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PETITIONER: KESHAVJI RAVJI & CO. ETC. ETC.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX

DATE OF JUDGMENT05/02/1990

BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) OJHA, N.D. (J) VERMA, JAGDISH SARAN (J)

CITATION:  1990 SCR  (1) 243        1990 SCC  (2) 231  JT 1990 (1)   235        1990 SCALE  (1)207

ACT:     Income         Tax        Act,          1961.         s. 40(b)--Non-deductibility--Interest  paid by partner on  bor- rowings  from firm--Whether to be set off against  interest- paid on his capital. Statutory Interpretation: Taxing statutes--Where meaning  is plain  and unambiguous ascertainment of  legislative  intent not required--Whether literal interpretation leads to result not  intended  another construction in consonance  with  the object to be adopted. Express statutory provisions departing from  general  law  will prevail over  the  latter--Rule  of construction--Not  applicable  invariably  in  all   circum- stances--Where,  a  provision is re-enacted using  the  same word as used in old provision, subsequent to judicial ascer- tainment  of meaning of that word, the word used in the  re- enacted  provision to be presumed to bear the same  meaning. ’Explanation’ provision in statute--Significance and use  of Circulars issued by CBDT expressing its views on a statutory provision-Not binding on Court.

HEADNOTE:     Section 40(b) of the Income Tax Act, 1961, as it  stood at  the  relevant time, prohibited  deduction  of  interest, salary,  bonus, commission or remuneration paid by the  firm to  the  partner. Explanation 1 introduced  thereto  by  the Taxation Laws (Amendment) Act, 1984, which took effect  from 1st  April, 1985, provided that where interest is paid by  a firm  to a partner who has also paid interest to  the  firm, the amount of interest to be disallowed shall be limited  to the net amount of interest paid by the firm to the  partner. Circular No. 33D(XXV-24) of 1965 issued by the Central Board of Direct Taxes provided that where a firm pays interest  to as well as receives interest from the same partner, only the net interest can be stated to have been received or paid  by the firm.     The  assessee-appellant, a registered partnership  firm, in the accounting year for the assessment year 1975-76, paid interest  to the partners on the amounts standing  to  their respective  credits.  It  also received  from  the  partners interest  on their borrowings from the firm. The  Income-tax Officer

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244 while  disallowing the amount of interest paid to the  part- ners  did  not set-off the interest received  from  them  on their  borrowings.  The  Appellate  Assistant   Commissioner allowed the claim of the appellants that only the net inter- est  paid  to the partners after  setting-off  the  interest received  from  them  was to be  disallowed.  The  Appellate Tribunal  affirmed the appellate order. The High  Court  an- swered  the reference in favour of the Revenue on  the  view that  the  Tribunal was not justified in  holding  that  net interest should be disallowed under s. 40(b) of the Act.     In  these appeals by special leave it was contended  for the  appellants that: (a) the sole object of s.  40(b)  was, having regard to the special features and legal incidents of a partnership, to enable the assessment of the ’real income’ of  the firm and did not require or compel the exclusion  of the  cross-interest  paid by a partner  in  determining  the quantum  to  be disallowed; (b) the extent  of  the  embargo under  s.  10(4)(b) of the 1922 Act on the  disallowance  of interest  paid to a partner was judicially  interpreted  and ascertained  in Sri Ram Mahadeo Prasad  v. CIT, 24  ITR  176 All. and when the legislature re-enacted those provisions in s.  40(b) of the 1961 Act in substantially the  same  terms, legislature  must be held to have used that expression  with the same implications attributed to it by the earlier  judi- cial  exposition; (c) the interest paid to a partner on  the capital  brought in by him and the interest received from  a partner  on his borrowings from the firm were both  integral parts of a method adopted by the partners for adjusting  the division of profits and in that sense both payments  partook of  the same character and it would be permissible  to  take both  the  payments into consideration  in  quantifying  the interest  and  treat only such excess, if any, paid  by  the firm  as susceptible to the exclusionary rule in  s.  40(b); (d) the circular of the Central Board of Direct Taxes, which was  statutory in character, was binding on the  authorities and  the  High Court was in error in taking a  view  of  the legal  position different from the one indicated in it;  and (e)  the  amendment of 1984 inserting Explanation  1  in  s. 40(b), though later in point of time, constitutes a legisla- tive  exposition of the correct import of the provision  and so construed offers a guide to the correct understanding  of the  provisions  in  s. 40(b) in their  application  to  the earlier years as well. Allowing the appeals, the Court,     HELD: 1.1 As long as there is no ambiguity in the statu- tory  language,  resort  to any  interpretative  process  to unfold  the  legislative intent becomes  impermissible.  The supposed  intention  of the legislature cannot then  be  ap- pealed to whittle down the statutory 245 language.  If the intendment is not in the words used it  is nowhere else. [255E-F]     Doypack  Systems Pvt. Ltd. v. Union of India,  [1988]  2 SCC 299, referred to.     1.2  Section 40 of the Income Tax Act, 1961  opens  with the  nonobstante clause and directs that outgoings  such  as interest, salary, bonus, commission or remuneration specifi- cally enumerated in cl. (b) shall not be deducted in comput- ing the income chargeable under the head "profits and  gains of business or profession". The words used therein on  their own  terms,  are plain and unambiguous.  They  manifest  the intention of the legislature and must, therefore, be applied as they stand. [255D-E, F-G, 256B]     1.3  Artificial and unduly latitudinarian rules of  con-

