Previous-year consent cannot alter the tax rate base: shorter-period income must be taxed at the rate for that period.

The proviso to section 2(11)(a) of the Indian Income-tax Act, 1922 was read as limiting the Income-tax Officer's power to consenting to and regulating the length of the previous year. Once a shorter previous year was permitted and the income for that period was ascertained, the applicable tax rate had to be taken from the Finance Act governing that period. The officer could not impose a condition that income of a period shorter than twelve months be taxed as if it were twelve months' income. Income for the nine-month period was therefore taxable only at the rate applicable to that period.

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Issues: Whether, on a permitted change of the previous year, the Income-tax Officer could impose a condition that the income of a period shorter than twelve months be assessed at the rate applicable to twelve months' income.

Analysis: The reference turned on the scope of the proviso to section 2(11)(a) of the Indian Income-tax Act, 1922. The relevant principle applied was that the Income-tax Officer's power under the proviso extended only to consenting to, and regulating the period of, the previous year. Once the length of the previous year was fixed and the income for that period was determined, the rate of tax had to be taken from the Finance Act applicable to that period. The officer could not, by imposing a condition, alter the legislative rate base and charge tax as though the income related to twelve months when consent had been granted only for a nine-month previous year.

Conclusion: The assessee's income for the nine months ended 31 March 1950 was liable to be taxed only at the rate applicable to that nine-month period and not at the rate applicable to twelve months' income.

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