TaxTMI 
TaxTMI 
1943 (4) TMI 14
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....dia as income tax under the protest to the Government of India as income tax under the said provision was not legally payable by them; they claim a declaration that the said provision are ultra vires and ask for a return of the money so paid and other reliefs. The defendants in their written statement have pleaded Section 226 of the Government of India Act, 1935, which in its material part provides :- "No High Court shall have any original jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof according to the usage and practice of the country of the law for the time being in force." In order to decide whether and to what extent this plea will avail the defendants it is necessary to go into the facts of the case and the relevant provision of the law. There is no difference between the parties as to the facts. The Governor-General in Council as representing the Government of India is a party to the suit and has appeared through Sir Asoka Roy, the Advocate-General of Bengal, not acting as the Advocate General of Bengal, but as Counsel representing the Government of India; we were informed by Sir Asoka Roy t....
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.... of the companies are held in England. The registered offices of six of the sterling companies are in the Isle of Man and of three others in London, but all the sterling companies have officer in London." Copies of Articles 97, 98 and 100 of the Memorandum of Association of the Tobacco Manufacturers (India) Ltd., are exhibited separately. It is agreed that each of the other sterling companies contains similar Articles. These are marked Exhibit B. All the companies above concerned, with the exception of the plaintiffs, have carried on business in India and made profits here which have been assessed to income tax and super tax under the Indian Income tax laws and those taxes have been paid. Dividends have been declared after payment of Indian Income Tax and super tax by the 11 companies, and the plaintiffs have received such dividends as they are entitled to on their share holdings in those eleven companies. Dividends on the two rupee-companies were paid to a representative of the plaintiff company at 37, Chowringhee, Calcutta. The dividends of the nine sterling companies were declared by them in England and paid by them in England to the plaintiff company in England. On Jun....
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....ter to the plaintiffs - C/o Messrs. Imperial Tobacco Co., of India Ltd., 37, Chowringhee, Calcutta. Paragraph 6 of this letter is as follows :- "You are further requested to let me know that in view of Explanation (3) to Section 4(1) of the Act, the dividends shown in Section D of the return being income accruing or arising in British India and thus liable to be included in total income, it appears that the total income accruing or arising in British India exceed the income arising without British India in the previous year and as such in terms of Section 4A[c] the company is to be treated as resident in British India and as such the entire profits are liable to be taxed." (the letter is reproduced as put in evidence, the wording is faulty.) Paragraph 7 as follows :- "You are requested to let me know if you have anything to urge against this." On June 3, 1940, the plaintiffs replied from Rusham House, Egham, Surrey, to which address they had apparently removed from Millbank, London, as follows : "Dear Sir, Your letter of the April 3, addressed to this company, care of the Imperial Tobacco company of India, Limited, Calcutta has been forward....
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....as since been dropped. It is convenient here to set out Section 4(1)(c) of the Act and Explanation (3) which were added to the Indian Income Tax act of 1922 by the Indian Income Tax (Amendment) Act of 1939 : "4. (1) Subject to the provisions of this Act, the total income of any previous year of any person includes all income, profits and gains from whatever source derived which - (c) if such person is not resident in British India during such year, accrue or arise or are deemed to accrue or arise to him in British India during such year." Explanation is as follows :- "A dividend paid without British India shall be deemed to be income accruing and arising in British India to the extent to which it has been paid out of profits subjected to income tax in British India." At this time communications between India and England had become more difficult. On August 2, 1940, the Income Tax officer sent another notice under Section 22 of the Income Tax Act to the plaintiffs, and on August 3, Mr. Hamilton, an Accountant of the Imperial Tobacco company of India, Ltd., at 37, Chowringhee informed the Income Tax Officer of the difficulty in getting a reply f....