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struction,  with  their general tendency to ’give  the  tax- payer  the breaks’, are out of place where  the  legislation has  a  fiscal  mission. Taxation is regarded  as  a  potent fiscal  tool of State policy to achieve equitable  distribu- tion  of  the  burdens of the community  to  sustain  social services. [256C-D] Thomas M. Cooley: Law of Taxation, Vol. 2, referred to.     1.4 The test of ’real income’ as one on which the opera- tion  of  s. 40(b) could be sought to be limited  is  not  a reliable one. It might on its own extended logic validate  a set off of the interest paid to one partner against interest received  from another and likewise, interest received  from one partner on some other dealings between him and the  firm against  interest  paid  to another partner on  his  or  her capital contribution and thus lead to positions and results, whose dimensions and implications are not fully explored. It must  not, therefore, be called in aid to defeat the  funda- mental  principles of the law of income tax. [257  A,  256A, 256G, 257D1     State Bank of Travancore  v. CIT, [1986] 158 ITR 102  at 155, referred to.     2.1  When  words acquire a particular meaning  or  sense because  of  their authoritative  construction  by  superior courts,  they  are presumed to have been used  In  the  same sense  when used In a subsequent legislation In the same  or similar context. [257G]     H.H. Ruckmaboye v. Lulloobhoy Mottichund, Moore’s Indian Appeals, Vol. 5, p. 234 at 250, referred to. 2.2  However, the rules of interpretation are not  rules  of law. they 246 are  mere  aid  to construction and  constitute  some  broad pointers.  The interpretative criteria apposite in  a  given situation may, by themselves, be mutually irreconcilable. It is  the task of the court to decide which one, in the  light of all relevant circumstances, ought to prevail. [258E-F]     Maunsell v. Olins, [1975] 1 All ER 16 and Utkal Contrac- tors & Joinery v. State of Orissa, [1987] 3 SCR 317 at  330, referred to.     2.3  The decision in Sri Ram Mahadeo Prasad v. CIT,  (24 ITR  176 All.) proceeded on a construction of  the  relevant provision  i.e.s. 10(4)(b) of the 1922 Act and on  what  the High  Court considered as affording to the assessee  a  fair treatment.  It  did  not rest on any  special  or  technical connotation  of  the word ’interest’ nor any  special  legal sense which that word could be said to have acquired by  the earlier judicial ascertainment of its amplitude. The  appeal to  this principle of construction in the instant  case  is, therefore, out of place. [258D-E]     3.1 To the extent the statute expressly or by  necessary implication departs from the general law, the latter can not be  invoked  to displace the effect of the statute.  But  if there  is no such statutory departure the general  principle operating  in that branch of law would determine the  nature of legal relationship. [261F-H]     Sir  Francis  Bennion, on Statutory  Interpretation,  p. 350, 354, referred to.     In  the case of partners, therefore, to the  extent  not prohibited  by  s. 40(b) of the Act, the  incidents  of  the general law of partners would be attracted to ascertain  the legal  nature and character of a transaction. This is  quite apart from distinguishing the ’substance’ of the transaction from  its  ’form’. But the legal effect  of  a  transaction, cannot  be  displaced by probing into the substance  of  the transaction.  The  Court,  however, is  not  precluded  from

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treating what the transaction is in point of fact as one  in point of law also. [262C-D, 263A-B]     Sargaison  v. Roberts, [1969] 45 Tax Cases 612;  CIT  v. Gillanders  Arbuthnot  &  Co., 87 ITR  407;  Narayanappa  v. Krishtappa, [1966] 3 SCR 400; CIT v. Chidambaram, [1977] 106 ITR 292; Lindley on Partnership, (14th Edn.) p. 30; Regional Director  Employees State Insurance Corporation, Trichur  v. Ramanuja  Match  Industries, [1985] 2 SCR 119 and  Ellis  v. Joseph Ellis & Co., [1905] 1 KB 324. referred to. 3.2 If interest paid by the firm to a partner and the inter- est, in 247 turn, received from the partner are mere expressions of  the application  of the funds or profits of the partnership  and which,  having  regard to the community of interest  of  the partners, are mere variations of the method of adjustment of the  profits,  they  could be treated as part  of  the  same transaction  if,  otherwise, in general law  they  admit  of being so treated. The provisions of s. 40(b) do not  exclude or prohibit such an approach. [263B-D]     If  instead of the transactions being reflected  in  two separate  or distinct accounts in the books of the  partner- ship they were in one account, the quantum of interest  paid by the firm to the partner would, to the extent of  interest on drawings of the partner, stand attenuated. The mere  fact that the transactions were split into or spread over to  two or more accounts would not by itself make any difference if, otherwise.  the substance of the transaction was  the  same. [263D-E] Official  Liquidator  v.  Lakshmikutty, [1981]  2  SCR  349, referred to.     Even  the idea of a set-off itself, which presupposes  a duality  of entities may be out of place in the very  nature of  the relationship between a firm and its  partners  where the  former is a mere compendious reference to  the  latter. But  even to the extent the income tax law which  identifies the  firm as a distinct entity and unit of assessment  goes, the idea of set-off may be invoked in view of the  mutuality implicit  in  the putative duality inherent in  deeming  the firm  as  a distinct entity under the Act for  certain  pur- poses.  The  fiction may have to be pushed  to  its  logical conclusions. [263H-264B]     3.3  Where  a  strict literal construction  leads  to  a result  not intended to subserve the object of the  legisla- tion another construction, permissible in the context should be adopted. Therefore, though equity and taxation are  often strangers, attempts should be made that these do not  remain always  so.  More so, a taxing statute being  not  different from  other statutes it is not to be construed  differently. The duty of the Court is to give effect to the intention  of the legislature. [264C, E-F, G-H, 265A]     CITv.  J.H. Gotla, 156 ITR 323 and A.G.V. Carlton  Bank, [1899] 2 QB 158, referred to.     3.4 Accordingly, where two or more transactions on which interest is paid to or received from the partner by the firm are shown to have the element of mutuality and are referable to the funds of the 248 partnership as such, s. 40(b) should not be so construed  as to exclude in quantifying the interest on the basis of  such mutuality.  If  that be so, the interest, if any paid  to  a partner  by the firm in excess of what is received from  the partner  could  alone be excluded from  deduction  under  s. 40(b). [265B-C] C.I.T. v. T.V. Ramanaiah & Sons, 157 ITR 300 A.P., approved.

