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CASE NO.: Appeal (civil)  3326 of 2008

PETITIONER: R & B Falcon (A) Pty Ltd.

RESPONDENT: Commissioner of Income Tax

DATE OF JUDGMENT: 06/05/2008@ S.B. Sinha & V.S. Sirpurkar & J U D G M E N T REPORTABLE

CIVIL APPEAL NO.   3326       OF 2008 (Arising out of SLP (C) No.10451 of 2007)

S.B. Sinha, J.

1.      Leave granted. 2.      Interpretation and/or application of the provisions of Section 115WB  of the Income Tax Act, 1961 (for short, ’the Act’) providing for imposition  of tax on ’fringe benefits’ is in question herein.   3.      Before embarking upon the said question, however, we may notice the  basic fact of the matter.          Appellant is incorporated under the laws of the Commonwealth of  Australia.  It is engaged in the business of providing Mobile Offshore  Drilling Rig (MODR) along with crew on a day rate charter hire basis to  drill offshore wells.  The MODR operates offshore (upto 200 nautical miles  off the coast of India).  Allegedly, having regard to the harsh working  environment and purported to be in line with global practices typical to such  industry, the employees who may be residents of various countries including  Australia, USA, UK, France etc. work on the MODR on a ’commuter basis’.   They come to India, stay in the Rig for 28 days and go back to their own  country being their place of residence for a further period of 28 days.  The  crew or the employees are transported from their home country to the  MODR in two laps : -       first is from the nearest designated base city at  the place of residence in the home country to a  designated city in India for which the petitioner  provides free air tickets of economy class and; -       second is from that city in India to the MODR  through helicopter especially hired by the  petitioner for this purpose.

4.      Allegedly, on completion of 28 days, they go back from the Rig to the  designated base city in their home country in the same manner.  Appellant  states that no conveyance/transport allowance is paid to them.   Appellant entered into a contract of supplying MODR along with  equipment and offshore crew on charter hire basis with Oil and Natural Gas  Commission, a public sector undertaking, on or about 10.10.2003.  It filed an  application under Section 245Q(1) of the Income Tax Act, 1961 before the  Authority for Advance Ruling (AAR) on the following question : "Whether transportation cost incurred by the  petitioner in providing transportation facility for  movement of offshore employees from their  residence in home country to the place of work and  back is liable to Fringe Benefit Tax?"

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5.      Chapter XII of the Act providing for income tax on fringe benefits  was inserted by the Finance Act, 2005.  It came into force with effect from   1.4.2006.   6.      Section 115W defines "employer" and "fringe benefit tax".  "Fringe  Benefit Tax" (FBT) has been defined as a tax chargeable under Section  115WA.         Section 115 WA(1) provides for the basis for charge of fringe benefit  tax in the following terms : "115WA.(1) In addition to the income-tax charged  under this Act, there shall be charged for levy  assessment year commencing on or after the 1st  day of April, 2006, additional income-tax (in this  Act referred to as fringe benefit tax) in respect of  the fringe benefits provided or deemed to have  been provided by an employer to his employees  during the previous year at the rate of thirty per  cent on the value of such fringe benefits. (2) Notwithstanding that no income-tax is payable  by an employer on his total income computed in  accordance with the provisions of this Act, the tax  on fringe benefits shall be payable by such  employer."

       Section 115WB consists of three sub-sections, the relevant clauses  whereof read as under: "Section 115WB - Fringe benefits (1) For the  purposes of this Chapter, "fringe benefits" means  any consideration for employment provided by  way of-

(a)     any privilege, service, facility or amenity,  directly or indirectly, provided by an  employer, whether by way of reimbursement  or otherwise, to his employees (including  former employee or employees);

(b)     any free or concessional ticket provided by  the employer for private journeys of his  employees or their family members; and

xxx                     xxx                     xxx      

(2) The fringe benefits shall be deemed to have  been provided by the employer to his employees, if  the employer has, in the course of his business or  profession (including any activity whether or not  such activity is carried on with the object of  deriving income, profits or gains) incurred any  expense on, or made any payment for, the  following purposes, namely:-