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....; 3,967 7 42,557 9 98,419 2 3,73,165 13 Total demand 4,48,201 13 On the same day a copy of this assessment was sent by the Income Tax officer together with a notice of demand under Section 29 of the Indian Income Tax Act to the plaintiffs at 37, Chowringhee Calcutta. On January 2, 1941, Mr. McAra writing as a director of the Imperial Tobacco Company of India wrote back to the Income Tax officer stating at follows :- "Dear Sir, On Friday or Saturday last week delivery of a cover addressed to the Releigh Investment Co., Ltd., 37, Chowringhee, Calcutta, from your office was incorrect accepted here. You have already been advised that the Raleigh Investment Co., Ltd., have no place of business nor any representative in this country, and you were informed of the address to which correspondence should be sent. We have, on this occasion and without accepting any responsibility as to the ultimate delivery, re-addressed and air-mailed the cover to England; but if the contents called for an urgent replay of laid down a time limit within which s....
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....cer when he made the assessment. The Income Tax Officer, as the assessment shows, rejected paragraph (a) of the plaintiffs objections in the letter of June 3. He did not deal with the question of ultra vires. On August 21, 1941, Mr. Ryan wrote to the Appellate Assistant commissioner of Income Tax as follows :- "In view of certain constitutional questions which are raised by some of the Grounds of Appeal in this case, the Raleigh Investment Co., Ltd., has been advised to take other proceedings to have those questions determined. What form those proceedings should take is now under consideration. In the meantime, the Raleigh Investment Co., Ltd., does not wish to abandon its rights under the Act respecting the assessment on the constitutional question or on the other grounds raised. In the circumstances, I request that you would be good enough to allow the appeal to remain in abeyance by adjourning it sine die until such time as the Raleigh Investment Co., Ltd., been [Sic] able to decided upon its other course of action." On November 11, 1941, the Appellate Assistant Commissioner wrote to Mr. Ryan as follows :- "The request in your letter 21-8-41 is u....
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.... the other is an Accountant. The Appellate Tribunal may state a case for the opinion of the High court functions with regard to such case stated are to advice on the law and from its judgment or opinion there is an appeals to the Privy Council. On April 17, the plaintiffs began the present proceedings in this court claiming : (1) a declaration that in so far as explanation 3 and the other provisions of Section 4 of the Indian Income Tax Act purport to authorize the assessment and charging to tax of a non resident company in respect of dividends which have been declared and or paid outside British India upon shares situate outside British India but which have never been brought into British India, the said provisions are ultra vires the legislative powers of the Central India Legislature and that therefore the plaintiff company is not liable to be assessed or charged to income tax or super tax in respect of the said assessment for the year 1938-40 was illegal and wrongful : (2) an injunction restraining the defendant, his officers, servants or agents from making any further assessment upon the plaintiff company in any subsequent years in respect of dividends of ....
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.... similar provision in respect of super tax which is a flat rate tax payable by companies as well as individuals. The consequence is that the income tax authorities gave the plaintiffs credit for the income tax paid by the two rupee and nine sterling companies, viz., Rs. 11,06,890/- against the income tax demanded of the Raleigh Investment Company Ltd., viz., Rs. 11,78,939/-. The difference is Rs. 72,047/- which is a part of the money the plaintiffs paid. Of that amount of tax a certain proportion is attributable to the dividend received from the rupee companies about which there is now no dispute. The proportionate amount attributable to the sterling companies is Rs. 57,689/-. As regards the item of Rs. 3,73,155-13-0 this is super tax paid by the plaintiffs in respect of the income received by them from the rupee companies (Rs. 15,03,576/-) and the sterling companies (Rs. 60,41,621/-) in all (Rs. 75,45,197/-). Each of the rupee companies and the sterling companies had already paid super tax on their respective profits at the flat rate before before they paid their dividends to the plaintiffs. Section 18(3-D) of the Income Tax Act provides that an Income Tax officer, it he has....
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....o prepare a table with necessary explanations to show, how the taxes have been arrived at. The table and the explanations are exhibited and marked Exhibit 1. The written statement put in by the defendant admits in paragraph 2 that the dividends of the sterling companies were declared, paid and received in England and that the plaintiffs were assessed on such a basis. In paragraph 3 the defendant pleads that - "The plaintiff company is the principal shareholder in all the rupee companies as well as the sterling companies referred to in paragraph 2 of the plaint. As such the plaintiff company controls the business and trade of all the said companies in British India. In any event the plaintiff company has sufficient interest in the capital and assets of the said companies employed in British India and in the trading operations of the said companies in British India to make it liable to Indian Income Tax in respect of income arising out of such trading operations." This pleas has not been developed, but is I believe disposed of hereafter in this judgment. The defendant denies that the sums paid by the plaintiffs were paid under any coercion or duress. He also denies tha....
