1951 (3) TMI 31 - HC - Income Tax

Court rules agent cannot sign for partner, upholds Income-tax Rules.

The court held that the term 'personally' in Rule 6 of the Income-tax Rules excludes the possibility of an agent signing on behalf of a partner for ... - Issues Involved:1. Interpretation of the word 'personally' in Rule 6 of the Income-tax Rules.2. Validity of Rules 2 and 6 under the rule-making authority.Issue-wise Detailed Analysis:1. Interpretation of the word 'personally' in Rule 6 of the Income-tax Rules:The primary issue was whether the term 'personally' in Rule 6 of the Income-tax Rules precludes a duly authorised agent of a partner from signing an application for renewal of registration of the firm under Section 26A of the Income-tax Act. The court examined the language of Rule 6, which mandates that applications for renewal must be signed 'personally' by all partners. The court referred to a previous decision, Commissioner of Income-tax, Madras v. Subba Rao, where it was held that the word 'personally' necessarily excludes acting by an authorised agent. This interpretation was consistent with the special provision in Rule 6 that overrides the general provision in Section 2 of the Powers-of-Attorney Act, 1882, which allows an agent to act on behalf of the principal. The court reaffirmed that the term 'personally' in Rule 6 excludes the possibility of an agent signing on behalf of a partner.2. Validity of Rules 2 and 6 under the rule-making authority:The second issue was whether Rules 2 and 6 were ultra vires the rule-making authority. The argument presented by the petitioner was that the rule-making power does not extend to altering or affecting other statutory provisions, such as those in the Powers-of-Attorney Act. The court examined the legislative framework, noting that Section 59 of the Income-tax Act empowers the Central Board of Revenue to make rules for carrying out the purposes of the Act. These rules, once published in the official gazette, have the effect as if enacted in the Act itself. The court also referred to the General Clauses Act, which allows for the amendment, variation, or rescission of such rules.The court held that a subordinate legislative power cannot be exercised in a manner that alters or abrogates legislative provisions in other statutes. Such an exercise would be beyond the scope of the rule-making authority and would amount to an unconstitutional delegation of legislative power. The court cited various authorities, including Maxwell on Interpretation of Statutes and Craies on Statute Law, which support the principle that rules and by-laws must not be repugnant to the statute under which they are made or to the general principles of law.The court concluded that Rules 2 and 6, by requiring personal signatures, effectively abrogate the common law rule and statutory provision in the Powers-of-Attorney Act that allows for acts to be done by an agent. Therefore, these rules were held to be ultra vires the rule-making authority. The court suggested that if the legislature intended to require personal signatures, it should explicitly state so in Section 26A of the Income-tax Act.Separate Judgments Delivered:Satyanarayana Rao, J.:Satyanarayana Rao, J., held that Rules 2 and 6 are ultra vires the rule-making authority and cannot be enforced. He reasoned that these rules, by excluding the right to appoint an agent, contravene the Powers-of-Attorney Act and the Contract Act. He concluded that the applications made by the assessee for renewal of registration are valid despite the rules.Viswanatha Sastri, J.:Viswanatha Sastri, J., differed from his learned brother. He held that Rules 2 and 6 are explicit and mandatory, requiring all partners to sign personally. He argued that these rules are within the authority conferred by Sections 26A and 59 of the Income-tax Act and have the same effect as if they were part of the Act itself. He concluded that the rules do not conflict with the Powers-of-Attorney Act and are valid.Final Decision:The final decision was that the questions referred to the court were answered against the assessee and in favour of the Department. However, due to the differing opinions, the judgment of Viswanatha Sastri, J., prevailed, and the rules were held to be valid. The assessee was ordered to pay costs to the Commissioner of Income-tax.