ltd. v. CIT, noting that while liberal interpretation may apply to beneficial exemptions, the conditions for eligibility must be strictly met. The ratio decidendi is that statutory exemptions, particularly those tied to specific categories like 'small scale industrial undertakings', must be strictly adhered to, and loss of eligibility in any relevant year disentitles the assessee from the benefit for that year and subsequent years.

The Supreme Court held that if an assessee loses its eligibility as a small-scale industrial undertaking in a particular assessment year, it is not entitled to the deduction under Section 80 IB for that year, even if it was initially eligible.

The Supreme Court held that the advance deposit of central excise duty in the PLA constitutes actual payment of duty for the purpose of Section 43B. The consistent practice of the assessee, accepted by the Revenue for several years, and the decisions of High Courts in favor of the assessee were considered significant.

The Supreme Court held that the instruction regarding monetary limits for appeals would apply to pending matters, but with specific caveats. These caveats were that the circular should not be applied automatically when matters had a cascading effect or involved common principles across multiple cases.

The Supreme Court held that Section 73 of the Gold (Control) Act, 1968, is not applicable to confiscations made under the Defence of India Rules, 1962. The redemption fine should be based on the market value of the gold on the date the option to pay fine was exercised.

The Supreme Court allowed the appeals. The Court held that Education Cess and Higher Education Cess are refundable along with excise duty when the excise duty itself is exempted. The reasoning was based on two circulars issued by the Government (dated August 10, 2004, and April 8, 2011) which stated that if the entire excise duty is exempted, then Education Cess and Higher Education Cess would not be payable. The Court found these circulars to be binding on the Department. Furthermore, the Court reasoned that Education Cess is a surcharge on excise duty, levied at 2% on the aggregate of duties of excise. Therefore, when the basic excise duty is Nil due to exemption, there cannot be any surcharge. The Court also referred to the Rajasthan High Court's reasoning in Banswara Syntex Ltd., which held that the surcharge takes the character of the parent levy and is subject to the same provisions, including exemptions and rebates. The Court agreed with this reasoning and also cited the principle that when two views are possible, the one favouring the assessee should be adopted. The Court disapproved of the CESTAT's contrary view in Jindal Drugs Ltd. and noted that the Tribunal did not provide reasons for deviating from earlier judgments. The operative direction is that the appellants were entitled to the refund of Education Cess and Higher Education Cess paid along with excise duty.

The Supreme Court allowed the appeals, holding that the Education Cess and Higher Education Cess paid along with excise duty were also liable to be refunded. The Court reasoned that these cesses, levied at 2% of the excise duty, partake the character of excise duty itself. This was supported by the Supreme Court's decision in Union of India v. Tata Engineering and Locomotive Co., which held that a cess levied on excise duty should be calculated and treated as if it were excise duty. The Court distinguished the Calcutta High Court's judgment in Biswanath Hosiery Mills Ltd. case, finding it not applicable as the cess in that case was levied under a separate and independent statutory scheme. The Court also reiterated the principle that when two views are possible, the one favouring the assessee should be adopted. The operative direction was that the appellants were entitled to the refund of Education Cess and Higher Education Cess.

The Supreme Court held that when the Settlement Commission exercises its discretion to waive interest, a concomitant right to claim interest on the resulting refund arises for the assessee. Therefore, the High Court was incorrect in denying this right.

The Supreme Court held that 'mobilisation fee' paid to assessees engaged in mineral oil exploration is taxable under Section 44BB as it falls within the 'deemed profits' calculation. The court clarified that Section 44BB overrides normal computation provisions for such businesses.

The Supreme Court disposed of the appeal in terms of its earlier judgment in CIT vs. Yokogawa India Limited. The Assessing Officer was directed to issue notice to the respondent.

The Supreme Court held that no Permanent Establishment (PE) existed in India for the US companies based on the facts presented. Consequently, the appeals filed by the Revenue were dismissed.

