Retrospective income-tax and jurisdiction: Rajasthan income earned before taxability attached could not be assessed, and prohibition lay.

Rajasthan was treated as a taxable territory only from 1-4-1950, except for Bundi, so income accruing, arising or received there before that date was not liable to income-tax. The taxing scheme was read strictly, and any ambiguity was resolved in favour of the taxpayer; the Revenue's proviso did not extend chargeability to pre-1-4-1950 income. The Dominion Parliament also lacked competence to impose income-tax in Rajasthan on income earned before 26-1-1950, as the relevant constitutional and accession arrangements did not confer retrospective taxing power. A writ of prohibition remained available despite alternative remedies because the proposed levy lacked jurisdiction, and relief was granted against the Union of India.

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Issues: (i) whether Rajasthan became a taxable territory only from 1-4-1950, with the result that income accruing in Rajasthan before that date was not liable to income-tax; (ii) whether the Dominion Parliament had power to enact a law imposing income-tax in Rajasthan in respect of income accruing before 26-1-1950; and (iii) whether a writ of prohibition could be granted despite the availability of alternative statutory remedies.

Issue (i): whether Rajasthan became a taxable territory only from 1-4-1950, with the result that income accruing in Rajasthan before that date was not liable to income-tax.

Analysis: The charging scheme of the Income-tax Act proceeds on the income of the previous year, and the definition of "taxable territories" in the amended statute had to be read according to its temporal clauses. On that construction, Rajasthan, except the area of Bundi, became a taxable territory only from 1-4-1950. The proviso relied upon by the Revenue was held not to extend chargeability to income received or accrued in Rajasthan before that date. In construing the taxing provision, any ambiguity had to be resolved in favour of the subject.

Conclusion: The income accruing, arising or received in Rajasthan prior to 1-4-1950 was not liable to assessment to income-tax, except in relation to the area of Bundi.

Issue (ii): whether the Dominion Parliament had power to enact a law imposing income-tax in Rajasthan in respect of income accruing before 26-1-1950.

Analysis: The legislative power of the Dominion Legislature before the Constitution was controlled by the relevant constitutional framework and the Instrument of Accession, which excluded authority to impose income-tax in the territories of Rajasthan. The later constitutional settlement did not authorise retrospective taxation in respect of a period when no such legislative power existed. The agreement and constitutional arrangements were not treated as conferring retrospective competence to tax pre-26-1-1950 income.

Conclusion: The Parliament had no power to enact a law imposing income-tax in Rajasthan in respect of income prior to 26-1-1950.

Issue (iii): whether a writ of prohibition could be granted despite the availability of alternative statutory remedies.

Analysis: A writ of prohibition lies where there is absence or excess of jurisdiction, and the existence of another remedy does not bar relief when the illegality is apparent and the authority lacks power to proceed. Since no lawful basis existed for levying income-tax on the relevant pre-1-4-1950 income, the petitioner made out a proper case for supervisory writ relief. The Union of India could be directed to act through its officers, though a writ was not issued against persons not formally made parties.

Conclusion: The writ of prohibition was maintainable and relief was granted against the Union of India.

Final Conclusion: The assessment machinery could not be used to levy income-tax on Rajasthan income earned before 1-4-1950, and the petitioner was entitled to writ relief restraining such action.

Ratio Decidendi: Where a taxing statute defines chargeability by reference to taxable territory and the previous year, income arising before the territory becomes taxable cannot be retrospectively taxed in the absence of clear legislative authority; a writ of prohibition lies to prevent proceedings without jurisdiction notwithstanding the existence of alternative remedies.

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