(A)     entertainment;

xxx                     xxx                     xxx               (F)     conveyance;

xxx                     xxx                     xxx      

(Q)     tour and travel (including foreign travel).;

(3) For the purposes of sub-section (1), the  privilege, service, facility or amenity does not  include perquisites in respect of which tax is paid

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or payable by the employee or any benefit or  amenity in the nature of free or subsidised  transport or any such allowance provided by the  employer to his employees for journeys by the  employees from their residence to the place of  work or such place of work to the place of  residence".

7.      Before the AAR, a circular issued by the Central Board of Direct Tax  (CBDT) bearing No.8 of 2005, was relied upon by both the parties.  We will  refer to a part of it.  The circular provides for explanatory notes on  provisions relating to fringe benefit tax.   The object for imposition of the said tax is stated to be as under: "The taxation of perquisites or fringe benefits is  justified both on grounds of equity and economic  efficiency.  When fringe benefits are under-taxed,  it violates both horizontal and vertical equity.  A  taxpayer receiving his entire income in cash bears  a higher tax burden in comparison to another  taxpayer who receives his income partly in cash  and partly in kind, thereby violating horizontal  equity.  Further, fringe benefits are generally  provided to senior executives in the organization.   Therefore, under-taxation of fringe benefits also  violates vertical equity.  It also discriminates  between companies which can provide fringe  benefits and those which cannot thereby adversely  affecting market structure.  However, the taxation  of fringe benefits raises some problems primarily  because- (a)     all benefits cannot be individually attributed to  employees, particularly in cases where the  benefit is collectively enjoyed; (b)     of the present widespread practice of providing  perquisites, wherein many perquisites are  disguised as reimbursements or other  miscellaneous expenses so as to enable the  employees to escape/reduce their tax liability;  and (c)     of the difficulty in the valuation of the  benefits."

8.      The heading of paragraph 11 of the said circular is "Frequently asked  questions".  The questions which were posed and answered and in turn are  relevant for our purpose read as under : "In terms of the provisions of sub-section (1) of  Section 115WA, an employer in India is liable to  FBT in respect of the value of fringe benefits\027 (a)     Provided by him to his employees; and (b)     Deemed to have been provided by him to his  employees. The scope of fringe benefits provided or deemed to  have been provided is defined in section 115WB.   Sub-section (1) of the said section defines the  scope of fringe benefits provided by the employer  to his employees.  Similarly, sub-section (2) of the  said section defines the scope of fringe benefits  deemed to have been provided by the employer to  his employees. Therefore, sub-section (2) expands  the scope of sub-section (1) through a deeming  provision. The provision relating to the computation of the  value of the fringe benefits is contained in section