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   C.I.T.  v. O.M.S.S. Sankaralinga Nadar & Co.,  147,  ITR 332 Mad., overruled.     4.  The Central Board of Direct Taxes cannot pre-empt  a judicial  interpretation of the scope and ambit of a  provi- sion  of  the  Income Tax Act by issuing  circulars  on  the subject.  A circular cannot even impose on the tax  payer  a burden higher than what the Act itself on a true interpreta- tion envisages. Nor can it detract from the Act. The task of interpretation  of the laws is the exclusive domain  of  the courts. The circulars do not bind them. [265E-F, 266D, 265F, G-H] State  Bank of Travancore v. CIT, [1986] 158 ITR  102.,  re- ferred to.     Since the circular of 1965 broadly accords with the view taken  on the true scope and interpretation of s.  40(b)  as regards  qualification  of  interest it  is  unnecessary  to examine whether or not such circulars are recognised legiti- mate aids to statutory construction. [266E-F]     5. An ’Explanation’ is generally intended to explain the meaning  of certain phrases and expressions contained  in  a statutory  provision. There is no general theory as  to  the effect  and  intendment of the Explanation except  that  the purpose and intendment of the Explanation are determined  by its  own  words. An Explanation depending on  its  language, might  supply or take away something from the contents of  a provision.  An Explanation may also be introduced by way  of abundant caution in order to clear the meaning of a statuto- ry provision and to place what the legislature considers  to be the true meaning beyond controversy or doubt. [266G-267B]     In  the instant case, the notes on clauses  appended  to the Taxation Laws (Amendment) Bill, 1984 say that clause  10 which  seeks to amend s. 40will take effect from 1st  April, 1985 and will, accordingly, apply in relation to the assess- ment  year  1985-86  and subsequent years. In  view  of  the express prospective operation and effectuation of the Expla- nation 249 it  is  not necessary to examine its  possible  purpose  any further. [267C-E]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1177  to 1184 (NT) of 1990.     From  the  Judgments and Order  dated  5.3.85,  21.1.85, 25.2.85,  11.2.85,  14.10.85, 11.2.85 and  20.10.86  of  the Madras  High  Court  in T.C.  Nos.  694/82,565/80,  1404/80, 637/81,638/81,521/81,429/83 and 572/83.     T.A.  Ramachandran and Mrs. Janki Ramachandran  for  the Appellant.     S.C. Manchanda, B.B. Ahuja and Ms. A. Subhashini for the Respondent. The Judgment of the Court was delivered by     VENKATACHALIAH,  J. These Special Leave Petitions  arise out of and are directed against the orders of the High Court of  Judicature at Madras disposing of references made  under Section 256(1) of the Income Tax Act 1961 (Act for short) in Tax  Case Nos. 694 of 1982, 565 of 1980, 1404 of  1980,  637 and  638 of 1981, 521 of 1981, 429 of 1983 and 572 of  1983. The  High Court following its earlier pronouncement of  that Court in Commissioner of Income-tax v. O.M.S.S. Sankaralinga Nadar  &  Co.,  147 ITR 332 answered the  question  of  law, similar  in  all the cases, in favour of  the  revenue.  The question was whether in making a disallowance for the inter-

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est  paid by a partnership firm to a partner  under  Section 4O(b).of the Act the interest, in turn, paid by the  partner on  his borrowings from the firm should be taken account  of and  deducted and only the balance disallowed under  Section 40(b).     On  this question, there is a sharp divergence of  judi- cial  opinion in the High Courts. In Sri Ram Mahadeo  Prasad v. C.I.T., 24 ITR 176 (All) 1; C.I.T. v. Kailash Motors, 134 ITR  312;  C.I.T. v. T.V. Roman sigh & Sons,  157  ITR  300; C.I.T.  v.  Kothari  & Co., 165 ITR 594  (Kar.);  C.I.T.  v. Balaji  Commercial Syndicate, 165 ITR 596 (Kar.); C.I.T.  v. Motiisi  Ramjiwan  and Co., 171 ITR 294  (Raj.);  C.I.T.  v. Precision  Steel and Engg. Works, 179 ITR 283 (Pun &  Har.), the  High Courts have taken the view that where a firm  pays interest  to its partner and the partner also pays  interest to  the  firm, only the net amount of interest paid  by  the firm to the partner is liable to disallowance under  Section 40(b) of the Act. However, in C.I.T. v. O.M.S.S. 250 Sankaralinga Nadar & Co., 147 ITR 332 (Mad.), the High Court of Madras has taken a contrary view.     2.  We  have  heard Shri  Ramachandran,  learned  senior counsel for the appellants and Sri Manchanda, learned Senior Counsel and Sri B.B. Ahuja for the revenue. Special Leave is granted.  The appeals are taken up for final hearing,  heard and are disposed of by this common judgment.     3.  We may refer to the facts in SLP(C)  No.  14291/1985 which is representative of and typifies the context in which the  question arises. The appellant, M/s. Keshavji  Ravji  & Co.  is a registered firm consisting of 6 partners and  car- ries  on a business in the manufacture and export of  stain- less  steel  articles. In the accounting year  ended  13.11. 1974, corresponding to the assessment year 1975-76, the firm paid  interest  to the partners on the amounts  standing  to their respective credits in the firm. The firm also received from  the  partners interest on their  borrowings  from  the firm. For the relevant assessment year, the appellant  filed a  return  disclosing  a total income  of  Rs.2,55,225.  The Income-tax Officer while disallowing the amount of  interest paid to partners did not set-off the interests received from the  partners on their own borrowings. With  this  disallow- ance, the income of the firm was assessed at Rs.2,79,730. In the assessee’s appeal, the Appellate Assistant  Commissioner of  Income  Tax by his order dated  18.10.1977  allowed  the claim  of the appellant that only the net-interest  paid  to the  partners, after setting-off the interest received  from them,  was to be disallowed. The Revenue took-up the  matter in  further appeal before the Income Tax Appellate  Tribunal which  by its order dated 6.1.1979 dismissed the appeal  and affirmed the appellate order of the Assistant  Commissioner. The  Tribunal, as did the Appellate Assistant  Commissioner, placed reliance on the decision of the Allahabad High  Court in Sri Ram Mahadeo Prasad v. C.I.T., 24 ITR 176 (All).     At  the  instance of the revenue the Tribunal  stated  a case  and  referred the following question of  law  for  the opinion of the High Court. "Whether, on the facts and in the circumstances of the case, the  Appellate  Tribunal  was correct in  holding  that  net interest  should  be disallowed under section 40(b)  of  the Income-tax Act, 1961 ?" This  reference under Section 256(1) of the Act  was  regis- tered in 251 the High Court as Tax Case No. 694/82 and the High Court  by its  order  dated  5.3. 1985 answered the  question  in  the