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....uccessful in the Privy Council. In the other case the Ford Motor Company were substantially unsuccessful in the Court of first instance and also an appeal to the Bombay High Court and in the Privy Council. There is no evidence of any plea of Section 226 of the Government of India Act, 1935, or its predecessor Section 106(2) of the Government of India Act, 1915, being raised although Sea Customs Duty is just as much revenue as Income Tax. However, the matter must be decided according to law. This particular section, except where it provide for its repeal, substantially re-enacts Section 8 of the Act of Settlement, 1781. This Section was enacted to prevent the Supreme Court in Calcutta from interfering with the East India Company's collection of land revenue. It has been retained in successive enactments and, in particulars, Section 106(2) of the Government of India Act, 1915. It will be noticed that it is only the exercise of the original jurisdiction of the High Court that is forbidden. The exercise of the appellate jurisdiction of the High Court is not forbidden. Had the offices of the Income Tax Officer been two miles south of where they are now and so outside the or....
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....employed to administer the Act and he had to take the Act as he found it. Section 30(i) says : "Any assessee..... denying his liability to be assessed under this Act........ may appeal to the Appellate Assistant Commissioner." In that appeal both parties had to take the Act as they found it, not the Act with Explanation [3] of Section 4[1] [c] treated as in doubt. It appears to me that the Appellate Tribunal, although one of the two members of it is a gentleman with judicial experience, must take the Act as they find it and not call it in question. Section 66 provides that within sixty days of the date on which he is served with a notice of an order under Section 33[4] the assessee or the Commissioner may require the Appellate Tribunal to refer to the High Court any question of law arising out of such order. I doubt whether the validity of Explanation [3] to Section 4 [1] [c] would arise out of the order. Moreover raising that question in a reference would present the Court with serious difficulties since it would not have evidence before it but only a statement of facts. If a constitutional question of this sort is to be raised it ought to be raised before a cour....
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.... return of the money they have paid together with other connected reliefs. A decision in this suit will clearly affect the amount of money the Government will be able to collect as Income Tax both in the year in question and in subsequent years. The suit would therefore appear to be one "concerning the revenue". It is necessary however to consider what the word "revenue" means. In 1781, when prohibition against the Supreme Court exercising original jurisdiction in matters concerning the revenue clearly meant income from land, but in 1935, when prohibition against the Supreme Court exercising original jurisdiction in matters concerning the revenue was first introduced into the Act of Settlement, revenue clearly meant income from land, but in 1935, when the same provision was substantially re-enacted, revenue, in view of the provisions of Sections 136 and 138 of the Act of 1935, would clearly include money derived from Income Tax. In the present case the plaintiffs say that the money they have paid as a result of the assessment and demand for Income Tax is demanded under an invalid provision of law and therefore the money is not money paid under the law but is an illegal exaction.....
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....urisdiction or not. Section 99[1] of the Government of India Act provides : "Subject to the provisions of this Act. The Federal Legislature may make laws for the whole or any part of British India or for any Federated State." Federation is not yet in being but the Indian Central Legislature has meanwhile the same law-making powers as those given by the Act to the Federal Legislature : Section 316 of the Act. Section 99 [2] of the same Act provides : "Without prejudice to the generality of the powers conferred by the preceding sub-section, no Federal law shall, on the ground that it would have extra-territorial operation, be deemed to be invalid in so far as it applies - (a) to British subjects and servants of the Crown in any part of In dia; or (b) to British subjects who are domiciled in any part of India wher ever they may be; or (c) to, or to persons on, ships or aircraft registered in British India or any Federated State wherever they may be; or (d) in the case of a law with respect to a matter accepted in the Instrument of Accession of a Federated State as a matter with respect to which the Federal Legislature may make laws for that....