The Supreme Court held that the assessees did not have a Permanent Establishment (PE) in India. Regarding a fixed place PE under Article 5(1) of the DTAA, the Court found no specific finding that a fixed place of business was at the disposal of the US companies through which they carried on their own business. The US SEC Form 10K Report, relied upon by the revenue, was deemed to show worldwide operations of the group and did not indicate that the main business and revenue-earning activities were carried on through a fixed place in India at the disposal of the US companies. The Court clarified that outsourcing support services to an Indian subsidiary does not give rise to a fixed place PE. Concerning a service PE under Article 5(2)(1), the Court noted that the requirement of furnishing services 'within India' was not met, as the assessees' customers were located outside India and received services there. The Court also found no factual foundation to attract clauses related to an agency PE under Article 5(4). The Court dismissed the appeals, agreeing with the High Court's conclusion that no PE existed. The Court also noted that a mutual agreement reached between competent authorities was case and time-specific and not a precedent for subsequent years.

The Supreme Court held that the High Court did not err in interfering with the ITAT's order. The Court found that the ITAT's reasoning that the building's use solely as a cinema necessitates a different valuation method than commercial buildings was not sufficient to override the land and building method. The Court noted that the mere fact that a building is used for cinema exhibition does not diminish its marketable price, especially when it is self-occupied and unencumbered. The Court also addressed the assessee's reliance on the principle of adopting the interpretation favouring the assessee when two constructions are possible. It clarified that this principle applies to ambiguous statutory provisions, not to choosing between valuation methods. The Court found Section 7 of the Wealth Tax Act to be clear and not leading to ambiguity. Furthermore, the Court highlighted that the income capitalization method could lead to unrealistic negative valuations if the business incurred losses, as evidenced by the Appellate Authority's observation of a loss in the year 1969-70. The Court found no fault with the assessment made by the WTO, which relied on the DVO's report using the land and building method. Consequently, all appeals were dismissed.

The Supreme Court held that the Board's circular was not applicable to the respondent's perfumery compound, as it was capable of being sold in the market. Marketability, not actual sale, is the decisive test for dutiability.

The Supreme Court held that Section 80-IA is a special provision and a code by itself. Depreciation must be deducted when computing profits eligible for deduction under Section 80-IA, irrespective of whether the assessee claimed it under Section 32.

The Supreme Court held that Clause 8(3) of the Amnesty Scheme, mandating the withdrawal of pending appeals/revisions, would not apply to the present case. The Court reasoned that the initial show cause notice was issued within the prescribed time, and its legitimacy was not contested by the Assessee at the appropriate stage. The Assessee's delay in raising the issue until the writ petition stage indicated a lack of bonafide, preventing them from gaining an undeserved advantage. The Court found that the High Court, in exercising its extraordinary jurisdiction under Article 226, should have permitted the Revenue to issue a fresh notice under Clause 8 of the Scheme if it was so advised, rather than quashing the order. The Supreme Court allowed the appeals, setting aside the High Court's order and directing that the Revenue may issue a fresh notice to the Assessee under Clause 8 of the Amnesty Scheme if it chooses to do so.

The Supreme Court held that income tax cannot be levied on hypothetical income. Since the development transaction did not materialize, no actual income or capital gain arose for taxation.

The Supreme Court held that the exercise of revisional power under Section 40 of the Haryana General Sales Tax Act, 1973, after its repeal, was unsustainable. The Court reasoned that the repeal and saving clause in Section 61 of the Haryana Value Added Tax, 2003, explicitly saved only pending proceedings under the repealed Act. Since no proceedings were pending against the respondent when the new Act came into force, matters that had closed under the Act of 1973 could not be reopened. The Court found that the intendment of Section 61 of the Act of 2003 was to give a quietus to closed matters, and therefore, Section 4 of the Punjab General Clauses Act, 1898, had no application due to the contrary intention expressed in the repealing Act. The Court noted that the subsequent amendment to Section 61 in 2010 indicated the legislature's intent to address limitations and constraints, and interpreting the revisional power as saved without pending proceedings would render the amendment redundant. The High Court's order was upheld.

The Supreme Court held that the High Court had erred by proceeding to decide the appeals without formulating the substantial question(s) of law, as mandated by Section 27-A of the Wealth Tax Act, 1957, which is in pari materia with Section 100 of the Code of Civil Procedure, 1908. The Court relied on the principles laid down in Santosh Hazari vs. Purushottam Tiwari, emphasizing that the existence of a substantial question of law is a prerequisite for the High Court's jurisdiction to hear such appeals. Since the High Court failed to identify and formulate these questions, its impugned orders were deemed not legally sustainable. Consequently, the appeals were allowed, the High Court's orders were set aside, and the cases were remanded to the High Court for a fresh decision on merits after formulating the substantial questions of law, if any.