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negative and against the appellant relying, as stated earli- er,  on  its earlier pronouncement in  Sankaralinga  Nadar’s case. Broadly, similar are the circumstances under which the other appeals arise.     4.  Before we advert to and evaluate the merits  of  the contentions,  it  is appropriate to refer to  the  statutory provision as it then stood. Section 40 of the Act provided: "40.  "Notwithstanding anything to the contrary in  sections 30  to  39, the following amounts shall not be  deducted  in computing the income chargeable under the head ’Profits  and gains of business or profession",       (a)         ]               (1) ]               to  ]   Omitted as unnecessary               (v) ]       (b) in the case of any firm, any payment of  interest, salary bonus, commission or remuneration made by the firm to any partner of the firm."       (c)         ]                       ]     Omitted as unnecessary       (d)         ] By  the Taxation Laws (Amendment) Act, 1984, several  amend- ments were introduced in the body of Section 40. One of them was  the  introduction  of Explanation 1 in  clause  (b)  of Section 40. That Explanation reads: "Explanation  1:  Where interest is paid by a  firm  to  any partner of the firm who has also paid interest to the  firm, the  amount of interest to be disallowed under  this  clause shall  be  limited  to the amount by which  the  payment  of interest  by the firm to the partner exceeds the payment  of interest by the partner to the firm." Referring  to the new Explanation inserted in clause (b)  of Section 40 by the amendment, the "Notes on Clauses" say: 252 "This  clause  seeks  to insert three  new  Explanations  to section  40(b)  of the Act. Explanation 1 seeks  to  provide that  where interest is paid by a firm to a partner who  has also paid interest to the firm, the amount of interest to be disallowed  under section 40(b) of the Act shall be  limited to the net amount of interest paid by the firm to the  part- ner, that is, the amount by which the payment of interest by the  firm to the partner exceeds the payment of interest  by the partner to the firm." "The  proposed amendments will take effect from  1st  April, 1985,  and will, accordingly, apply in relation to  the  as- sessment year 1985-86 and subsequent years." The  Explanation I, which was introduced in  1984,  proprio- vigore, does not apply to the assessment relating, as  here, to  an earlier year. Whether the Explanation brings about  a change  in, or admits of being understood as  an  exposition of, the law is, however, a different matter. It is, perhaps, also  appropriate  here to refer to the  circular  No.  33-D (XXV-24)  of 1965 of the Central Board of Direct Taxes,  the operative part of which provides: "However  where a firm pays interest to as well as  receives interest from the same partner, only the net interest can be stated  to  have been received or paid by the firm,  as  the case may be, and only the net interest should be taken  into consideration. This view also finds support in the  decision of  the Allahabad High Court in the case of Sri Ram  Mahadeo Prasad,  [1953]  24 ITR 176. In view of the above,  the  in- structions contained in Board’s Circular No. 55 of 1941  may be treated as modified accordingly  ......  "     5. Section 40 imposes a restriction on the deductibility of  certain  outgoings and expenses  which  are,  otherwise,

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enabled  under Sections 30-39 of the Act and constitutes  an exception  to  these sections. Clause (b) of Section  40  is analogous, with some enlargement, to Section 10(4)(b) of the predecessor  Act  of  1922. The prohibition  in  Section  40 against the deductibility of certain outgoings is in  manda- tory  terms. It is this aspect that has loomed large in  the reasoning  supporting the view accepted by the  Madras  High Court  in  Sankaralinga Nadar’s case and emphasised  by  the learned counsel for the Revenue. The reasoning of the Madras High Court in that case and of the Andhra Pradesh High Court in Commissioner of Income-tax v. T.V. Ramanaiah & Sons, 157 253 ITR  300  (A.P.) illustrate the rival points  of  view.  The Madras High Court held: "   .....  The collocation of the words shows that  what  is disallowed  in the matter of payment of interest  cannot  be the net interest, but can only be interest paid with  refer- ence  to a given account relating to payment of interest  by the  firm  to the partner. This is because  the  subject  of disallowance in the matter of payment of interest appears in s.  40(b)  cheek by jowl with salary, bonus,  commission  or remuneration  made by the firm to the partner. There  cannot be  any net salary or net bonus or net remuneration as  mat- ters  of disallowance. They can only be salary, as such,  or bonus,  as such, or commission, as such, or remuneration  as such which are the subject of disallowance. In like  manner, when  the section speaks of payment of interest by the  firm to a partner as the subject of disallowance, it can only  be payment  of  ’gross’ interest in the particular  account  in which  interest  is payable. Salary,  bonus,  commission  or remuneration  do  not have what may be  characterised  as  a two-way traffic  ......  " "   .....  In the earliest of the cases, the Allahabad  High Court endorsed the Tribunal’s decision to disallow only  the net interest. The court did so, not on a construction of the words   of  the  section,  but  on  equitable   grounds   of fairness"......" (P. 336)     The  Andhra  Pradesh  High Court,  however,  taking  the contrary  view relied on, what it considered, the  revenue’s own understanding of the legal position as made manifest  in the Board’s circular that the "real purpose of Section 40(b) of  the Act was to add back only the net amount of  interest and not the gross amount". On the interpretation of  Section 40(b), the High Court in Rarnanaiah’s case said: "  .....  As a matter of interpretation of section 40(b)  of the  Act,  we find that there is nothing  in  the  provision which  expressly states that the amount to be added back  is either  gross or net. The provision requires that "any  pay- ment  of interest" by a partnership firm to a partner  shall not  be deducted in computing the income of the  partnership firm. For the purpose of finding out the amount paid by  way of 254 interest, it is necessary for the Income-tax Officer to find out  the amount of interest paid by the partnership firm  to the partner and also see if the same partner paid any inter- est  to  the partnership firm and ascertain  the  amount  of interest  effectively  paid by the partnership firm  to  the partner  ......" [157 ITR 300 at p. 304]     5A.  The arguments of the learned counsel on both  sides covered a wide range of contentions. The submissions of  Sri Ramachandran in support of the appeals admit of being formu- lated thus:

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(a) The scheme of Section 40 of the Act does not evince  any intention  to  penalise a firm for the outgoings  which  are rendered  non  deductible; but the sole  object  of  Section 40(b)  is, having regard to the special features  and  legal incidents of a partnership, to enable the assessment of  the ’real-income’  of  the  firm. The  outgoings  disallowed  by Section  40(b) are not really outgoings at all, but  consti- tute  what are, otherwise, ingredients or components of  the real income of the firm. Therefore, the ascertainment of the real income or the real commercial profits does not  require or  compel  the exclusion of the cross-interest  paid  by  a partner  in determining the quantum to be  disallowed  under Section 40(b). (b) The extent of the embargo under Section 10(4)(b) of  the 1922 Act on the disallowance of "interest" paid to a partner was judicially interpreted and ascertained in Sri Ram  Maha- deo Prasad v. Commissioner of Income-tax, 24 ITR 176  (All.) and  when  the legislature re-enacted  those  provisions  in Section  40(b)  of the 1961 Act in  substantially  the  same terms, legislature must be held to have used that expression with  the same implications attributed to it by the  earlier judicial exposition. (c) Interest payable by the partners to the firm pursuant to an  agreement between the partners is of the same nature  as that  payable  by the firm to the partners on  the  capital, brought-in  by  them. Interest paid to and received  from  a partner  are both integral parts of a method adopted by  the partners  for adjusting the division of profits and in  that sense both payments partake of the same character. In  identifying and quantifying the ’interest’ for  purposes of 255 Section  40(b)  it  would be permissible to  take  both  the payments  into consideration and treat only such excess,  ii any,  paid  by the firm as susceptible to  the  exclusionary rule in Section 40(b). (d)  The  circular No. 33-D(XXV-24) of 1965 of  the  Central Board of Direct ’Faxes, which is statutory in character,  is binding  on the authorities. The High Court was in error  in taking  a view of the legal position different from the  one indicated in it. (e) The amendment of 1984 inserting Explanation I in Section 40(b), though later in point; of time, constitutes a  legis- lative exposition of the correct import of the provision and so construed offers a guide to the correct understanding  of the  provisions in Section 40(b) in its application  to  the earlier years as well. 6. Re: Contention (a)     The  premises of the argument is good in parts; but  the inference  does not logically follow. Section 40(b),  it  is true,  seeks to prevent the evasion of tax by  diversion  of the profits of a firm; but the legislative expedience adopt- ed to achieve that objective requires to be given effect  on its  own  language. Section 40 opens with  the  non-obstante clause  and  directs  that  certain  outgoings  specifically enumerated  in it "shall not be deducted" in  computing  the income  chargeable  under  the head "profits  and  gains  of business or profession": As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible.  The supposed  intention of the legislature can not then  be  ap- pealed  to  whittle  down the statutory  language  which  is otherwise unambiguous. If the intendment is not in the words used it is nowhere else. The need for interpretation  arises when the words used in the statute are, on their own  terms,

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ambivalent and do not manifest the intention of the Legisla- ture. In Doypack Systems Pvt. Ltd. v. Union of India, [1988] 2 SCC 299 it was observed: "The words in the statute must, prima facie, be given  their ordinary  meanings.  Where the grammatical  construction  is clear  and  manifest and without  doubt,  that  construction ought  to prevail unless there are some strong  and  obvious reasons to the contrary  ......  " (p. 33 1) 256 "It  has to be reiterated that the object of  interpretation of a statute is to discover the intention of the  Parliament as expressed in the Act. The dominant purpose in  construing a  statute is to ascertain the intention of the  legislature as  expressed in the statute, considering it as a whole  and in its context. That intention, and therefore the meaning of the statute, is primarily to be sought in the words used  in the statute itself, which must, if they are plain and  unam- biguous, be applied as they stand  ......  " (Emphasis Supplied) (p. 332)     Artificial and unduly latitudinarian rules of  construc- tion  which, with their general tendency to "give  the  tax- payer  the breaks", are out of place where  the  legislation has  a  fiscal mission. Indeed, taxation has  ceased  to  be regarded as an "impertinent intrusion into the sacred rights of private property" and it is now increasingly regarded  as a potent fiscal-tool of State policy to strike the  required balance-required  in  the context of the felt needs  of  the times-- between citizens’ claim to enjoyment of his property on  the one hand and the need for an equitable  distribution of  the burdens of the community to sustain social  services and  purposes on the other- These words of Thomas M.  Cooley in ’Law of Taxation’ Vol.2 are worth mentioning; "Artificial  rules of construction have probably found  more favour  with the courts than they have ever deserved.  Their application  in  legal controversies has  often  times  been pushed to an extreme which has defeated the plain and  mani- fest purpose in enacting the laws. Penal laws have sometimes had  all their meaning construed away and in remedial  laws, remedies have been found which the legislature never intend- ed to give. Something akin to this has befallen the revenue laws  .....  " (Emphasis Supplied)     There are, indeed, strong and compelling  considerations against the adoption of the test suggested by Sri  Ramachan- dran. Limiting of the ambit of Section 40(b) on the supposed ’real  income’  test would, perhaps, lead to  positions  and results,  whose dimensions and implications are not, to  say the  least, fully explored. The test suggested by Sri  Rama- chandran,  might on its own extended logic, validate a  set- off  of  the interest paid to one partner  against  interest received from another and likewise. ’interest’ received from one partner on some other deal- 257 ings  between  him  and the firm against  interest  paid  to another partner on his or her capital contribution. The test of  ’real income’ as one on which the operation  of  Section 40(b)  could be sought to be limited is not a reliable  one. Indeed,  the  following observations of this  Court  on  the concept  of  ’Real Income’ in State Bank of  Travancore   v. C.I.T. [1986] 158 ITR 102 at 155, though made in a different context, are apposite:          ....   The  concept  of real  income  is  certainly applicable  in judging whether there has been income or  not