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115WC.  It is a settled principle of law that where  the computation provisions fail, the charging  section cannot be effectuated.  Therefore, if there  is no provision for computing the value of any  particular fringe benefit, such fringe benefit, even  if it may fall within clause (a) of sub-section (1) of  section 115WB, is not liable to FBT. XXX                     XXX                     XXX 19.     FBT is payable in the year in which the  expenditure is incurred irrespective of whether the  expenditure is capitalized or not.  However, the  same expenditure will not be liable to FBT again  in the year in which it is amortized and charged to  profit. Is FBT payable by an Indian Company having  employees based both in and outside India on its  total (global) expenditure incurred by it for the  purposes referred to in clauses (A) to (P) of sub- section (2) of section 115B? 20.     FBT is payable on the value of fringe  benefits provided or deemed to have been provided  to employees based in India and determined on a  presumptive basis in accordance with the  provisions of Section 115WC of the Income-tax  Act.  The value of such fringe benefits is  determined, inter alia, as a proportion of the total  amount of expenses incurred for some identified  purposes.  In the case of an Indian company having  employees based both in India and in a foreign  country, FBT is payable on the proportion (50 per  cent, 20 per cent or 5 per cent, as the case may be)  of the total amount of expenses incurred for the  purposes referred to in clauses (A) to (P) of sub- section (2) of section 115WB and attributable to  the operations in India.  If the company maintains  separate books of account for its Indian and  foreign operations, FBT would be payable on the  amount of expenses reflected in the books of  account relating to the Indian operations.  If  however, no separate accounts are maintained, the  amount of expenses attributable to Indian  operations would be the proportionate amount of  the global expenditure.  Further, such  proportionate amount shall be determined by  applying to the global expenditure the proportion  which the number of employees based in India  bears to the total worldwide employees of the  company. Whether an Indian company carrying on business  outside India would be liable to FBT even though  none of its employees in such business may be  liable to pay income tax in India? 21.     An Indian company would be liable to the  FBT in India if it has employees based in India.   Therefore, if an Indian company carries on  business outside India but does not have any  employees based in India, such company would  not be liable to FBT in India. Does FBT apply to foreign companies? XXX                     XXX                     XXX 103. FBT is a liability qua employer.  It is an  expenditure laid out or expended wholly and  exclusively for the purposes of the business or  profession of the employer.  However, sub-clause  (ic) of clause (a) of section 40 of the Income-tax

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Act expressly prohibits the deduction of the  amount of FBT paid, for the purposes of  computing the income under the head profits and  gains of business or profession.  This prohibition  does not apply to the computation of book profit  for the purposes of section 115JB.  Accordingly,  the FBT is an allowable deduction in the  computation of book profit under section 115JB of  the Income-tax Act. Whether expenditure incurred by the employer for  the purposes of providing free or subsidized  transport for journeys to employees from their  residence to the place of work or such place of  work to the place of residence would attract FBT?"

9.      AAR by reason of its judgment and order dated 13.12.2006 holding  that the company is liable to pay fringe benefit tax for providing  transportation and movement of offshore employees for their residence and  home countries outside India to the place of rig and back, opined that  (1)     The exemption provision contained in sub-section (3) of Section  115WB is restricted to sub-section (1) whereas the exemption falls  under the deeming provision contained in sub-section (2);  (2)     Residence within the meaning of the said provision would mean  residence in India and as the employees concerned are residents of the  countries outside India, sub-section (3) of Section 115WB is not  applicable. 10.     Mr. S. Ganesh, learned counsel appearing on behalf of the appellant,  would submit;  (1)     The AAR committed an error of law insofar as it failed to consider  that sub-section (3) covers both the contingencies envisaged under  sub-sections (1) and (2);  (2)     The distinction between sub-sections (1) and (2) is highly artificial  inasmuch as the exemption is provided for in clauses (F) and (Q) of  sub-section (2) of Section 115WB and unless the said provisions are  read into sub-section (3), the same would be rendered otiose;  (3)     While granting exemption, the Parliament having not restricted the  operation of sub-section (3) only to the regular employees or the  transport provided by the employer, no restrictive meaning can be  given to sub-section (3).   (4)     Residence of an employee being not restricted to the Territory of  India, the AAR committed a serious error of law in passing the  impugned judgment.   (5)     CBDT itself, in its circular, having clarified that sub-section (2) is  merely an expansion of sub-section (1), it was impermissible for the  AAR to take the said factor into account.   (6)     From the questions and answers contained in the said circular, it is  evident that fringe benefit tax would be applicable on the value of  fringe benefit provided or deemed to have been provided to  employees based in India and no fringe benefit tax would be payable  in respect of an expenditure incurred by the employer for an employee  who is not based in India and in any event if the employee is based in  a foreign country would also come within the purview thereof.   (7)     The AAR is clearly wrong in holding that the word ’residence’ would  mean only residence in India. 11.     Mr. G.E. Vahanavati, learned Solicitor General appearing on behalf of  the respondent, on the other hand, would urge: (A)     Fringe benefit tax is a new concept in terms whereof any  consideration for employees provided, inter alia, for facility or  amenity comes within the purview thereof; and (B)     The tax is payable only when the employer incurs an expenditure  delineated in sub-section (2) and such exemption is to be granted only  on the tax leviable under sub-section (1).   (C)     The terms ’residence’, ’transport’, ’conveyance’ etc. must be given a  broad meaning which would lead to the conclusion that only when

