VENIGALLA RAMAKRISHNAIAH Vs. PILLUTLA SITARAMASASTRY

JUDGEMENT

(1.) THE plaintiff is the Appellant and this appeal arises out of a suit filed by him for the recovery of a sum of Rs. 28,258, -8 -0 by way of reimbursement on the ground that he paid income -tax on the income derived from motor bus M.D.G. 95 which he purchased from the defendant. The plaintiff's allegation is that the defendant was liability to pay the amount of income -tax and inasmuch as he paid the amount in order to save the property from being sold by restraint and other process that might be adopted by the IT authorities he was entitled to be reimbursed The defendant was a shareholder along with others in company called Sri. Seetharam Motor Transport Company. In 1945 or about the composite State of Madras issued a G.O. to the effect that permits for plying of buses would be issued only to persons who were owners of a fleet of buses, that is to say, who owner 20 buses and more. As it was not possible for individuals to own 20 buses, a number of owners of buses joined together and formed into a private limited company called "Sri Seetharam Motor Transport Company". It may be stated that although in so far as the permit was concerned the permit was granted to this company as the owner of the buses, in the actual working the buses were allotted to the shareholders and the shareholders received the income of the buses at the disposal of the company. In the actual working the buses used to be run by the individuals, the income derived therefrom was utilised by them, but in so far as the Government was concerned it looked to the company for all purposes.

(2.) ON 1st Jan., 1948, the defendant sold vehicle No. M.D.G. 95 to the plaintiff under Exhibit 1. After the sale was effected, it would appear that the assessment for income -tax for the anterior period 1946 -47 was finalised. This was in 1951, and a demand notice was issued to the company for payment of the income -tax. The case of the plaintiffs that on 26th March, 1951, all the shareholders met together and it was agreed that each individual was to pay the proportionate amount of income -tax having regard to the number of vehicles in his possession. The plaintiff paid the amount as the purchased and in possession of the vehicle M.D.G. 95 as according to him there was the apprehension of the bus being sold. The plaintiff claims this amount both under the terms of the contract of sale as well as under the law. The defence was that there was no undertaking by the defendant to pay anterior taxes; secondly, that the plaintiff could have only recourse to the company if had paid the amount of income -tax, In any event the plaintiff was not bound to pay the amount of income -tax and if he piad he could not make the defendant liable for the same. On the evidence placed before the Court, the trial Court held that the defendant vendor was liable to pay the amount of income -tax paid by the plaintiff and decreed the suit. It also applied the provisions of ss. 69 and 70 of the Indian Contract Act. On appeal the lower appellate Court differed from the trial Court and held that under the law the plaintiff could not recover the amount from the defendant. It also came to the conclusion that the terms of the contract did not envisage the payment of anterior charges by the vendor which the vendee was entitled to get from him.

(3.) THE plaintiff has now come up in appeal. It is argued by the learned Advocate -General that the judgment of the learned Subordinate Judge is wholly erroneous for the reason that he has ignored the evidence in the case altogether. The submission is that both under the terms of the contract as well as under the principles of the Contract Act governed by S. 69 and 70, the plaintiff was entitled to be reimbursed for amounts paid by him. It was urged that under the arrangements come to by the shareholders of this company, the amount of income -tax was to be paid individually although the IT Department looks to the company as such for the payment of the income -tax. In so far as the Government was concerned, the assessee was the company, but as between the shareholders it was agreed by mutual understanding that the tax payable on the income derived was to be contributed by the individuals, who owned the buses and who derived the income therefrom.