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....he powers conferred by the preceding sub-section...." They are however clearly precautionary and probably mean that laws made for British India, even when they do not come within the cases sets out in Section 99(2), may in certain eventualities which are either too numerous or uncertain to specify, have some extra-territoriality; such as in the cases prescribed for in Items 3, 21, 23, 24 and 25 of List I, or where anti-smuggling laws are made as related in Croft v. Dunphy. There may be other such cases. Such extra-territoriality would be of the kind and decree necessary to give efficacy to the legislation as it affected British India-small extensions for such purpose, perhaps into no-mans air or water, or perhaps by agreement with a neighbouring State into that State; all other valid extra-territorial legislation must come within Section 99(2)(a), (b), (c), (d) and (e). In Croft v. Dunphy Lord Macmillan said : "Where a power is conferred to legislate on a particular topic it is important in determining the scope of the power to have regard to what is ordinarily treated as embraced within that topic in legislative practice and particularly in the legislative practice of the St....
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....oad from companies registered in England although those companies traded in India. Indeed, had such been the position, the present legislation now objected to would probably not have been passed by the Indian Income Tax Amendment Act, 1939. Reference to the legal position with regard to this matter in England and in India in 1936 does not mean that the Income Tax law in India after 1935 is to remain unchanged and unchangeable, but it does lend some support to the view that where the British Government had refrained from extra-territorial legislation involving taxation of non-residents upon income received by them abroad, it did not in the absence of express enactment intend to confer such power upon the Indian Government by the Act of 1935. Extra-territorial legislation is apt to produce friction between States and this is certainly so where one State takes another States nationals as Lord Esher pointed out in Colquhoun v. Brooks. The reactions to the assessment and demand for tax might have been much different in the present case had the plaintiffs been an American Company instead of a British Company. The dividends in respect of which tax has been claimed and paid in the pr....
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.... assumed were necessary to give efficacy to legislation for British India; it is something beyond all these. This is a case of the Legislature of British India without specific or apparent authority stretching out its legislative arm and fiscal hands beyond British India into other countries in an attempt to tax persons and property there not subject to its laws. In my opinion, for the reasons given above, the legislation impugned is not authorised by any provision, either express or implied, of the Government of India Act, 1935, from which statute the legislature of British India in 1939 derived its powers. I am therefore of opinion that the impugned legislation was and is beyond the law-making powers of the Government of India and therefore invalid. Consequently the words "or are deemed to accrue or arise" in Section 4(1) of the Indian Income Tax Act and Explanation (3) thereof are of no legal effect. The Government of India were only able to obtain the money now claimed in this suit from the plaintiffs because they were in a position to treat, and intended to treat, plaintiffs as defaulter under the Income Tax Act and so collect the money with possible penalties under the ....
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.... entitle the payer to recover it back, but if it be shown that it was made under circumstances which show that the payer intends to resist the claim and yields to it merely for the purpose of relieving himself of the inconvenience of having his goods sold, the money can be recovered back, and the fact of a protest is some indication that it is so made." It is inconceivable that the plaintiffs in the present case would under protest have paid money from England in the way they did over four lakhs of rupees - or in English currency over 30,000 Pounds - to the Income Tax Officer in Calcutta but for the fact that the Income Tax Officer held threats of the Income Tax Act over their heads and the fear that he would use powers under Section 46 to take the plaintiffs money coming from the rupee company whether they liked it or not. Having found that the money now claimed was money paid by the plaintiffs to the Government of India as aforesaid as a result of a demand made under a law which the Government of India had no power to make and so an invalid law, I am of the opinion that the suit does not concern revenue in the sense used in Section 226, viz., legal revenue, and that therefo....
