1947 (4) TMI 8 - Other - Income Tax

Indian Income-tax Act, 1922: Applicability, Governor's powers under GOIA, 1935, and retrospective regulations

Chatturam Versus Commissioner of Income-tax

Chatturam Versus Commissioner of Income-tax - [1947] 15 ITR 302 Issues Involved:1. Applicability of the Indian Income-tax Act, 1922, to partially excluded areas.2. Legislative powers of the Governor under Section 92 of the Government of India Act, 1935.3. Validity of the assessment proceedings initiated before the Notification of 26th May, 1940.4. Retrospective application of the Notification and Regulation I of 1941.Issue-wise Detailed Analysis:1. Applicability of the Indian Income-tax Act, 1922, to partially excluded areas:The appellants contended that the Income-tax Act, 1922, was not applicable to the partially excluded areas as no Notification or Regulation under Section 92 had been issued by the Governor of Bihar. The court found this contention unsound, stating that by sub-section (2) of Section 1 of the Indian Income-tax Act, 1922, the Act extended to the whole of British India, including Baluchistan and Santal Parganas. The term 'British India' included all territories within the Governor's provinces. The court noted that the Indian Income-tax Act, 1922, was in force when the Government of India Act, 1935, came into effect and continued to remain operative in the Province of Bihar until altered, as provided in Section 292 read with Section 92 of the Constitution Act.2. Legislative powers of the Governor under Section 92 of the Government of India Act, 1935:The appellants argued that Section 92 did not grant legislative powers to the Governor but only delegated administrative authority. The court rejected this argument, explaining that the Governor was given authority by Notification to direct that an Act of the Federal or Provincial Legislature would apply to a particular area, subject to exceptions and modifications. The court emphasized that the right to modify an Act of the Legislature constituted legislative power, not administrative power.3. Validity of the assessment proceedings initiated before the Notification of 26th May, 1940:The appellants contended that the notices issued under Section 22 (1) and (2) of the Income-tax Act before the Notification of 26th May, 1940, were ultra vires and could not confer jurisdiction on the Income-tax Officer. The court clarified that the issue or receipt of a notice was not the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessees to pay the tax. The liability to pay the tax was founded on Sections 3 and 4 of the Income-tax Act, which were the charging sections, while Section 22 and others were machinery sections to determine the amount of tax.4. Retrospective application of the Notification and Regulation I of 1941:The principal argument was that the Governor had no authority to apply the Acts mentioned in the Notification and Regulation I of 1941 retrospectively. The court examined Section 92 and concluded that while Section 92 (1) did not grant the Governor power to make independent legislation, Section 92 (2) authorized the Governor to make Regulations for the peace and good government of any excluded or partially excluded area. The court held that the Governor had plenary legislative powers under Section 92 (2) and could make Regulations with retrospective effect. The court noted that the Governor-General had assented to Regulation I of 1941, giving it retrospective effect and validating the assessment proceedings.The court concluded that the appellants' contentions failed, agreeing with the High Court's affirmative answer to the question submitted for its opinion. The appeals were dismissed with costs.