TaxTMI 
TaxTMI 
1965 (10) TMI 11
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....s 1948-49 to 1952-53 they were assessed to sales tax by the State of Madras on the basis that the contracts executed by them were "works contracts". On April 5, 1954, the High Court of Judicature at Madras held in Gannon Dunkerley and Co. v. State of Madras that the relevant provision of the Madras General Sales Tax Act empowering the State of Madras to assess indivisible building contracts to sales tax was ultra vires the powers of the State legislature. On July 5, 1954, the appellants issued a notice to the State of Madras under section 80 of the Code of Civil Procedure claiming the refund of the amounts collected from them. As the demand was not complied with, on March 23, 1955, they filed O.S. No. 2272 of 1955 in the City Civil Court, Madras, for the recovery of a sum of Rs. 36,320-1-11, being the total amount of taxes illegally levied and collected from them for the years 1948-49 to 1952-53 and for incidental reliefs. The main basis of the claim was that the relevant provisions of the Madras General Sales Tax Act empowering the sales tax authorities to impose sales tax on indivisible building contracts were unconstitutional and void, that the sales tax authorities had no juris....
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....ithin three years from the date they had knowledge of the mistake whereunder they paid the amounts. The arguments of Mr. A. Ranganatham Chetty, learned counsel for the respondent, may be briefly put thus : On a fair reading of the provisions of section 18A of the Act it should be held that a suit to set aside or modify an assessment made under the machinery of the Act is not maintainable. The expression "assessment" has three elements, namely, (i) power to make the assessment; (ii) the process of assessment; and (iii) its content. The section emphasizes the making of assessment, i.e., its two component parts, power and process, under the Act and not its content. If it be held that it refers to the content, it will lead to anomalies, for in making an assessment the assessing authority has to consider the principles of different laws and it cannot obviously be held that his decision based upon laws other than sales tax law is a decision made under the provisions of the Act. Any provision of the Act relating to the content of assessment cannot have a higher sanctity than a provision of law other than the sales tax law relating to the content of assessment. So, the argument proceeds....
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....he written statement, the State did not deny that they were indivisible building contracts; indeed, it assumed that the said contracts were covered by the decision of the Madras High Court in Gannon Dunkerley and Co.'s case but stated that the said decision required reconsideration and that the matter was pending in appeal before this court. Issue (1) framed by the City Civil Judge reads: "Has sales tax for the years 1948-53 been validly levied and as such the suit claim is untenable ?" On that issue the learned City Civil Court Judge, on a consideration of the entire material placed before him, held that the plaintiffs entered into works contracts only and there was no element of sale of the materials used in the buildings separately in the said contracts. He observed : " It is clear from the assessment files produced by the defendants that the plaintiffs were assessed only on the basis that they entered into 'works contracts' and not on the basis that they sold building materials." In the High Court no attempt was made to canvass the correctness of that finding. Indeed, the High Court proceeded on the basis that the appellants' turnover from the works contracts was co....
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....eads : " For the purpose of sub-rule (1), the amount for which goods are sold by a dealer shall, in relation to a works contract, be deemed to be the amount payable to the dealer for carrying out such contract less a sum not exceeding such percentage of the amount payable as may be fixed by the Board of Revenue, from time to time for different areas, representing the usual proportion in such areas of the cost of labour to the cost of materials used in carrying out such contract, subject to the following maximum percentages ......" It will be seen from the said provisions that an indivisible works contract is deemed to be a sale and the person entering into such a contract, a dealer. The turnover of the dealer in respect of such contracts is arrived at by deducting from the amount payable to the dealer the cost of labour arrived at in the manner prescribed thereunder. The provisions are wide enough to take indivisible works contracts where, under the terms of the contracts, the value of the materials supplied by a contractor and the charges he made for the labour are separately specified. As we have pointed out earlier, the assessments in the present case were made under th....
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....islature, the next question is whether a suit for the refund of the amounts paid in respect of assessments made under the said ultra vires provisions is maintainable. The sheet-anchor of the arguments of the learned counsel for the respondent is the decision of the Judicial Committee in Raleigh Investment Co.'s case. Before we consider the scope of the said decision, it will be convenient to notice some of the propositions of law settled in the context of the ouster of jurisdiction of a civil court. Under section 9 of the Code of Civil Procedure : "The courts shall, subject to the provisions herein contained, have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred ". A suit is expressly barred if a legislation in express terms says so. It is impliedly barred if a statute creates a new offence or a new right and prescribes a particular penalty or a special remedy. In that event, no other remedy can, in the absence of evidence of contrary intention, be resorted to : see Wolverhampton New Waterworks v. Hawkesford. The general rule is that statutes affecting jurisdiction of courts are to be construed, so far....