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....on the same date expressing regret, and at the same time asked the company to arrange for payment by the March 15, 1941. The money was paid by that date. This suit was filed by the company on the Original Side of this Court in April, 1942. On the pleadings the following five issues have been raised : 1. Has the company any cause of action ? 2. Is the suit barred by reason of the provision of the Indian Income Tax Act ? 3. Has this Court, in the exercise of its original jurisdiction power to entertain the suit in view of Section 226 of the Government of India Act, 1935 ? 4. Is Explanation (3) to Section 4 of the Income Tax Act ultra vires and legislature ? and 5. What relief, if any, is to be given to the company ? I would take up the fourth issue first. The charging provisions (Sections 3 and 4) of the Income Tax Act before its amendment by Act VII of 1939 were as follows :- A person whether residing in or outside British India in the relevant year, was chargeable only in respect of the income (a) which had arisen or accrued to him in the accounting year in British India or (b) which had been received by him in British ....
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....me which in fact had arisen or occurred to a non-resident outside British India is brought within the British Indian assessment by this Explanation, for dividend which accrues to a share-holder of a company is income which is quite distinct from the income of the company in which the shares are held, even when the whole of the share capital of the company is held by that share-holder. This follows from the observations of Fletcher-Moulton, L.J., in Gramophone and Typewriter Ltd. v. Stanley and of Lord Wrenbury in Bradbury v. English Sewing Cotton Co. The property of a person who may be the subject of another independent foreign State and may be a resident of such a State, and over whom the Indian Legislature has no jurisdiction is thus brought under the provision of a taxing statute enacted by the British Indian Legislature. Limiting Explanation (3) to the case of a non-resident, that explanation is a piece of extra-territorial legislation, not by a supreme or paramount legislature but by a subordinate legislature, which derives its authority from Parliament under the Government of India Act, 1935. The question is whether the explanation so far as it affects non-residents is ultra ....
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....d by courts of foreign countries. A subordinate legislature is, no doubt, not an agent or delegate of the supreme legislature in respect of legislation on the permitted subject but has plenary powers : Rex v. Burah, Hodge v. The Queen. That does not necessarily imply that it can legislate on the permitted subject in an extra-territorial manner in the same way as the supreme legislature. If the judgment of Lord Macmillan in Croft v. Dunphy be considered in its entirety it cannot be said that his Lordship was laying down by the observations at page 163 of the report, that every subordinate legislature can legislate with extra-territorial effect on the permitted subject just as the Imperial Parliament, for on the next page he observes that a statute violating International Law passed by the Imperial Parliament cannot be challenged as ultra vires in a domestic court but such a statute passed by a subordinate legislature can be challenged as ultra vires in a domestic court on the ground that the Imperial Parliament must not be taken to have granted the power to enact such a statute to a subordinate legislature. In the early part of judgment I have pointed out that Explanation (3) to Sec....
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....ation on the permitted subject would not be effective without a provision being enacted having extra-territorial operation a power to legislate extra-territorially will be implied; for instance where the permitted subject of legislation is defence of the territory subject to the jurisdiction of the subordinate legislature, a provision in a statute which deals with that subject would not be considered ultra vires, because the provision has extra-territorial effect, the principle being that the Sovereign Legislature gave the subordinate legislature such a power by necessary implication. The absurdity of limiting the power to legislate within the territorial bounds in such a matter is well expressed by the phrase "Imagine the navy confined to the three mile limit." The cases where the validity of laws of exclusion and expulsion passed by the Colonial or Dominion Legislature were considered also fellow within this category : (see Attorney-General for Canada v. Cain and Gilhula). The legislative practice in England in Income Tax matters is summarised at pages 27 and 35 of Lord MacMillans Report (Income-tax Codification Report of 1936). According to the legislative practice in England....
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....was received in British India or which under the provisions of that Act was to be deemed to have arisen, accrued or to have been received in British India. The only provision in that Act which defined what was to be deemed to have arisen etc., in British India was Section 33 which corresponds to Section 42 of the Act of 1922(XI of 1922). The last mentioned Act, as it stood in 1935, and before the amendment of 1939, made the income of a resident taxable when the income had accrued, arisen or had been received in British India, or though arising out of British India, has been received or brought into British India within a certain time, but with regard to a non-resident he could be taxed only in respect of income which had accrued or arise in British India or which had been received there. The extending Section was Section 42. The legislative practice in India up to 1935 was not to assess a non-resident who had no business connection in British India, to Income Tax in respect of an income which had not arisen or accrued to him in British India or which had not been received by him in British India. Moreover the nature of the subject of legislation does not necessarily require any leg....