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but, in every case, it must be applied with care and  within well-recognised limits.          We  were invited to abandon  legal  fundamentalism. With a problem like the present one, it is better to  adhere to  the basic fundamentals of the law with clarity and  con- sistency  than  to be carried away by  common  cliches.  The concept of real income certainly is a well-accepted one  and must be applied in appropriate cases but with circumspection and  must  not be called in aid to  defeat  the  fundamental principles of the law of income-tax as developed". This contention of Sri Ramachandran rests on  generalisation which  incur the criticism of being too-broad and have  cer- tain limitations of their own. Contention (a) does not advance appellants’ case. 7. Re: Contention (b)     The submissions of Sri Ramchandran on the point are that where  the  meaning  of a word used in a  statute  had  been judicially ascertained by a court and where the legislature, while  re-enacting  the law on the subject,  uses  the  same word, it must be taken to have been aware of the meaning  so judicially ascertained earlier and not to have used the word with  a different content. This is, no doubt, a well  recog- nised guide to construction. When words acquire a particular meaning or sense because of their authoritative construction by  superior courts, they are presumed to have been used  in the same sense when used in a subsequent legislation in  the same  or similar context. This principle was stated  by  the Judicial Committee in H.H. Ruckmaboye v. Lulloobhoy  Mottic- hund, Moore’s Indian Appeals, Vol. 5, p. 234 at 250 thus: 258   "  ....  it is, therefore, of considerable  importance  to ascertain  what has been deemed to be the legal  import  and meaning of them, because, if it shall appear that they  have long  been  used,  in a sense which may  not  improperly  be called technical, and have been judicially construed to have a certain meaning, and have been adopted by the  Legislature in  that sense, long prior to the Statute, 21 James  I.,  c. 16, the rule of construction of Statutes will require,  that the  words in the Statute should be construed  according  to the  sense  in which they had been so previously  used,  al- though  that sense may vary from the strict literal  meaning of them." This principle has been reiterated by this Court in  several pronouncements.  But the limitations of its  application  in the  present  cases arise out of the circumstance  that  the decision  of  the Allahabad High Court in  Sri  Ram  Mahadeo Prasad  v.  Commissioner of Income-tax, 24 ITR 176  did  not proceed  or rest on any special or technical connotation  of the  word "interest" nor any special legal sense which  that word could be said to have acquired by the earlier  judicial ascertainment of its amplitude. The decision proceeded on  a construction of the relevant provision i.e. Section 10(4)(b) of  the  1922 Act and on what the High Court  considered  as affording to the assessee a fair-treatment. Nothing particu- lar  stemmed  from  the  interpretation  of  the  expression "interest". The appeal to this principle of construction is, in  our  opinion, somewhat out of place in  this  case.  The rules of interpretation are not rules of law; they are  mere aids to construction and constitute some broad pointers. The interpretative  criteria apposite in a given situation  may, by themselves, be mutually irreconcilable. It is the task of the Court to decide which one, in the light of all  relevant circumstances, ought to prevail. The rules of interpretation are useful servants but quite often tend to become difficult masters.  It  is  appropriate to recall the  words  of  Lord

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Reid’s in Maunsell  v. olins, [1975] 1 All ER 16:           "Then  rules of construction are relied  on.  They are  not rules in the ordinary sense of having some  binding force. They are our servants not our masters. They are  aids to construction, presumptions or pointers. Not  infrequently one  ’rule’ points in one direction, another in a  different direction. In each case we must look at all relevant circum- stances  and decide as a matter of judgment what  weight  to attach to any particular ’rule’." 259 This passage was referred to with approval by this Court  in Utkal Contractors and Joinery  v. State of Orissa, [1987]  3 SCR 317 at 330.     Contention  (b) is, therefore, not of any assistance  to the appellants. 8. Re: Contention (c)     There  are  certain aspects of  the  legal  relationship amongst partners which do impart a special complexion to the question  under  consideration. The point  raised  in  these appeals in confined to a situation where a partner  receives interest  on  the  capital subscribed by him  and  the  same partner pays interest on the drawings made by him.     A  firm  under the general law is not a  distinct  legal entity  and has no legal existence of its own. The  partner- ship  property vests in all the partners and in  that  sense every partner has an interest in assets of the  partnership. However, during the subsistence of the partnership no  part- ner can deal with any portion of the property as his own. In Narayanappa  v.  Krishtappa, [1966] 3 SCR  400,  this  Court referred  to the nature of the interest of a partner in  the firm and observed:          "   .....  The whole concept of partnership  is  to embark upon a joint venture and for that purpose to bring in as  capital  money  or  even  property  including  immovable property.  Once  that is done whatever is brought  in  would cease to be the exclusive property of the person who brought it  in. It would be the trading asset of the partnership  in which all the partners would have interest in proportion  to their  share  in the joint venture of the  business  of  the partnership. The person who brought it in would,  therefore, not  be able to claim or exercise any exclusive  right  over any  property  which he has brought in, much less  over  any other partnership property. He would not be able to exercise his right even to the extent of his share in the business of the partnership  ......  "     In CIT  v. Chidambaram, [1977] 106 ITR 292 at 295 &  296 this Court observed:           "Here the first thing that we must grasp is that a firm  is  not  a legal person even though it  has  some  at- tributes  of personality. Partnership is a certain  relation between 260 persons, the product of agreement to share the profits of  a business. ’Firm’ is a collective noun, a compendious expres- sion  to  designate an entity, not a person.  In  income-tax law, a firm is a unit of assessment, by special  provisions, but  is not a full person which leads to the next step  that since a contract of employment requires two distinct persons viz.  the employer and the employee, there cannot be a  con- tract  of service, in strict law, between a firm and one  of its  partners. So that any agreement for remuneration  of  a partner for taking part in the conduct of the business  must be  regarded as portion of the profits being made over as  a reward  for the human capital brought in. Section 13 of  the Partnership Act brings into focus this basis of  partnership

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business." "  .....  It is implicit that the share income of the  part- ner  takes in his salary. The telling test is that  where  a firm  suffers loss, the salaried partner’s share in it  goes to depress his share of income. Surely, therefore, salary is a different label for profits, in the context of a partner’s remuneration" (Underlining Supplied)     In  Lindley  on Partnership (14th Edn.),  we  find  this statement of the law: "   .....  In point of law, a partner may be the  debtor  or the  creditor  of his co-partners, but he cannot  be  either debtor  or  creditor of the firm of which he  is  himself  a member, nor can he be employed by his firm, for a man cannot be his own employer."                               (p. 30) The  position as stated above was approved by this Court  in Chidabaram’s case.      In Regional Director Employees State Insurance Corpora- tion,  Trichur  v. Ramanuja Match Industries, [1985]  2  SCR 119,  this  Court dealing with the  question  whether  there could be a relationship of master and servant between a firm on  the  one hand and its partners on the  other,  indicated that  under  the  law of partnership there can  be  no  such relationship  as it would lead to the anomalous position  of the  same person being both the master and the servant.  The following observations of Justice Mathew in Ellis  v. Joseph Ellis & Co., [1905] 1 KB 324 were referred to with approval: 261 "The  argument  on behalf of the applicant  in  this  appeal appears  to involve a legal impossibility, namely, that  the same person can occupy the position of being both master and servant, employer and employed." (p. 126) And observed: ".....  A partnership firm is not a legal entity. This Court in Champaran Cane Concern v. State of Bihar and Anr., point- ed  out that in a partnership each partner acts as an  agent of the other. The position of a partner qua the firm is thus not that of a master and a servant or employee which concept involves  an element of subordination but that of  equality. The  partnership business belongs to the partners  and  each one of them is an owner thereof  ......  " (p. 123) "It  is thus clear that in the United States, Great  Britain and  Australia, a partner is not treated as an  employee  of his  firm merely because he receives a wage or  remuneration for work done for the firm. This view is in complete  accord with  the  jurisprudential approach. In the absence  of  any statutory  mandate, we do not think there is any  scope  for accepting the view of the Rajasthan High Court." (p. 127)     9. Sri Ramachandran’s contention is that both the  capi- tal  brought-in by the partners to the firm and the  amounts that may be drawn by them from the partnership firm  partake of  the same nature and character as the funds of the  part- nership.  This  may be so. But in  effectuating  the  conse- quences of the recognition of this position, it is necessary to  ensure that express provisions of the statute  departing from  the general law are not whittled down. To  the  extent that  the  statute  expressly or  by  necessary  implication departs  from the general law, the latter cannot be  invoked to displace the effect of the statute.     But, if there is no such statutory departure the general principles operating in that branch of the law determine the nature of the legal relationship. Sir Francis Bennion in his

