Tax recovery, certiorari review, and strict proof of exemption conditions failed where the assessment remained operative.
Mandamus cannot restrain income-tax recovery while the assessment order remains operative, because Article 265 applies only to tax levied or collected without authority of law. A revisional order under section 33A of the Income-tax Act, 1922 is treated as administrative in character and is therefore not amenable to certiorari under Article 226. The exemption notification of 21.03.1922 applies only on cumulative conditions: the remuneration must be paid out of, or determined with reference to, profits, and the assessee must prove the claim. On the facts noted, those conditions were not established, so the exemption failed.
Issues: (i) Whether a writ of mandamus could be issued to restrain recovery of income tax when the assessment order remained in force. (ii) Whether the Commissioner's order under section 33A of the Income-tax Act, 1922 was amenable to certiorari. (iii) Whether the remuneration paid to the assessee satisfied the cumulative conditions of the exemption notification dated 21.03.1922.
Issue (i): Whether a writ of mandamus could be issued to restrain recovery of income tax when the assessment order remained in force.
Analysis: Article 265 of the Constitution of India operates only where tax is levied or collected without authority of law. Where the assessment order stood and collection was to proceed under that order, no mandamus could be granted against the recovery authorities unless the assessment itself was quashed.
Conclusion: The prayer for mandamus failed.
Issue (ii): Whether the Commissioner's order under section 33A of the Income-tax Act, 1922 was amenable to certiorari.
Analysis: The power exercised under section 33A was treated as administrative in character, following the view that the revisional machinery under the corresponding provision did not create a judicial or quasi-judicial function. An administrative order of that kind was not liable to be corrected by certiorari under Article 226 of the Constitution of India.
Conclusion: The order was not amenable to certiorari.
Issue (iii): Whether the remuneration paid to the assessee satisfied the cumulative conditions of the exemption notification dated 21.03.1922.
Analysis: The exemption operated only if the sums were paid out of, or determined with reference to, the profits of the business and, by reason of that mode of payment or determination, had not been allowed as a deduction but had been included in the business profits assessed to tax. The conditions were cumulative. The material on record did not show that the remuneration was paid out of profits or determined with reference to profits, and the burden of proving the exemption lay on the assessee. The deduction had been reduced as excessive, not because it was paid out of profits.
Conclusion: The assessee did not satisfy the exemption conditions.
Final Conclusion: The challenge to the revisional orders failed, the claimed exemption was not established, and the petitions were liable to be dismissed with costs.
Ratio Decidendi: An exemption notification must be strictly proved by the assessee, and where its conditions are cumulative, failure to establish any one of them defeats the claim; an administrative revisional order under section 33A is not liable to certiorari, and mandamus cannot issue while the assessment order remains operative.