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....the company the right to deduct and retain the amount of tax payable by it on the interest payable to the absentee debenture-holder from the amount payable to them. Dixon, J., however stated in clear words that the company could not escape assessment simply because foreign courts may, by reason of the laws of that foreign country, refuse to recognize the right of deduction so given to the company by the Australian legislature. The majority of the Judges agreed with Dixon, J. In this view as to the scope of the Australian Statute no question of its having extra-territorial effect arises. The Statute was certainly intra vires, as the Australian legislature legislated on a subject which was within the territorial limits of Australia. Evatt, J., however, adopted the reasons which he had given in the earlier case, namely in Trustees, Executors and Agency v. Federal Commissioner of Taxation. In support of his view that the State legislature had power to legislate extra-territorially he gave four reasons : (i) that the Australian Commonwealth has full self-government and the Commonwealth Parliament has power to legislate extra-territorially, as such a power is an essential part o....
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....hose companies have been issued in England, the share registers are kept in England, dividends are declared in England and paid in England; (iv) Those companies carry on business in British India and earn profits here. They have been assessed to Income Tax in British India on their profits earned in British India; (v) The Raleigh Investment Company is a non-resident Company; (vi) The dividends in question had been declared and paid to it in England. Leaving out the case where income is not received in British India income of a non-resident is assessable in British India only if the income had accrued or had arisen in British India or is deemed to have arisen or accrued in British India. Explanation (3) to Section 4, which deals with dividend only, defines the circumstances under which a class of income actually arising or accruing outside British India is deemed to have arisen or to have accrued in British India. Section 42 which is not relevant to the case before us, for the assessment is not as an agent of the plaintiff company, also mentions the case where income would be deemed to have arisen etc., in British India. For the purpose of this issue we....
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....d on, that is to say, "where the central management and control abides"; De Beers Consolidated Mines Ltd. v. Howe, Bradbury v. English Sewing Cotton Co. A company may no doubt have, like a natural person, more than one place of residence, but in that case the central management and control must be divided and exercised from more places than one : Swedish Central Ry. Co. v. Thompson. The other view is that the situs of the shares for purposes of taxing statutes must be taken to be the place where the share register is kept, "for the evidence of title to shares is the share register". This is the view taken in Brassard v. Smith, and London and South American Investment Trust v. British Tobacco Co. Whichever view be accepted the situs of the shares which the plaintiff company had in the sterling companies would not be in British India but in England. The income in the shape of dividends paid by the sterling companies to the plaintiff company therefore arose or accrued not in British India but in England. The case of the Commissioner of Income Tax, Bombay v. Major Goldie is an authority directly on the point. The plaintiff company has assessed to Income Tax in British India in re....
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....ked by the defendant for the purpose of defeation the suit before us, only if it can be shown that the point raised in the suit and on the basis of which the plaintiff seeks relief, could have been determined by the special tribunals set up by the Income Tax Act. Section 30 of the Act create a tribunal to which the assessee dissatisfied with the assessment made by the Income Tax Officer is to go in the first instance. What questions he can raise before that tribunal are indicated in the section itself. He can object to the amount of his income as determined by the Income Tax Officer or to the amount of loss computed under Section 24 or the amount of the tax etc. He can also deny his liability to be assessed under the Act. That phrase to my mind mean that he can only urge before that tribunal that the provisions as they stand in the Act do not make him liable, i.e., exempt his income or a part of his income from assessment. He cannot urge there that though a provision of the Act makes his income or part thereof liable to be assessed, that provision is illegal, being ultra vires the Indian Legislature. The Appellate Assistant Commissioner would not be competent to entertain or dec....