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Statutory Interpretation observes: "Unless the contrary intention appears, an enactment by 262 implication  imports any principle or rule of  law  (whether statutory or non-statutory) which prevails in the  territory to which the enactment extends and is relevant to its opera- tion in that territory."                          (p. 350) "Unless  the  contrary intention appears,  an  enactment  by implication  imports the principle of any legal maxim  which prevails in the territory to which the enactment extends and is relevant to the operation of the enactment in that terri- tory."                                   (p. 354) What  follows is that, to the extent not prohibited  by  the statute,  the incidents of the general law of  partners  are attracted  to ascertain the legal nature and character of  a transaction.  This  is quite apart from  distinguishing  the ’substance’ of the transaction from its ’from’. In Sargaison v.  Roberts, [1969] 45 Tax Cases 612 at 617 & 618,  Megarry, J., observed:          "I appreciate that what I have to do is to construe the words used, and not to insert words which are not there, or  to resort to a so-called "equitable construction"  of  a taxing  statute. But even when I have given full  weight  to this  consideration, I think that I am entitled  to  distin- guish between the substance of a transaction and the machin- ery used to carry it through  .....  " ".....  "Substance" and "form" are words which must no doubt be applied with caution in the field of statutory  construc- tion.  Nevertheless,  where the  technicalities  of  English conveyancing  and  land law are brought  into  juxtaposition with  a  United Kingdom taxing statute, I am  encouraged  to look at the realities at the expense of the technicalities. In Commissioner of Income-tax v. Gillanders Arbuthnot & Co., 87 ITR 407 at 418, this Court said: ".....  The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a trans- action.  If the parties have chosen to conceal by  a  device the  legal relation, it is open to the taxing  authority  to unravel 263 the device and to determine the true character of the  rela- tionship.  But the, legal effect of a transaction cannot  be displaced by probing into the substance of the transaction" (Emphasis Supplied)     The Court is not precluded from treating what the trans- action is in point of fact as one in point of law also.     10.  How  do. these principles operate  on  the  present controversy? It appears to us that if in substance  interest paid  by  the firm to a partner and the interest,  in  turn, received from the partner are mere expressions of the appli- cations  of  the  funds or profits of  the  partnership  and which,  having  regard to the community of interest  of  the partners, are a mere variations of the method of  adjustment of  the profits, there should be no impediment  in  treating them  as  part  of the same transaction  if,  otherwise,  in general  law they admit of being so treated. The  provisions of  Section  40(b) do not exclude or prohibit  such  an  ap- proach.  If instead of the transactions being  reflected  in two separate or distinct accounts in the books of the  part- nership  they were in one account, the quantum  of  interest paid by the firm to the partner would. to the extent of  the drawings  of  the partner, stand attenuated. The  mere  fact that  the transactions are split into or spread over to  two or  more accounts should not by itself make  any  difference if, otherwise, the substance of the transaction is the same.

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One  of  the relevant tests would be whether  the  funds  on which  interest  is  paid or received partake  of  the  same character.     A broad analogy, though in itself may not be conclusive, is furnished by the idea of "mutual-dealings" and the  prin- ciple  of set-off statutorily recognised in bankruptcy  pro- ceedings  under Section 46 of the Provincial Insolvency  Act and  attracted also to proceedings for winding-up of  compa- nies  by virtue of Section 529 of the Companies  Act,  1956, where  the  ’mutual-credit’  clause steps in  to  avoid  the injustice,  which  would otherwise, arise, of  compelling  a creditor to pay the official-assignee the full amount of the debt  due  from  him to the insolvent,  while  the  creditor would,  perhaps, only receive a small dividend on  the  debt due  from the insolvent to him under a  pari-passu  payment. This  principle  was recognised by this  Court  in  Official Liquidator v. Lakshmikutty, [1981] 2 SCR 349. The set-off in this case is, no doubt, the result of a statutory provision. In  the  case of partners, the special  legal  incidents  of their relationship would substitute for the statutory provi- sion and govern the situation. Indeed, even the idea of 264 a  set-off itself, which presupposes a duality of  entities, may  be out of place in the very nature of the  relationship between  a firm and its partners where the former is a  mere compendious reference to the latter. But even to the  extent the  income tax law which identifies the firm as a  distinct entity and unit of assessment goes, the idea of set-off  may be invoked in view of the mutuality implicit in the putative duality  inherent in deeming the firm as a  distinct  entity under the Act for certain purposes. The fiction may have  to be pushed to its logical conclusions.     11. The decision of the Madras High Court in Sankaralin- ga  Nadar’s  case  speaks of  income-tax  and  equity  being strangers.  To say that a Court could not resort to the  so- called  "equitable construction" of a taxing statute is  not to  say that where a strict literal construction leads to  a result  not intended to subserve the object of the  legisla- tion,  another  construction, permissible  in  the  context, should not be adopted. In Commissioner of Income-tax v. J.H. Gotla, 156 ITR 323, this Court said: "  .....  we should find out the intention from the language used  by the Legislature and if strict literal  construction leads to an absurd result, i.e., a result not intended to be subserved  by  the object of the legislation  found  in  the manner  indicated  before, then if another  construction  is possible  apart from strict literal construction, then  that construction  should  be  preferred to  the  strict  literal construction.  Though equity and taxation are often  strang- ers, attempts should be made that these do not remain always so  and if a construction results in equity rather  than  in injustice, then such construction should be preferred to the literal  construction. Furthermore, in the instant case,  we are  dealing with an artificial liability created for  coun- teracting  the  effect only of attempts by the  assessee  to reduce tax liability by transfer  ......  " (p. 339-40) In this respect taxing statutes are not different from other statutes.  In A. G  v. Carlton Bank, [1899] 2 QB  158,  Lord Russel of Killowen, CJ said: "I  see  no reason why any special  canons  of  construction should be applied to any Act of Parliament, and I know of no authority for saying that a taxing Act is to be construed 265 differently from any other Act. The duty of the court is, in