The Supreme Court held that the ITAT and High Court had correctly quashed the notice under Section 153C. The court found that the seized documents did not belong to a person other than the searched person, which is a prerequisite for Section 153C proceedings.

The Supreme Court upheld the High Court's decision, which partly modified the trial court's decree. The Court ruled that the appellant was not entitled to claims for pitching (Claim 1) and extra lead for water (Claim 3) due to contractual terms and evidence.

The Supreme Court held that the High Court was correct in quashing the show-cause notice and the confiscation order. The Court reasoned that there was no evidence of concealment or a manner of keeping the jewellery to evade detection. The respondent chose the Green Channel, and as a tourist with no dutiable goods to declare under the Baggage Rules, she committed no violation. The presumption that the jewellery could not be personal effects due to its high value was rebutted, and the respondent was entitled to import personal jewellery duty-free. The Court found that the jewellery was bona fide for personal use and intended to be taken out of India. The proximity of purchase and the newness of the goods were not decisive. The Court also noted that the respondent's return to India after a trip to London was not concealed and that there was no UK law prohibiting re-importation after VAT claims. The Court expunged remarks made against the DRI in the High Court's judgment.

The Supreme Court held that the issue of whether lease rent fixation is statutory or contractual and its effect on deduction is a mixed question of law and fact. It was not adequately decided by lower authorities.

The Supreme Court held that while the delay was significant, the appellant should not be liable for interest and penalty on service tax that was not legally payable. The High Court erred in dismissing the entire writ petition.

The Supreme Court held that the right of appeal is a substantive right and not merely procedural. It ruled that for assessee appeals, the court fee is governed by the law in force on the date of the assessment order, and for revenue appeals, it's governed by the law in force when the appellate authority set aside the Assessing Officer's judgment. Section 52A of the 1959 Act would not apply if these relevant dates were prior to March 6, 2003.

The tribunal held that the appellant society's activities, including dealing with 'nominal members' and investing funds with external banks, demonstrated a lack of mutuality and that it was not exclusively providing credit facilities to its members. Therefore, it was not entitled to the deduction under Section 80P.

The Supreme Court held that the process of bottling LPG into cylinders constitutes 'production' for the purposes of Sections 80HH, 80-I, and 80-IA of the Income Tax Act. The Court agreed with the ITAT and High Court that bottling is a complex and essential activity that makes the product marketable.

The Supreme Court set aside the impugned judgment of the High Court. It was of the view that it would be just and equitable to grant the appellant an opportunity to avail the statutory remedy. Accordingly, the appellant was granted a period of 30 days to file a statutory appeal before the Sales Tax Tribunal. The Tribunal was directed to entertain the appeal as having been filed in time. The Supreme Court explicitly stated that it had not considered the matter on merits and that it would be open to both sides to raise all available contentions before the Tribunal. For the connected appeal, the order of the Sales Tax Tribunal was set aside, and the appeal was restored to the file of the Sales Tax Tribunal to be consolidated with the appeal permitted to be filed by the judgment in the other appeal.

The Supreme Court held that anti-dumping duty was applicable to stainless steel products with widths between 1251 mm and 1280 mm, considering the tolerance limits introduced by a review notification. However, in a related appeal, the duty was not applicable as the goods were re-exported.

The Supreme Court held that Parliament was fully competent to enact Section 139AA of the Income Tax Act, 1961. The Court found no conflict between the Aadhaar Act and Section 139AA, as they operate in distinct fields when interpreted harmoniously. Regarding Article 14, the Court held that Section 139AA is not discriminatory and does not offend the equality clause, as it treats all income tax assessees, who form a class, alike. The Court also held that Section 139AA does not violate Article 19(1)(g) as quoting the Aadhaar number does not, by itself, impinge upon the right to carry on profession or trade. However, the Court read down the proviso to Section 139AA(2) to operate only prospectively, to avoid unsettling settled rights and to prevent severe consequences for individuals whose PAN cards might be invalidated retrospectively. The Court explicitly stated that the validity of Section 139AA is upheld subject to the outcome of the proceedings before the Constitution Bench concerning Article 21 of the Constitution, particularly the Right to Privacy. A partial stay on the proviso to Section 139AA(2) was granted until the Constitution Bench decision.