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....ded in 1939, purported to authorise the assessment and charging to tax of a non-resident in respect of dividends declared or paid outside British India but not brought into British India, those provisions were ultra vires the legislature, and that the assessment was illegal and wrongful. The judicial Committee held that section 67 of the Act was a bar to the maintainability of the suit. The argument on behalf of the assessee in that case was that an assessment was not an assessment "made under the Act," if the assessment gave effect to a provision which was ultra vires the Indian legislature; that, in law, such a provision, being a nullity, was non-existent; and that an assessment justifiable in whole or in part by reference to, or by, such a provision was more aptly described as an assessment not made under the Act than as an assessment made under the Act. This was an argument similar to that now advanced by Mr. Desai on behalf of the assessee. The argument was negatived by the Judicial Committee for the following reason, at pages 63-64 : " Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment ... The, obv....
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....rived from property held under trust wholly for charitable purposes. It held that the assessments of the Income-tax Officer, who had jurisdiction to decide whether the said income was exempt from the relevant provision and who had held that the said income was not exempt and on that basis made the assessments, were not a nullity. In coming to that conclusion the Judicial Committee found strong support in the decision in Raleigh Investment Company's case. This is not a case where the income-tax officer made an assessment under a provision which was ultra vires. In Raja Bahadur Kamakhya Narain Singh of Ramgark v. Commissioner of Income-tax, the Federal Court was concerned with a case where the Appellate Tribunal, relying upon the Bihar Regulations 1 of 1941 and IV of 1942, held that the assessment made by the Income-tax Officer before the said Regulations were passed was good. Before the Tribunal it was contended that the said Regulations were ultra vires, but that contention was rejected. After giving long extracts from the judgment in Raleigh's case Kania J., as he then was, observed : " These observations clearly show that the right of appeal and the machinery provided in th....
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....ely, that the machinery provided by the Act should be followed even when the contention of the assessee was that the impugned Act or any provision thereof was ultra vires, would equally apply whether the suit was instituted before the assessment was made or thereafter. To the extent this court held that such a suit would lie before the assessment was made for an injunction restraining the authority from proceeding with the assessment on the ground of ultra vires, it detracts from the correctness of the decision in Raleigh's case. This court in Firm Illuri Subbayya Chetty and Sons v. State of Andhra Pradesh had to consider the scope of the bar of a suit under section 18A of the Madras General Sales Tax Act, 1939. There, the appellants were carrying on commission agency and other businesses at Kurnool and as such they were purchasing and selling groundnuts. The sales tax authorities during the relevant period, on the basis of the returns made by the assessees, assessed the total turnover of the dealers and collected the tax thereon. Having paid the tax, the assessees claimed to recover part of the tax collected from them on the ground that the said tax was wrongly collected on the tu....
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....was without jurisdiction for the reason that the said item did not belong to the joint family but was their separate property. This court held that section 67 of the Income-tax Act barred a suit in so far as it sought to set aside the assessment. This was also a case where the plaintiffs sought to set aside the order of assessment on the ground that it was vitiated by an error. This court again considered the scope of the decision in Raleigh's case in Bharat Kala Bhandar Ltd. v. Municipal Committee, Dhamangaon . There the question raised was whether the suit filed by the appellant against the Municipal Committee, Dhamangaon, for refund of the excess tax paid on ginned cotton was barred under section 48 of the Central Provinces Municipalities Act, 1922. The cause of action alleged was that the said excess tax collected from the appellant was in derogation of the constitutional prohibition under article 276 of the Constitution of India. Under section 48 of the said Act, no suit shall be instituted against any committee for anything done or purporting to be done under the Act until the prescribed notice was given within the prescribed time and manner and every such suit should be d....
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....o the maintainability of a suit, even if an assessment was made on the basis of a provision which was ultra vires the Constitution. Though in a sense it may be said that the said observations are in the nature of obiter, they are the considered views of this court. The decision in Raleigh's case was again considered by a Bench of this court in Kamala Mills Ltd. v. State of Bombay . There the sales tax authority held on the material placed before him that certain transactions were inside sales and on that basis assessed the appellant to sales tax. The appellant filed a suit on the original side of the Bombay High Court to recover the amount from the respondent on the ground that the Sales Tax Officer had no jurisdiction to assess the outside sales in view of the judgment of this court in Bengal Immunity Co. Ltd. v. State of Bihar. It was contested by the respondent, inter alia, on the ground that section 20 of the Bombay Sales Tax Act, 1946 (V of 1946), was a bar to the maintainability of the suit. This court accepted the said contention and held that section 20 of the said Act was a bar to the maintainability of the suit. Under section 20 of the said Act no assessment made and n....