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employees are provided for transport on a regular basis for attending  to their work from the place of their residence to the place of work,  exemption should be granted.   (D)     The Parliament, in its wisdom, having used the words ’employees,  journey, the same would only mean that on any journey undertaken by  the employees for regularly attending the works and not on a work on  periodic basis.   12.     Fringe benefit tax is a new concept. The taxes to be levied on the  fringe benefit provided or deemed to have been provided by an employer to  employees during the previous year is at the rate of 30 per cent on the value  of such fringe benefits.  The object for imposition of the said tax, as is  evident from the said circular dated 29.8.2005, was to bring about an equity.   The intention of the Parliament was to tax the employer who, on the one  hand, deducts the expenditure for the benefit of the employees including  entertainment, etc. and on the other when the employees getting the perks  are to be taxed, those who get direct or indirect benefits from the  expenditures incurred by the employer, no tax is leviable.  As stated in the  objective, it is for bringing about a horizontal equity and not a vertical  equity.   13.     Sub-section (1) of Section 115WB contains the interpretation section.   It is in two parts.  It provides for a direct meaning, as also an expanded  meaning.  Expanded meaning of the said provision is contained in sub- section (2).  Whereas sub-section (1) takes within its sweep any  consideration for employment, inter alia, by way of privilege service, facility  or amenity directly or indirectly, sub-section (2) thereof expands the said  definition stating as to when the fringe benefit would be deemed to have  been provided.  The expansive meaning of the said term ’benefits’ by reason  of a legal fiction created also brings within its purview, benefits which  would be deemed to have been provided by the employer to his employees  during the previous year.  Indisputably, sub-section (3) refers to sub-section  (1) only.  Ex facie, it does not have any application in regard to the matters  which have been brought within the purview of the fringe benefit tax by  reason of application of the deeming provision.  We are concerned here with  a question in regard to grant of exemption in respect of ’conveyance’ as  provided for in clause (F) of sub-section (2) and ’tour and travel’ which is  provided for in clause (Q) of sub-section (2) of Section 115WB. 14.     CBDT categorically states in answer to question number 7 that sub- section (2) provides for an expansive definition.   Does it mean that sub-section (2) is merely an extension of sub- section (1) or it is an independent provision?  If sub-section (2) is merely an  extension of sub-section (1), Mr. Ganesh may be right but we must notice  that Section 115WA provides for imposition of tax on expenditure incurred  by the employer or providing its employees certain benefits.  Those benefits  which are directly provided are contained in sub-section (1).  Some other  benefits, however, which the employer provides to the employees by  incurring any expenditure or making any payment for the purpose  enumerated therein in the course of his business or profession, irrespective  of the fact as to whether any such activity would be carried on a regular  basis or not, e.g., entertainment would, by reason of the legal fiction created,  also be deemed to have been provided by the employer for the purpose of  sub-section (2).  Whereas sub-section (1) envisages any amount paid to the  employee by way of consideration for employment, what would be the limits  thereof are only enumerated in sub-Section (2).  We, therefore, are of the  opinion that sub-sections (1) and (2), having regard to the provisions of  Section 115WA as also sub-section (3) of Section 115WB, must be held to  be operating in different fields.   15.     We must test the submissions of Mr. Ganesh from another angle.  The  learned counsel contended that any benefit or amenity in the nature of free or  subsidized transport provided by the employer to his employee for the  purposes mentioned in sub-section (3) are to be found only in clauses (F)  and (Q) of sub-section (2) and if that be so, the statute must be held to  envisage grant of exemption in respect of matters which do not form the  subject matter thereof.         We have noticed the factual matrix of the instant case.  The  employees concerned are experts in their field.  They are necessarily