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....n suits relating to Income Tax and to decisions in other suits where the private provisions in the statute are of similar scope. The first case is Haji Rahamatulla v. Secretary of State for India in Council. In that case a person, whose place of residence was outside British India, was assessed on profits, which also had accrued outside British India, under the Income Tax Act of 1886 (Act II of 1886). He brought a suit for a declaration that the assessment on him was illegal. Section 39 of the Act II of 1886 which is couched exactly in the same terms as the first part of Section 67 was pleaded as a bar to the suit. The plea was overruled on the ground that if the questioned assessment was ultra vires that Section did not stand in the way of the plaintiff. This case was cited in Meyappa Chettiars case but was distinguished on two grounds : (1) that the Act of 1886 contained no provision corresponding to the second part of the Section 67, and (2) the said Act did not provide the same safeguards, as in the act of 1922, by way of appeal and reference to the High Court with a further right of appeal to the Privy Council. In my judgment Haji Rahamatullas case cannot be put aside on these....
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....hat a civil suit was maintainable to declare that the assessment of revenue made by the revenue authorities was illegal on the ground that on a contraction of the provisions of Act IX of 1847 the revenue authorities could not have legally imposed revenue on the land in question. The decision of the Bombay High Court in Bhag Chand Dagdusa v. Secretary of State for India in Council, affirmed on appeal in (54 I.A. 338), on a different ground also supports the same view. In that case a large body of shop-keepers of Malegaon filed a suit against the Secretary of State for India for a declaration that a certain notification issued by the District Magistrate, by which compensation for damage caused at a riot and the costs of additional police for keeping order were to be recovered, was illegal and for injunction. A notice under Section 80 of the Code of Civil Procedure was given, but the suit was filed before the expiry of two months from the date of that notice. The Secretary of State raised three substantial questions : (1) that Section 4(f) on the Bombay Revenue Jurisdiction Act (Act X of 1876) barred the suit, (2) that the suit having been instituted before two months of the notice gi....
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....ervations made by the Bombay High Court in respect of the scope of Section 4(f) of the Revenue Jurisdiction Act. The case on which the learned Advocate-Generally has relied are Forces v. Secretary of State for India, Dr. R. N. Singha v. Secretary of State for India, Secretary of State for India v. Forbes and Secretary of State for India v. Meyyappa Chettiar. In none of those cases was the question of ultra vires raised. In all of them the assessment was not outside but under the Income Tax Act and the suits challenged the correctness of findings on points which the Income Tax Officer was competent to determine. In Secretary of State for India v. Mask & Co. a case which concerned customs duties, the plaintiff contended that the goods which he had imported were of a different description from what the Customs authorities took them to be and so the proper duty payable was at a lower rate. That case is also of the same type as the first mentioned case. In the suit before us Section 67 is of no avail to the defence as the suit is not for setting aside or modifying an assessment made under that Act. It is a suit for a declaration that the assessment is unauthorised by the Act and outs....
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....as been enacted to give an indemnity to revenue officers who in the discharge of their duties may have collected or may have made attempts to collect revenue by passing orders or by doing things which may not be strictly according to law but which they bona fide believed to be in accordance with law. The cases cited by the learned Advocate-General are cases which concerned the collection of what was in fact revenue or was found to be revenue. The first case is the case of Spooner v. Juddow. The act that was done there was an attempt to collect quit rent due to the East India Company by executing a distress warrant. It could not be justified in law, for the distress warrant issued against one person was executed against another and for a liability whip was not fully the liability of the latter. A suit for damages was brought against the Govt., agent who had executed the said warrant. The main defence was that the suit was not maintainable in view of the provision is of sustain 9 of 37 EGO. III, c. 142, which was in the seams terms as Section 226 of the Government of India Act, 1935. In reversing the judgment of the Bombay High Court the Judicial Committee of the Privy Council poi....
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...., which would otherwise be within its competence, is excluded by a statute, and there is a dispute as to facts, which if established, would oust its jurisdiction, that Court would have not only the power but would be under a duty to give its decision on the said dispute. Unless the private statute plainly prohibits it from adjudicating upon toes disputed facts. In the light of these principles this court has the power to determine whether the subject matter of this suit concerns revenue. If it does, the suit would be barred, otherwise not. In my judgment on the plaintiff company is or can be called revenue in the popular sense or the defendant gives it that designation. Revenue is that which the State collects from the subject or from the possessions of the State for the purpose of carrying out its administrative and governmental duties. In the first mentioned case it involves the right to levy form the subjects. If the right does not exist in respect of a particular matter, what is assessed or collected would not in my judgment be considered AAC revenue within the meaning of Section 226, although the name of a tax may be given to it. Without a valid act on the part of the State, w....