The Supreme Court held that the expenditure incurred for technical know-how under the TCA was capital in nature, as it was crucial for setting up a new plant for manufacturing cars for the first time. This was distinguished from cases where technical know-how is obtained for improvising existing facilities.

The Supreme Court held that the appeals lacked merit and were dismissed. Regarding Issue 1, the Court affirmed the Tribunal's finding that the appellant was a 'deemed owner' under Section 27(iiib) of the Income Tax Act, 1961, due to having leasehold rights for over 12 years. This finding was based on the terms of the agreement and the appellant's actions. Concerning Issue 2, the Court agreed with the Tribunal that the income was to be taxed under the head 'Income from House Property'. The reasoning was that the appellant received income by letting out shops/stalls, and it had not established a systematic or organized activity of providing services that would constitute the receipts as business income. The Court distinguished the appellant's case from Chennai Properties & Investments Ltd. and Rayala Corporation (P) Ltd., finding the principle in East India Housing and Land Development Trust Ltd. applicable, where letting out property was not the main object of the company, and the income retained its character as income from house property. On Issue 3, the Court found no perversity in the Tribunal's order, as the appellant had not produced sufficient material to demonstrate that its principal business activity was letting out property. The ITAT, as the final fact-finding authority, had made its findings, which were not shown to be perverse by the appellant. The operative direction was the dismissal of the appeals.

The Supreme Court held that the product 'Appy Fizz' is required to be classified under Item No. 5 of Entry 71, as amended by S.R.O. No. 119 of 2008. The Court found no error in the High Court's decision that no revisional order of the Supreme Court in earlier proceedings could conclude the issues that could be considered in an application for clarification by the competent authority under Section 94 of the Act. The Court set aside the order passed by the Committee of Joint Commissioners dated 06.11.2015, which had classified the product as 'aerated branded soft drinks' at 20% VAT. The appeals arising out of SLP(C)Nos. 24460-61 of 2016 were disposed of directing that proceedings against the assessee be decided in light of this judgment, with consequential orders to be passed, including adjustment of any amounts deposited. The appeal arising out of SLP(C)No. 9467 of 2016 was dismissed.

The Supreme Court held that Section 14A of the Income Tax Act, 1961, would apply to dividend income on which tax is payable under Section 115-O. The Court reasoned that the plain reading of Section 14A shows that if income does not form part of the total income of the assessee, any expenditure incurred in earning such income cannot be allowed as a deduction. The fact that the dividend-paying company pays tax under Section 115-O does not negate the applicability of Section 14A, as the recipient assessee's income is not includible in its total income. The Court emphasized that the object of Section 14A is to prevent the claim of allowance of expenditure incurred towards earning exempted income. Regarding the second issue for Assessment Year 2002-2003, the Court found that the Revenue had failed to establish any nexus between the expenditure disallowed and the earning of dividend income. The Court noted the absence of new facts or change of circumstances and the lack of compelling reasons to depart from the consistent position taken in earlier assessment years. Therefore, for Assessment Year 2002-2003, the assessee was entitled to the full benefit of claiming dividend income without any deductions. The appeal was allowed, and the High Court's order was set aside subject to the conclusions on the applicability of Section 14A to dividend income under Section 115-O.

The Supreme Court held that Section 40(a)(ia) of the Income Tax Act, 1961, covers not only those cases where the amount is yet to be paid but also those where the amount has actually been paid. The Court reasoned that the entire scheme of the obligation to deduct tax at source and pay it to the Central Government, as outlined in Sections 194C and 200, read holistically, indicates that the word 'payable' in Section 40(a)(ia) is not restricted to amounts that are merely due. If the provision were interpreted to apply only to amounts not yet paid, a person violating the TDS provisions would escape consequences, despite specific provisions designed to penalize such defaults. The Court approved the view taken by the High Courts of Punjab & Haryana, Madras, and Calcutta, and overruled the contrary view of the Allahabad High Court in CIT v. Vector Shipping Services (P) Ltd. The appeal was dismissed, upholding the disallowance of expenditure.