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residents of other country.  They are brought to the Rig by providing air  tickets for their coming from their place of residence to the Rig.         The employer incurs the said expenditure as of necessity.  It,  therefore, clearly falls within the purview of the words ’consideration for  employment’.  If fringe benefits are provided for consideration for  employment, which is given or provided to the employee by way of an  amenity, reimbursement or otherwise; clearly clause (a) of sub-section (1)  shall be attracted.   A statute, as is well known, must be read in its entirety.  What would  be the subject matter of tax is contained in sub-sections (1) and (2).  Sub- section (3), therefore, provides for an exemption.  There cannot be any doubt  or dispute that the latter part of the contents of sub-section (3) must be given  its logical meaning.  What is sought to be excluded must be held to be  included first.  If the submission of learned Solicitor General is accepted,  there would not be any provision for exclusion from payment of tax any  amenity in the nature of free or subsidized transport. 16.     Thus, when the expenditure incurred by the employer so as to enable  the employee to undertake a journey from his place of residence to the place  of work or either reimbursement of the amount of journey or free tickets  therefor are provided by him, the same, in our opinion, would come within  the purview of the term ’by way of reimbursement or otherwise’.   The Advanced Law Lexicon defines "otherwise" as:  "By other like means; contrarily; different from  that to which it relates; in a different manner; in  another way; in any other way; differently in other  respects in different respects; in some other like  capacity."

"Otherwise" is defined by the Standard Dictionary as meaning ’in a  different manner, in another way; differently in other respects’; by Webster,  ’in a different manner; in other respects’.   As a general rule, ’otherwise’ when following an enumeration, should  receive an ejusdem generis interpretation (per CLEASBY, B. Monck v.  Hilton, 46 LJMC 167, The words ’or otherwise’, in law, when used as a  general phrase following an enumeration of particulars, are commonly  interpreted in a restricted sense, as referring to such other matters as a are  kindred to the classes before mentioned, (Cent. Dict.)" 17.     It is now a well settled principle of law that a statute should ordinarily  be given a purposive construction.  {See New India Assurance Company  Ltd. v.  Nusli Neville Wadia and Anr. [2007 (14) SCALE 556]; Tanna and  Modi v. C.I.T., Mumbai XXV and Ors. [2007 (8) SCALE 511] and Udai  Singh Dagar and Ors. v. Union of India (UOI) and Ors. [2007 (7) SCALE  278]}. 18.     The Parliament, in introducing the concept of fringe benefits, was  clear in its mind in so for as on the one hand it avoided imposition of double  taxation, i.e., tax both on the hands of the employees and employers; on the  other, it intended to bring succour to the employers offering some privilege,  service, facility or amenity which was otherwise thought to be necessary or  expedient.  If any other construction is put to sub-sections (1) and (3), the  purpose of grant of exemption shall be defeated.  If the latter part of sub- section (3) cannot be given any meaning, it will result in an anomaly or  absurdity.  It is also now a well settled principle of law that the court shall  avoid such constructions which would render a part of the statutory  provision otiose or meaningless.  [See Visitor and Ors. v. K.S. Misra [(2007)  8 SCC 593]; Commissioner of Sales Tax, Delhi and Ors. v. Shri Krishna  Engg. Company and Ors. [(2005) 2 SCC 692]. 19.     We, therefore, are of the opinion that AAR was right in its opinion  that the matters enumerated in sub-section (2) of Section 115WB are not  covered by sub-section (3) thereof, and the amenity in the nature of free or  subsidized transport is covered by sub-section (1). 20.     It brings us to the next question, namely, whether the employee  concerned should be a resident of India.  The statute does not say so.  Fringe  benefit tax being a tax on expenditure; the only concern of the revenue  wherefor should be as to whether such expenditure has been made.  