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....pon a person in respect of his income. As a learned author pithily puts it, " section 3 charges total income; section 4 defines its range ; section 6 qualifies it ; and sections 7 to 12B quantify it. " Section 23 empowers the income-tax Officer to assess the said total income in the manner prescribed thereunder. His jurisdiction is confined to the ascertainment of the total income of a person in accordance with the provisions of the Act. His duty is to assess the income of a person under the provisions of the Act and certainly not to ignore any of them for any reason whatsoever. Against the said assessment an appeal lies to the Appellate Assistant Commissioner, who also functions under the Act. Section 30 confers a right of appeal on an assessee in respect of specified orders of the Income-tax Officers. He can, by an appeal, object, inter alia, to the amount of income assessed, to the amount of tax determined and to his liability to be assessed under the Act. Section 31 provides the procedure to be followed and the powers to be exercised by the Appellate Assistant Commissioner in disposing of the appeal. Indeed, the appeal being in substance the continuation of the assessment proce....
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....on. If an assessee raises such a question, the Tribunal can only reject it on the ground that it has no jurisdiction to entertain the said objection or decide on it. As no such question can be raised or can arise on the Tribunal's order, the High Court cannot possibly give any decision on the question of the ultra vires of a provision. At the most the only question that it may be called upon to decide is whether the Tribunal has jurisdiction to decide the said question. On the express provisions of the Act it can only hold that it has no such jurisdiction. The appeal under section 66A(2) to the Supreme Court does not enlarge the scope of the said jurisdiction. This court can only do what the High Court can. The said machinery provisions cannot be construed in vacuum : they must be collated with the charging sections; that is to say, the Act provided for a machinery for deciding disputes that arise under the substantive provisions of the Act. To illustrate : suppose there is provision in the Act to the effect that the said Act does not apply to indivisible building contracts. Can the officer decide that the Act applies to such building contracts ? Such a decision, if given, will ....
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....cannot be enlarged but must be limited to points which were open for adjudication by the court or tribunal of first instance, the Appellate Tribunal functioning under the Act, to which an appeal is taken under section 33, would have no power to entertain the said question and deal with it in its order. This court on a reference being made to it under section 66 cannot also deal with such a question, as the reference must be limited to points arising out of the order passed by the Appellate Tribunal." The judicial Committee did not take any serious notice of the legal position so clearly explained by Mitter J. Chagla C.J. in the Bombay High Court in United Motors (India) Ltd. v. State of Bombay, distinguishing the decision in Raleigh Investment Co.'s case observed : " They have come before us before any assessment could be made, contending that the authorities under the Act have no right to assess them because the Act is ultra vires of the legislature. Therefore the petitioners are challenging the very authorities who are supposed to decide the assessment made against them, and it is difficult to understand how under the machinery provided under the Act it would be open to the....
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....tutional, and that it would be beyond the jurisdiction of this court, functioning under section 66 of the Act, which, as stated already, is narrow in its scope and reach, to consider and determine a question not properly within its sphere." We agree with the said observation. There is, therefore, weighty authority for the proposition that a tribunal, which is a creature o a statute, cannot question the vires of the provisions under which it functions. The legal position that emerges from the discussion may be summarized thus : If a statute imposes a liability and creates an effective machinery for deciding questions of law or fact arising in regard to that liability, it may, by necessary implication, bar the maintainability of a civil suit in respect of the said liability. A statute may also confer exclusive jurisdiction on the authorities constituting the said machinery to decide finally a jurisdictional fact thereby excluding by necessary implication the jurisdiction of a civil court in that regard. But an authority created by a statute cannot question the vires of that statute or any of the provisions thereof whereunder it functions. It must act under the Act and not outsi....
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....certainly raises an important question : but, in the view we have expressed on the construction of section 18A of the Act, this does not fall for our decision in the present appeal. Lastly, it is contended that the suit is not barred by limitation. The City Civil Court judge held that the suit was governed by article 62 of the Limitation Act and, on that basis, declared that the suit for the recovery of the amounts that were paid prior to three years from the date of the suit was barred by limitation. But the High Court, in the view it had taken on the question of the maintainability of the suit, did not express any opinion on the said question. Learned counsel for the appellants contends that the suit was for the recovery of the amounts paid to the respondent under a mistake of law and that such a suit is governed by article 96 of the Limitation Act. This court in State of Kerala v. Aluminium Industries Ltd. accepted that contention and held that to such a suit article 96 of the Limitation Act would apply. Article 96 of the Limitation Act prescribes a period of limitation of 3 years for relief on the ground of mistake when the mistake became known to the plaintiff. When did the....
