TaxTMI 
TaxTMI 
1958 (11) TMI 25
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....r 1950-51 (previous year ending 31st December, 1949) the Income-tax Officer had passed an order on 18th January, 1951, assessing the total income of the petitioner mills at Rs. 30,30,622. At that time in accordance with the provision contained in clause (1) of the proviso to paragraph B of Part 1 of the Schedule to the Finance Act of 1950, he allowed the rebate of one anna in a rupee on the undistributed profits of Rs. 6,43,621. The rebate so allowed amounted to Rs. 40,226. It will be convenient to reproduce the provision of law relating to that rebate. It is to be found in the First Schedule to the Finance Act of 1950 : " In the case of every company * * * (1) where the total income, as reduced by six and a half annas in the rupee and by the amount, if any, exempt from income-tax, exceeds the amount of any dividends (including dividends payable at a fixed rate) declared in respect of the whole or part of the previous year for the assessment for the year ending on the 31st day of March, 1951, and no order has been made under sub-section (1) of section 23A of the Income-tax Act, a ....
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....52 and 1952-53 had been allowed on undistributed profits. There was some correspondence and ultimately the first respondent passed orders on the mills company under section 35(10) of the Act, terms of which sub-section are as follows : " Where, in any of the assessments for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive, a rebate of income-tax was allowed to a company on a part of its total income under clause (i) of the proviso to Paragraph B of Part 1 of the relevant Schedules to the Finance Acts specifying the rates of tax for the relevant year, and subsequently the amount on which the rebate of income-tax was allowed as aforesaid is availed of by the company, wholly or partly, for declaring dividends in any year, the amount or that part of the amount availed of as aforesaid as the case may be, shall, by reason of the rebate of income-tax allowed to the company and to the extent to which it has not actually been subjected to an additional income-tax in accordance with the provisions of clause (ii) of the proviso to paragraph B of Part 1 of the Schedules to the Finan....
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....It seems to us that these are both phases of the same argument. It will be convenient to set out here section 28 of the Finance Act of 1956, whereby section 35(10) was introduced for the first time in the Income-tax Act : " The amendments made in the Income-tax Act by section 4 and clause (b) of section 15 shall be deemed to have come into force on the 1st day of April, 1955, and the amendments made by sections 3 to 27 inclusive shall come into force on the 1st day of April, 1956. " The amendment by way of introduction of section 35(10) was brought about by section 19. It is one of the provisions which section 28 says " shall come into force on the 1st day of April, 1956 ". There is no dispute, and there can be no dispute, that section 35(10) came into force on the 1st day of April, 1956, but the dispute is as to the precise effect of the coming into force of that section on 1st April, 1936, in the light of the provisions of section 35(10) itself. In a case of the nature before us the prospective or the retrospective operation of section 35(10) cannot depend merely on the words " shall come i....
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....in words of sufficient clarity and precision, no more requires to be done. Indeed, in such a case the task of interpretation can hardly be said to arise : Absoluta sententia expositore non indiget. The language used by the Legislature best declares its intention and must be accepted as decisive of it. We may also permit ourselves to make some further observations of the nature we have made before about the interpretation of provisions said to be retroactive in their operation. The general rule indubitably is that where a statute is passed altering the law it is to be presumed as intended to apply to a state of facts coming into existence after the Act. It is a fundamental and firmly established rule of interpretation that a statute which deals with matters of substantive law-and taxation is a matter of substantive law-would not be construed to have retrospective operation unless such a construction appears very clearly in the terms of the Act or arises by necessary implication. Now, the use of the expression " retrospective operation " is at times vague and misleading. In a broad general sense it may be right to say that a statute has retrospective operation when it purports to suc....
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....ly " and " for declaring dividends in any year " in the sub-section have reference to the words " in any of the assessments for the years beginning on the 1st day of April of the years 1948 to 1955 inclusive. " That, in our judgment, permits of no doubt and little debate. We leave out certain words in sub-section (10) which deal with matters of detail, and doing so, we find that the words that follow are the crucial words. They are made in the context of rebates made and the amount of undistributed profits on which rebates were granted being availed of by the company for paying dividends in subsequent years, and the crucial words are that in such a case the amount of undistributed profits availed of by the company on which rebate had been allowed " shall be deemed to have been made the subject of incorrect relief under this Act. " In such a case the Income-tax Officer is authorised to recompute the tax payable by the company by reducing the rebate originally allowed as if the recomputation is a rectification of a mistake apparent from the record. The substance of the matter, evidently, is that something which had in fact not taken place, something which was not incorrect when done,....
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....irs ; it does not say that having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs. " Far from there being any prohibition in the present case, the statute enjoins that what when done was not a mistake, what was correct relief granted according to the provisions of the Finance Acts in operation at the relevant times, shall nevertheless be deemed to have been made by mistake and the relief granted shall be deemed to have been incorrectly granted. By virtue of this deeming provision, the granting of rebate must be assumed even factually to have been made as a result of a mistake apparent from the record although in fact and in truth no such mistake had ever been made. Therefore, the crucial question that we have to put to ourselves is : What is the point of time at which the mistake was made and the relief incorrectly given ? The first of April, 1956, has no cogency to the point under consideration. It is a date after which the Income-tax Officer can sit down for the first time to think as to what is it that is to be deemed by him to have taken place by or through a mistake. Apart from that, the 1st o....
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.... That, ex hypothesi, has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay. " The declaration of liability of the assessee-mills was by the statute itself. The assessment in respect of the relevant years was made much prior to 1956. But says Mr. Kolah, that assessment is being altered and affected by giving effect to section 35(10). In our opinion it would not be accurate to say that the effect of section 35(10) is to asess the mills company over again or to reopen the assessment already made. It is stressed that some change or some alteration is being made. Of course, some change or alteration is being made. That is the very purpose of section 35(10). But the question is what is the nature of that change or alteration ? The assessment, strictly speaking, is not being changed or affected. There is only recomputation of a restricted nature vis-a-vis the rebate. What is permitted to be done by operation of the deeming provision is that the rebate is wholly or partially to be recalled as it is to be deemed to have been allowed through a mistake and reli....
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....h the reopening of assessments when income has escaped assessment also has bearing on this doctrine of finality. To turn to the decisions to which our attention has been drawn by Mr. Kolah. In Chatturam v. Commissioner of Income-tax ([1947] 15 I. T. R. 302) the Federal Court had occasion to consider certain principles of taxation and a dispute about retrospective operation of certain provisions. There is nothing in the observations there made which lend any support to the argument of Mr. Kolah. Particular reliance was placed by counsel on the recent decision of the Supreme Court in Venkatachalam v. Bombay Dyeing & Manufacturing Co. Ltd. ([1958] 34 I. T. R. 143) Statutes which give retrospective operation to their provisions may have different objects in view and the purpose may be to lay down different rules. Mr. Kolah is right when he says that in case of different enactments different words are used in giving retrospective operation. Now, the meaning of the words employed in section 35(10) and the question whether the rule laid down in those words is to affect any rebates granted in the past can only be determined from the words themselves and the object of the rule if there i....