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Appellant has a permanent establishment in India.  It pays income-tax in  India.  It carries on business in India.  It has for the purpose of carrying out  its business activities engaged persons from within India or outside India.  If  it makes any expenditure for bringing any employee from abroad, the same  would also liable to be taken into consideration for the purpose of sub- section (1) of Section 115WB. 21.     AAR with respect was not correct in its view in reading the words ’in  India’ after the word residence in sub-section (3). 22.     If the reasonings of the AAR are taken to its logical conclusion, the  CBDT circular would not be attracted.  An employer cannot afford to loose  on both the fronts.  Its right to claim exemptions either would be in respect  of the employees who are based in India or who are not.  If the said  employees are required to be based in India, sub-section of Section 115WB  would not be attracted.  However, if such expenditure incurred is found to be  as consideration for employment, the same would also bring within its  purview the employees who have been hired from outside the country.  For  the purpose of obtaining the benefit of the said exemption, however, the  expenditure must be incurred on the employees directly for the purposes  mentioned therein, namely, they are to be provided transport from their  residence to the place of work or such place of work to the place of  residence.  Any expenditure incurred for any other purpose, namely, other  than for their transport from their residence to the place of work or from the  place of work to the place of residence would not attract the exemption  provision.  The Assessing Authority, therefore, must, in each case, would  have a right to scrutinize the claim.   CBDT has the requisite jurisdiction to interpret the provisions of  Income-tax Act.  The interpretation of CBDT being in the realm of executive  construction, should ordinarily be held to be binding, save and except where  it violates any provisions of law or is contrary to any judgment rendered by  the courts.  The reason for giving effect to such executive construction is not  only same as contemporaneous which would come within the purview of the  maxim temporania caste pesto, even in certain situation a representation  made by an authority like Minister presenting the Bill before the Parliament  may also be found bound thereby. 23.     Rules of executive construction in a situation of this nature may also  be applied.  Where a representation is made by the maker of legislation at  the time of introduction of the Bill or construction thereupon is put by the  executive upon its coming into force, the same carries a great weight.  24.     In this regard, we may refer to the decision of the House of Lords in  the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956]  and its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on  the question of ’executive estoppel’. In the former decision, Lord Steyn  stated:- "If exceptionally there is found in the Explanatory  Notes a clear assurance by the executive to  Parliament about the meaning of a clause, or the  circumstances in which a power will or will not be  used, that assurance may in principle be admitted  against the executive in proceedings in which the  executive places a contrary contention before a  court."

25.     A similar interpretation was rendered by Lord Hope of Craighead in  Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:-  "As I understand it [Pepper v. Hart], it recognized  a limited exception to the general rule that resort to  ’Hansard’ was inadmissible. Its purpose is to  prevent the Executive seeking to place a meaning  on words used in legislation which is different  from that which ministers attributed to whose  words when promoting the legislation in  Parliament\005"  

For a detailed analysis of the rule of executive estoppel useful  reference may be to the article authored by Francis Bennion entitled

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"Executive Estoppel: Pepper v. Hart revisited", published in Public Law,  Spring 2007, pg. 1 which throws a new light on the subject matter. 26.     We may notice a decision of this Court in Sedco Forex International  Drill. Inc. & Ors. v. Commissioner of Income Tax, Dehradun & Anr.  [(2005) 12 SCC 717], the question which arose therein was as to the salary  paid to the employees of UK National Services for field breaks outside India  would be subjected to tax under Section 9(1)(ii) and explanation appended  thereto as inserted in 1983 w.e.f 1.4.1979.  Appellant therein entered into  agreements which are executed in the United Kingdom with each of the said  employees who were residents of the said country.  This Court, upon  noticing the explanation appended to Section 9(1)(ii), as regards its  retrospective operation, held: "16. The departmental understanding of the effect  of the 1999 Amendment even if it were assumed  not to bind the respondents under Section 119 of  the Act, nevertheless affords a reasonable  construction of it, and there is no reason why we  should not adopt it. 17. As was affirmed by this Court in Goslino  Mario a cardinal principle of the tax law is that the  law to be applied is that which is in force in the  relevant assessment year unless otherwise  provided expressly or by necessary implication.  (See also Reliance Jute and Industries Ltd. v. CIT)  An Explanation to a statutory provision may fulfil  the purpose of clearing up an ambiguity in the  main provision or an Explanation can add to and  widen the scope of the main section. If it is in its  nature clarificatory then the Explanation must be  read into the main provision with effect from the  time that the main provision came into force. But if  it changes the law it is not presumed to be  retrospective, irrespective of the fact that the  phrases used are "it is declared" or "for the  removal of doubts"."