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.... sterling company, if our judgment to the effect that the assessment is illegal, be upheld on appeal. LODGE. J. - I am in entire agreement with the opinion expressed by Matter, J., on issues Nos. 2 and 4 as framed by him and with the reasons given, and I have nothing to add to his judgment so far as these issues are concerned. In placing his argument on issue No. 1, Sir. A. K. Roy enunciated the following propositions :- The plaintiff Company held shares in the sterling companies, i.e., invested money in the sterling companies. In order to obtain an income, the sterling companies had to do business-the shares would not of themselves earn any income. Therefore the income came through the business operations of the sterling companies carried on in India. The profits of the sterling companies became the subject matter of taxation in British India and were taxed and thereby impressed, as it were, with a label that they were something which had arisen or accrued in British India. The dividends were paid out of those profits. It is normally to be expected that dividends will be declared when profits are made; the profits of the sterling companies constituted the income of ....
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....uing or arising in India-a view which seems to me untenable. For these reasons, and for the reasons given by Mitter, J., in his judgment, I agree that issue No. 1 must be answered in the affirmative. Issue No. 3. - I am unable to accept the view that Section 226 of the Government of India Act, 1935, is not a bar to our exercising jurisdiction in the matters now before us. That section is a relic of an old quarrel and is founded on consideration is essentially different from those on which provision such as those in Section 67 of the Income Tax Act are based. The jurisdiction of the Civil Courts is excluded by Section 67 of the Income Tax Act and by similar Section in other statutes because under those statutes other tribunals have been established to give the necessary relief to aggrieved parties. But Section 226 of the Government of India Act operates whether the aggrieved person has or has not a remedy under the particular Act, indeed, the very wording of the Section indicates that there may be instances when an aggrieved person will have a remedy in Civil Courts if the cause of action arises outside the territorial limits of the original jurisdiction of the High Court but ....
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....ompany, Limited v. Chief Revenue Authority, Bombay, the question in issue was whether the High Court had power to make an order requiring the Chief Revenue Authority to perform his statutory duty of stating a case and referring it to the High Court under Section 51 of the Indian Income Tax Act, 1918. The Judicial Committee observed : "In their Lordships view the order of the High Court to a revenue officer to do his statutory duty would not be the exercise of "original jurisdiction in any matter concerning the revenue", and the latter part of the clause need not be considered, for the proceedings in this case had not to do with the collection of the revenue, but with the preliminary assessment to ascertain what that revenue was." This decision emphasizes the distinction between two parts of Section 226 (1) of the Govt., of India Act, 1936, and suggests that if the statutory duty in question has to do with the collect of the revenue, and not merely with the preliminary assessment, the power of the High Court to issue a direction to a revenue officer to perform that duty may possibly be excluded by this Section. But so far as the first part of the Section is concerned, this dec....
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....contested. For myself, with great respect to the learned Judges, I am not satisfied that that decision was correct. What is the position in the present case ? The Central Government in an attempt to increase the revenue considers whether it has a right, to tax certain incomes. Believing in good faith that it has the right it obtains the necessary statutory authority from the Indian Legislature. The Income Tax authorities assess the incomes in question, demand payment of the tax. Realism the same and appropriate the money to the revenue of the country. The questions in issue are-Has the Indian Legislature the power to tax these incomes ? Can the Indian revenue be increased in this manner ? Is the amount realised from the plaintiff, which has been claimed as revenue, realised as revenue, and treated as revenue, to continue to be so treated or is it to be deducted from the funds claimed by the Government as its revenue and refunded to the plaintiff. It seems to me that if the ordinary meaning is to attic to the words "any matter concerning the revenue" then all these questions are matters occurring the revenue. In other words, a decision that something is not valid revenue conce....