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my  opinion,  in all cases the same, whether the Act  to  be construed relates to taxation or any other subject, viz.  to give effect to the intention of the legislature  ......  "     12. We, accordingly, accept the submission of Sri  Rama- chandran  on this point. In our opinion, where two  or  more transactions  on which interest is paid to or received  from the  partner  by the firm are shown to have the  element  of mutuality and are referable to the funds of the  partnership as  such, there is no reason why Section 40(b) should be  so construed  as to exclude in quantifying the interest on  the basis of such mutuality. In such circumstances the interest, if  any, paid to a partner by the firm in excess of what  is received  from  the  partner could alone  be  excluded  from deduction under Section 40(b). Contention ’c’ is held and answered accordingly. 13. Re: Contention (d)     Sri Ramachandran contended that circular of 1965 of  the Central Board of Direct Taxes was binding on the authorities under  the Act and should have been relied upon by the  High Court  in  support of the Court’s  construction  of  Section 40(b) to accord with the understanding of the provision made manifest in the circular.     This  contention and the proposition on which it  rests, namely, that all circulars issued by the Board have a  bind- ing legal quality incurs, quite obviously, the criticism  of being too broadly stated. The Board cannot pre-empt a  judi- cial interpretation of the scope and ambit of a provision of the  ’Act’ by issuing circulars on the subject. This is  too obvious  a  proposition to require any argument  for  it.  A circular  cannot  even  impose on the tax  prayer  a  burden higher  than  what the Act itself on a  true  interpretation envisages.  The  task of interpretation of the laws  is  the exclusive  domain of the courts. However,--this is what  Sri Ramachandran really has in mind--circulars beneficial to the assessees  and which tone down the rigour of the law  issued in exercise of the statutory power under Section 119 of  the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of  the Act. The Tribunal, muchless the High Court, is an  authority under  the  Act.  The circulars do not bind  them.  But  the benefits  of such circulars to the assessees have been  held to  be  permissible  even though the  circulars  might  have departed  from the strict tenor of the  statutory  provision and mitigated the 266 rigour of the law. But that is not the same thing as  saying that  such circulars would either have a binding  effect  in the  interpretation  of  the provision itself  or  that  the Tribunal  and the High Court are supposed to  interpret  the law in the light of the circular. There is, however, support of  certain  judicial observations for the  view  that  such circulars constitute external aids to construction.     In  State Bank of Travancore v. C.I.T., [1986]  158  ITR 102,  however, this Court referring to certain circulars  of the Board said: "  .....  The earlier circulars being executive in character cannot  alter the provisions of the Act. These were  in  the nature  of  concessions and could  always  be  prospectively withdrawn. However, on what lines the rights of the  parties should  be  adjusted in consonance with justice in  view  of these circulars is not a subject-matter to be adjudicated by us and, as rightly contended by counsel for the Revenue, the circulars cannot detract from the Act."                          (Emphasis Supplied) (p. 139)     The expression ’executive in character’ is,  presumably,

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used  to distinguish them from judicial pronouncements.  The circulars referred to in that case were also of the  Central Board  of Direct Taxes and were, presumably also,  statutory in character.     However,  this contention need not detain us, as  it  is unnecessary  to  examine whether or not such  circulars  are recognised,  legitimate aids to statutory  construction.  In the present case, the circular of 1965 broadly accords  with the view taken by us on the true scope and interpretation of Section 40(b) in so far as the quantification of the  inter- est for purposes of Section 40(b). Contention (d) is disposed of accordingly. 14. Re: Contention (e)     Sri  Ramachandran  urged that the introduction,  in  the year  1984,  of Explanation I to Section 40(b)  was  not  to effect or bring about any change in the law, but was intend- ed  to be a mere legislative exposition of what the law  has always  been. An ’Explanation’, generally speaking,  is  in- tended to explain the meaning of certain phrases and expres- sions contained in a statutory provision. There is no gener- al theory as 267 to  the effect and intendment of an Explanation except  that the purposes and intendment of the ’Explanation’ are  deter- mined by own words. An Explanation, depending on its language,  might supply or take away something from the contents of a  provi- sion. It is also true that an Explanation may--this is  what Sri Ramachandran suggests in this case--be introduced by way of  abundant--caution in order to clear any  mental  cobwebs surrounding  the  meaning of a statutory provision  spun  by interpretative  errors  and to place  what  the  legislature considers  to  be  the true meaning  beyond  controversy  or doubt. Hypothetically, that such can be the possible purpose of  an ’Explanation’ cannot be doubted. But the question  is whether  in  the present case, Explanation I  inserted  into Section 40(b) in the year 1984 has had that effect.     15.  The notes on clauses appended to the Taxation  Laws (Amendment)  Bill, 1984, say that Clause 10 which  seeks  to amend  Section 40 will take effect from 1st April, 1985  and will, accordingly, apply in relation to the assessment  year 1985-86 and subsequent years. The express prospective opera- tion  and effectuation of the ’Explanation’ might,  perhaps, be  a factor necessarily detracting from any  evincement  of the intent on the part of the legislature that the  Explana- tion was intended more as a legislative-exposition or clari- fication of the existing law than as a change in the law  as it then obtained. In view of what we have said on point  (c) it  appears unnecessary to examine this contention any  fur- ther. Contention (e) is disposed of accordingly.     16.  In  the  result, for the  foregoing  reasons  these appeals  are  allowed; the orders of the  High  Court  under appeal set-aside and the question of law referred for  opin- ion  is  answered  in the affirmative in terms  of  para  12 (supra). In the circumstances, there will be no orders as to the costs in these appeals. P.S. S                                      Appeals allowed. 268