27.     It was categorically held that as the explanation sought to give an  artificial meaning to "earned in India" and brings about a change effectively  in the existing law, it should not be held to have any retrospective operation.   Section 115WB does not contain such a provision.  It must, therefore, be  given its natural meaning.  It would, therefore, be difficult to accept the  contention of the learned Solicitor General that the employees must be based  in India. 28.     However, it appears that the contention that such expenditure should  be paid on a regular basis or what would be the effect of the words  ’employees journey’ did not fall for consideration of AAR.  What, therefore,  is relevant would be the nature of expenses.  The question as to whether the  nature of a travelling expenditure incurred by the appellant would attract the  benefits sought to be granted by the statute did not and could not fall for  consideration of the AAR.  Its opinion was sought for only on one issue.  It  necessarily had to confine itself to that one and no other.  No material in this  behalf was brought on record by the parties.  Whether the payments were  made to them on a regular basis or whether the expenditures incurred which  strictly come within the purview of Section 115WB or not must, therefore,  be answered having regard to the materials placed on records.  If any  question arises as to whether the agreement entered into by and between the  appellant and the employees concerned would attract, in given cases, the  liability under FBT benefit tax would have, thus, to be determined by the  assessing authority. 29.     The appeal is allowed to the aforementioned extent and with the  aforementioned observations.  In the facts and circumstances of this case,  there shall be no order as to costs. + 5 3322 2008 !

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Lachhman Singh (Deceased)through Legal Representatives & Ors Vs. Hazara Singh (Deceased) through Legal Representatives & Ors @ May 6, 2008

BENCH: S.B. Sinha & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T REPORTABLE

CIVIL APPEAL NO.     3322          OF 2008 (Arising out of SLP (C) No.1395 of 2007)

S.B. Sinha, J.

1.      Leave granted. 2.      What would be the period of limitation in a suit for redemption of  mortgage in the factual matrix involved in the present case is the question in  this appeal which arises out of a judgment and order dated 19.7.2006 passed  by the High Court of Punjab and Haryana in RSA No.1340 of 1980. 3.      A transaction of mortgage in respect of the suit property admeasuring  58 kanals 11 marlas was entered into by and between the predecessors in the  interest of the parties herein.  The actual date of execution of the deed of  mortgage was not known to the plaintiffs-respondents.  However, the said  mortgaged properties were mutated in the name of the mortgagees on or  about 19.3.1913. 4.      A suit for redemption of the said mortgage was filed by the  respondents on or about 30.12.1970.  The learned trial court, as also the First  Appellate Court, dismissed the said suit as being barred by limitation  opining that the actual date of mortgage being not known, a decree for  redemption of mortgage could not be passed. 5.      The High Court, however, in the second appeal preferred thereagainst  by the respondent herein, formulated the following substantial questions of  law : "1.     Whether the finding recorded by the learned  first Appellate Court regarding relationship  is sustainable? 2.      Whether the suit for possession by way of  redemption is within the period of  limitation?"