The Supreme Court held that Formula One World Championship Ltd. (FOWC) had a Permanent Establishment (PE) in India. The Court reasoned that the Buddh International Circuit, being a fixed place where the commercial/economic activity of conducting the F-1 Championship was carried out, was at the disposal of FOWC. The Court emphasized that the entire arrangement between FOWC and Jaypee, when viewed holistically, demonstrated that FOWC had real and dominant control over the event and the circuit during the period of the championship. The Court found that FOWC, as the Commercial Right Holder (CRH), was actively involved in the conduct of the races and had access and control over the circuit, making it a virtual projection of the foreign enterprise in India. The twin conditions for a PE – existence of a fixed place of business and carrying on business through that place – were satisfied. Consequently, the taxable event took place in India, and FOWC is liable to pay tax on the income earned in India. The Court also upheld the High Court's finding that Jaypee was bound to make appropriate deductions under Section 195 of the Income Tax Act, 1961, on payments made to FOWC, as these were business income attributable to the PE. However, the Court clarified that only the portion of income attributable to the PE would be treated as business income, and the obligation to deduct tax under Section 195 is limited to that appropriate portion chargeable to tax in India. The Court dismissed the appeals by FOWC and Jaypee and disposed of the appeal by the Revenue, noting that the issue of a dependent PE had become academic.

The Supreme Court held that the case of the respondent-assessee does not fall within the four corners of Section 50(2) of the Income Tax Act, 1961. Section 50(2) applies to the transfer of one or more blocks of assets used in the running of a business. However, when the entire running business, with all its assets and liabilities, is sold in one go, as in this case, it constitutes a slump sale of a "long-term capital asset" and not "short-term capital assets". The Court found no fault with the reasoning of the CIT(Appeals), which was rightly upheld by the Tribunal and the High Court. The sale was therefore required to be taxed accordingly. The Court relied on the decisions in Commissioner of Income Tax, Gujarat vs. Artex Manufacturing Co. and Premier Automobiles Ltd. vs. Income Tax Officer & Anr. The appeal filed by the Revenue was dismissed.

The Tribunal and High Court correctly held that the sale of an entire running business as a slump sale does not fall under Section 50(2) and should be treated as a long-term capital gain. The Supreme Court found no fault with these decisions.

The Supreme Court held that the "premium amount" collected by the Company on its subscribed issued share capital is not and cannot be considered part of the "capital employed in the business of the Company" for the purpose of Section 35D(3)(b) of the Income Tax Act, 1961. The Court reasoned that if the legislature intended to include share premium in the capital employed, it would have been specifically mentioned in Explanation (b) of sub-section (3) of Section 35D. The absence of such a specific mention indicates the legislative intent not to extend the benefit of Section 35D to such sums. The Court also referred to the Companies Act provisions, noting that while Section 78 mandates a "securities premium account," it does not treat this amount as part of the company's capital employed for deduction purposes. The Court affirmed the view of the Tribunal and the High Court, dismissing the assessee's appeals. No issue was expressly left undecided.

The Supreme Court held that the Commissioner of Income Tax (CIT) could not exercise his powers under Section 263 of the Income Tax Act, 1961, in this case. The Court reasoned that Section 263 is intended to correct erroneous orders prejudicial to the Revenue and requires proper application of mind by the CIT. It cannot be invoked to correct every mistake or when the AO has taken one of the permissible views. The Court noted that while dissolution of a firm typically necessitates valuing assets at market price, this principle applies when the business comes to an end. In this instance, the business continued with the surviving partner who inherited the deceased partner's share. Therefore, there was no necessity to sell the assets, and valuing the stock-in-trade at market price was not required. The view taken by the Assessing Officer in accepting the book value of the stock-in-trade was a plausible and permissible view. Consequently, the CIT could not have invoked Section 263. The High Court's judgment was upheld, and the appeals were dismissed.

