Computation provisions cannot expand a tax charge, while Article 372(1) permits retrospective amendment by competent Legislature.

Schedule rules for excess profits tax cannot widen the charging provision beyond the Act's definition of "business"; where a banking company's rental receipts do not satisfy the proviso to Section 2(5), Rule 4(4) of Schedule I cannot bring those receipts into charge. The retrospective explanation inserted into Section 9(1)(iv) of the Indian Income-tax Act, 1922 was also held not to offend Article 372(1), because that Article preserves existing law until amended by a competent Legislature and does not bar retrospective amendment. The result was that the excess profits tax contention failed, while the validity of the retrospective income-tax amendment was upheld.

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Issues: (i) Whether rental income from immovable property let out by a banking company could be brought within business profits under Rule 4(4) of Schedule I to the Excess Profits Tax Act, 1940 despite the company not satisfying the proviso to Section 2(5); (ii) Whether the retrospective explanation added to Section 9(1)(iv) of the Indian Income-tax Act, 1922 by the Indian Income-tax (Amendment) Act, 1950 was ultra vires in view of Article 372(1) of the Constitution of India.

Issue (i): Whether rental income from immovable property let out by a banking company could be brought within business profits under Rule 4(4) of Schedule I to the Excess Profits Tax Act, 1940 despite the company not satisfying the proviso to Section 2(5).

Analysis: The charging of excess profits tax under Section 4 of the Excess Profits Tax Act, 1940 is confined to profits of a business to which the Act applies. The definition of business in Section 2(5) includes, by proviso, a company or society only where its functions consist wholly or mainly in holding investments or other property. The schedule rules are computational and cannot enlarge the charge created by the Act. Rule 4(4) must therefore operate only where the business already answers the statutory definition, and the expression used in the rule cannot override the proviso to Section 2(5).

Conclusion: The rental income was not chargeable under Rule 4(4) of Schedule I, and this issue was decided in favour of the assessee.

Issue (ii): Whether the retrospective explanation added to Section 9(1)(iv) of the Indian Income-tax Act, 1922 by the Indian Income-tax (Amendment) Act, 1950 was ultra vires in view of Article 372(1) of the Constitution of India.

Analysis: Article 372(1) continues existing law in force until altered, repealed, or amended by a competent Legislature. That language does not impose any limitation against retrospective amendment. A competent Legislature may amend existing law with retrospective effect unless restrained by some other constitutional limitation, and the word used in Article 372(1) does not create such a restraint.

Conclusion: The retrospective amendment was not ultra vires, and this issue was decided in favour of the Revenue.

Final Conclusion: The reference was answered by rejecting the Revenue's contention on the excess profits tax question while upholding the validity of the retrospective income-tax amendment.

Ratio Decidendi: Schedule provisions governing computation cannot expand the charge beyond the Act's definition of business, and Article 372(1) does not prohibit retrospective amendment of existing laws by a competent Legislature.

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