6.      It was held that in view of the fact that the relationship between the  parties as mortgagor and mortgagee was proved, the onus to prove that suit  was barred by limitation was on the defendants. The said Second Appeal on the said finding was allowed. 7.      Mr. Shambhu Prasad Singh, learned counsel appearing on behalf of  the appellant, would submit that the question of limitation being one of  jurisdiction, the High Court committed a serious error in allowing the said  second appeal.  It was submitted that as the date of mutation was not the date  of mortgage, the suit should have been held to be barred by limitation. 8.      Mr. Manoj Swarup, learned counsel appearing on behalf of the  respondents, on the other hand, has drawn our attention to an application  filed by the respondent for adduction of additional evidence, as envisaged  under Order 41 Rule 27 of the Code of Civil Procedure and submitted that  the deed of mortgage which was registered in Village Pangota, Tehsil Taran  Taran in the District of Amritsar, now in Pakistan, could be procured by the  respondents which, if taken into consideration, would clearly establish that  the suit was within the prescribed period of limitation having been executed

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on 20.2.1913.   The relationship between the parties is not in dispute.  Respondents  filed the aforementioned suit for a decree for redemption of mortgage on  payment of a sum as may be found due to the appellants herein.  The details  of the mortgage were furnished but the actual date of mortgage being not  known could not be furnished.   Sohan Singh and Bahadur Singh were the original mortgagors.  Sohan  Singh is said to have been not seen 10 years prior to the institution of the suit  and, thus, presumed to be dead.  Respondents are said to have inherited the  properties of the said mortgagors and, thus, stepped into their shoes.  In the  written statement, the respondent denied and disputed the relationship  between the parties, stating : "1.     Para No.1 of the plaint is wrong and  incorrect.  The suit land is not of the plaintiffs.   Rather the total land is under the permanent  continuing possession of defendant No.1.  The  land in dispute as mentioned in para No.1 of the  plaint filed by the plaintiffs never mortgaged with  the defendants and the facts mentioned in para  No.1 of the plaint regarding the alleged mortgaged  are forged and fictitious one and the plaint is not  with me."

9.      The defendant claimed the ownership as also possession of the suit  land in himself.  The courts below, as noticed hereinbefore, found that there  existed a relationship of mortgagor and mortgagee between the parties to the  lis.  The suit was dismissed only on the ground of being barred by limitation.   The High Court was, in our opinion, entirely wrong in holding that the  onus to prove that the suit was beyond the period of limitation was on the  defendants.  Limitation is a question of jurisdiction.  Section 3 of the  Limitation Act puts an embargo on the court to entertain a suit if it is found  to be barred by limitation. 10.     It appears that before the High Court also, an application for  adduction of additional evidence was filed.  No order thereupon was passed.   Respondents, in our opinion, have made out a case for adduction of  additional evidence.   It was stated that the mortgage deed was registered in the year 1913 in  the District of Lahore.  As it is a registered document, this Court in a  situation of this nature, keeping in view the findings of the courts below,  should allow the said application.   11.     There cannot be any doubt whatsoever that the court should be  loathed to entertain such an application but the respondents have herein  made out adequate grounds therefor.   The jurisdiction of the Appellate Court is to be exercised not only  when clause (a) or clause (aa) of sub-rule (1) of Rule 27 of Order 41 of the  Code is attracted but also when such a document is required by the appellate  Court itself to pronounce judgment or for any other substantial cause.  If  what the respondents contended is correct, namely, the mortgage was  executed in 1913, the period of limitation having been prescribed under the  old Limitation Act, namely, 60 years being the period of limitation having  regard to the provisions of the new Limitation Act, the suit could be filed  within a period of seven years from 1.1.1964, i.e. upto 1.1.1971.  As the suit  was filed on 30.12.1970, it may be held to be within the prescribed period of  limitation. 12.     We are of the opinion that keeping in view the peculiar facts and  circumstances of this case, the respondents should be permitted to adduce  evidence.  We, therefore, set aside the impugned judgment and remit the  matter back to the High Court directing it to take the additional evidence on  record either allowing the parties to adduce evidence before it or to prove the  said documents by the trial judge in terms of Order 41 Rule 28 of the Code.   Appeal is allowed to the above extent.  No costs.