The Supreme Court dismissed the appeal, agreeing with the High Court's analysis. The Court held that while the judgment in 'Saraswati Industrial Syndicate' dealt with Section 41(1) per se and might not be directly applicable where income accrues to an amalgamated company (which cannot be treated as income of the taking-over company), the present case is different. Here, the assessee was given the benefit of accumulated losses of the amalgamated company (HPL) under Section 72A. The Court reasoned that when the assessee is allowed the benefit of these losses, which were suffered by HPL but are deemed to be the assessee's losses by virtue of Section 72A, it is not open for the assessee to claim the benefit of accumulated losses without accounting for the income accrued under Section 41(1) at the hands of HPL. This income had to be necessarily adjusted to ascertain the actual accumulated losses for which the benefit is extended to the assessee. The High Court's reasoning, which considered the objective of Section 72A in facilitating mergers of sick units and the deeming fiction it creates, was upheld. The Court found that the waived interest was effectively availed of by the assessee company, and when it sought the benefit of HPL's accumulated losses, the income accrued to HPL had to be accounted for.

The Supreme Court upheld the High Court's decision, dismissing the appeal. The Court reasoned that while HPL ceased to have a legal identity post-amalgamation, the benefit of the waived interest was ultimately availed by the assessee company. When the assessee is allowed to set off the accumulated losses of the amalgamated company under Section 72A, any income that accrued to the amalgamated company (like the waived interest under Section 41(1)) must be adjusted while computing those accumulated losses. The Court concurred with the High Court's analysis that the income accrued under Section 41(1) at the hands of HPL had to be accounted for and adjusted to determine the actual accumulated losses to be carried forward by the assessee. The principle from Saraswati Industrial Syndicate v. CIT was distinguished as it did not deal with Section 72A.

The Supreme Court held that the Tribunal erred in reducing the penalty amount from Rs. 2,06,000/- to Rs. 50,000/-. The Court found that the Tribunal failed to consider the law laid down in the case of Union of India & Ors. v. Dharmendra Textile Processors & Ors. (2008) 13 SCC 369, which it was bound to do. Instead, the Tribunal wrongly relied on its own decision in Escorts JCB Ltd. The Court also noted that the Tribunal provided no justifiable legal reasons for reducing the penalty. The reasoning and conclusion of the Tribunal were found to be legally unsustainable. Therefore, the Supreme Court set aside the order of the Tribunal and restored the order of the adjudicating authority. The appeal was allowed.

The Supreme Court held that the Tribunal's decision was made without sufficient background checks into the actual processes involved. The Court noted that 'manufacture' implies change, but not every change constitutes manufacture; it typically results from treatment, labour, and manipulation. The Tribunal's finding that the mixing of food flavours with IMFL did not amount to manufacture was not adequately supported by an examination of the specific processes undertaken. The Court observed that the exact nature of the process, how mixing was done, and the overall process involved were not discernible or commented upon by the Tribunal, leaving the matter ambiguous. Furthermore, the Tribunal's conclusion that certain show cause notices were barred by limitation was also found to be based on a cryptic finding without appropriate scrutiny of the dates. Consequently, the matter was remitted back to the Tribunal for reconsideration of these aspects on the basis of detailed factual analysis and the applicable law. The Court explicitly stated that it had not expressed any opinion on the merits of the case, including the imposition of penalty and interest.

The Supreme Court held that the provisions of Section 2(22)(e) of the Income Tax Act, 1961, were attracted. The Court reasoned that the payment was made to the HUF, and the Karta, Shri Gopal Kumar Sanei, who held shares in the company, was a member of the HUF and had a substantial interest in it, being entitled to not less than 20% of the HUF's income. This position, as per Explanation 3 to Section 2(22)(e), meant that the provisions were attracted, and it was unnecessary to determine whether the HUF could legally be a beneficial or registered shareholder. The Court noted that the annual returns filed with the ROC showed the HUF as the registered and beneficial shareholder, and even if it were not a registered shareholder, the conditions of Section 2(22)(e) were met because the payment was received by the HUF, and the shareholder (Karta) was a member of the HUF with a substantial interest. The judgment in C.P. Sarathy Mudaliar was held not applicable due to the absence of Explanation 3 in the earlier Act.