BANERJEE,J. - (1.) THESE references, under s. 27(1) of the WT. Act, have been made in circumstances hereinafter related.
(2.) THE assessee is a sterling company, incorporated under the English Companies Act, and has its registered office in London. Admittedly, the assessee is not resident in India, within the meaning of Expln. 2 to s. 6 of the WT Act. It is well-known that the assessee is the owner of an undertaking running tramways, in Calcutta and its suburbs, for public transportation. The Government of West Bengal became desirous of acquiring the undertaking of the assessee and pursuant thereto entered into an agreement with the assessee, on 30th Sept., 1951, under which the assessee was allowed to carry on the undertaking till 1st Jan. 1972, (described as the "purchase date"), subject, inter alia, to the following conditions: "2. (1) The company shall continue to carry on the undertaking until the purchase date in accordance with this agreement and any statutory powers granted or to be granted to or empowering the company in that behalf. (2) Except as otherwise specifically provided in this agreement nothing herein shall be deemed to restrict the financial and administrative powers of the company or to restrict the right of the company to carry on its undertaking until the purchase date in the ordinary course of business. (3) The company shall exercise due care and economy in the management and administration of the undertaking and shall take all such steps as shall be reasonably practicable to work the undertaking to the best advantage of the parties to this agreement.... 4. (1) The company shall apply its revenues in the manner following, that is to say: (a) firstly, paying all expenses of managing, maintaining and working the undertaking, including debenture interest; (b) secondly, paying all Indian and United Kingdom taxes payable by the company ; (c) thirdly, setting aside in each accounting year in a renewals and replacements reserve account the sum of eighty thousand pounds sterling or such greater sum as the directors of the company for the time being may in consultation with the Government consider necessary in the light of experience and in view of the expansion of the undertaking or increase in prices; (d) fourthly, setting aside in each accounting year in a fund (hereinafter called 'the shareholders'account') the following sums: (i) 87,457 together with, (ii) four per cent. upon any additional outside share capital raised by the company with the consent of the Government after the date of this agreement; (e) fifthly, accumulating any surplus in a special reserve account the balance of which (after providing for losses, if any) will eventually accrue to the benefit of the Government. (Before such transfer, however, of a loss against the credit standing in the special reserve account, the Government should be consulted, the final decision on such matter nevertheless being reserved to the company). (2) If in any accounting year the Revenues arising from the undertaking are insufficient to provide for all the matters enumerated in the preceding sub-clause of this clause, such revenues shall be so applied in the priority there set out. 5. (1) The accounts of the company for the year ending the thirtyfirst day of Dec., one thousand nine hundred and fifty one and for each subsequent year shall be made out in conformity with this agreement. (2) The dividends to shareholders in respect of the year ending the thirty-first day of Dec., one thousand nine hundred and fifty-one and each subsequent year shall be paid out of the shareholders'account. (3) Any sum for the servicing of the debenture stock of the company, that is to say, any sum set apart for or used in, the repayment of the debenture stock of the company shall, in the year ending the thirty-first day of Dec., one thousand nine hundred and fifty-one and in each sub-sequent year, be paid out of the shareholders'account and be a charge on the same..... 7. (1) Not later than twelve months before the purchase date, the Government may serve upon the company notice in writing (hereinafter called 'a purchase notice') of its intention to acquire the undertaking on the purchase date. (2) In the event of the Government serving a purchase notice the following provisions shall have effect, that is to say : (a) The Government shall subject to the exchange regulations and other relevant laws prevailing at the time in the United Kingdom and India pay to the company in sterling in London not less than thirty days before the purchase date ? (i) the sum of 3,750,000; (ii) a sum equal to the amount of any additional outside capital brought into the undertaking with the consent of the Government under cl. 6(1) of the agreement during the period between the date of this agreement and the first day of January, one thousand nine hundred and seventy-one. (b) Subject to payment being made in terms of sub-cl. (a) above, all the right, title and interest of the company of and in the undertaking shall on the purchase date become vested in the Government free from all mortgages, charges and liens created by the issue of debenture or debenture stocks of the company : Provided that the company shall be entitled to retain all statutory books of account and other documents normally kept outside India but shall afford every facility to the Government to have inspection of the same or take copies of or extracts therefrom. (c) The Government shall also pay to the company in sterling in London, the amount of the balance (if any) of the shareholders'account at the purchase date within one month after a certificate by the company's auditors of the amount thereof has been served on the Government. (d) No further sum than is provided for in this clause shall be payable to the company in respect of the transfer of the undertaking to the Government. (3) From and after such vesting of the undertaking in the Government all powers, rights, obligations and liabilities excepting the liabilities in respect of the share and loans capital of the company shall be exercisable by and be binding on the Government in substitution for the company and shall cease to be exercisable by or binding on the company : Provided that no contract entered into by the company after the date of this agreement and extending for more than one year beyond the purchase date shall be binding on the Government unless it has been previously approved by the Government. If the Government does not serve a purchase notice in accordance with the last preceding clause, then all the terms and conditions of this agreement shall continue in force subject to the following modifications: (a) (i) The Government shall pay to the company in sterling in London such sums as may from time to time be necessary to redeem the second debenture stocks of the company on their due dates; (ii) After the second debenture stocks have been redeemed as aforesaid the company shall from time to time until the undertaking is vested in the Government pay to the Government sums equal to the interest which would have been payable on such debenture stocks had the same not been redeemed. (b) (i) The Government shall on giving two years'notice to the company be entitled to acquire the undertaking on the 1st day of January of any subsequent year and such date shall be the purchase date. (ii) In the event of the undertaking being acquired in pursuance of a notice under this clause there shall be deducted from the sum payable under cl. 7(2)(a)(i) hereof any sums which may have been paid by the Government in pursuance of paragraph (a)(i) of this clause."
(3.) THIS agreement was confirmed by an Act passed by the West Bengal legislature, on 18th Oct., 1951, known as the Calcutta Tramways Act, 1951.;