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....on. The trial court dismissed the suit, and the High Court of Madras confirmed the decree. With certificate granted by the High Court of Madras, the appellants have appealed to this court. The orders of assessment made by the Deputy Commercial Tax Officer are not on the record, nor are the contracts which gave rise to the turnover. It was assumed in the trial court and the High Court that the appellants had entered into works contracts in which there was no sale of materials used in the construction of buildings independent of the contract for construction and we must proceed to deal with this appeal on that footing. Three questions fall to be determined : (1) whether section 2(h) and Explanation (1)(i) of section 2(i) of the Madras General Sales Tax Act, 1939, read in the light of rule 4(3) of the Turnover and Assessment Rules, were ultra vires the legislature of the Province of Madras; (2) whether a suit for refund of tax paid pursuant to orders of assessment made by the Deputy Commercial Tax Officer was maintainable in view of the general scheme of the Act, and in particular of section 18A, which was added by Madras Act 6 of 1951 ; and (3) whether the suit was barred by th....
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.... of "turnover" provided : " Subject to such conditions and restrictions, if any, as may be prescribed in this behalf--- (i) the amount for which goods are sold shall, in relation to a works contract, be deemed to be the amount payable to the dealer for carrying out such contract, less such portion as may be prescribed of such amount, representing the usual proportion of the cost of labour to the cost of materials used in carrying out such contract." "Works contract" was defined by section 2(i-1) as meaning any agreement for carrying out for cash or for deferred payment or other valuable consideration, the construction, fitting out, improvement or repair of any building, road, bridge or other immovable property or the fitting out, improvement or repair of any movable property. Section 3 prescribed the rate of tax, and section 9 prescribed the procedure to be followed by the assessing authority. Section 10 imposed liability upon the assessee to pay tax assessed, in such manner and in such instalments and within such time as may be specified in the notice of assessment. By section 11 a right of appeal was given to an assessee objecting to an assessment made on him to the pres....
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....ey and Co. (Madras) Ltd., while affirming the decision of the High Court of Madras in Gannon Dunkerley and Company's case has held that the provisions of the Madras General Sales Tax (Amendment) Act (25 of 1947), which incorporated in the definition in section 2(h) the words "and includes also a transfer of property in goods involved in the execution of a works contract" and incidental changes in the definition of "turnover", were ultra vires the legislature of the Province of Madras. But that plea does not seem, in our judgment, to be correct. The Madras High Court had in Gannon Dunkerley and Company's case held that the "works contracts" of the assessee in that case "were not contracts of sale of goods and the Provincial legislature had no power to tax those contracts treating them as sale of goods", because the legislative power to levy tax on sales of goods was "confined to transactions of sales ... as understood in the law relating to the sale of goods, and any attempt of the legislature to tax under the guise of or under the pretence of such a power transactions which were wholly outside it, was ultra vires and must be declared invalid." This court in confirming the order set....
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....juris, its essential ingredients being an agreement to sell movables for a price and property passing therein pursuant to that agreement. In a building contract, which is, as in the present case, one, entire and indivisible----and that is its norm, there is no sale of goods, and it is not within the competence of the Provincial legislature under entry 48 to impose a tax on the supply of the materials used in such a contract treating it as a sale " and at page 427 : " To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible as the contracts of the respondents have been held by the learned judges of the court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at page 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to....
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....tions which are not transactions of sale of goods. But the court did not declare the clause added by Act 25 of 1947 as ultra vires : it merely directed that in the assessment of turnover from building contracts, restriction on the legislative power inherent in entry 48 of List II, Schedule VII, ought to be imported, and that the taxing authority must on that account determine whether the transaction of sale, turnover whereof is sought to be taxed, is of the nature of sale of goods within the meaning of the Sale of Goods Act. A transaction which does not involve sale of goods is not taxable, for the definition of the word "sale" in every case must be read subject to the constitutional restriction on the legislative power imposed upon the provinces. Stated differently, power to levy tax in respect of a works contract is not wholly denied to the Provinces or the States: in each case it has to be considered whether the transaction involves sale of goods, strictly so-called, or it is a transaction which is a works contract "one, entire and indivisible." If it is the latter, it would not be taxable, because there is no element of sale of goods within that transaction : if it is the forme....
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....s not intend to exceed its jurisdiction ...... and there, is ample authority for the proposition that general words in a statute are to be construed with reference to the powers of the legislature which enacts it." After referring to a number of cases cited at the Bar, the learned Chief Justice observed : " If the restriction of the general words to purposes within the power of the legislature would be to leave an Act with nothing or next to nothing......... or an Act different in kind, and not merely in degree, from an Act in which the general words were given the wider meaning, then it is plain that the Act as a whole must be held invalid, because in such circumstances it is impossible to assert with any confidence that the legislature intended the general words which it has used to be construed only in the narrower sense ...... If the Act is to be upheld, it must remain, even when a narrower meaning is given to the general words, 'an Act which is complete, intelligible, and valid and which can be executed by itself '." This is precisely the approach this court made in State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd. They interpreted the expression "works con....
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....any specified classes of goods or by any specified classes of persons in regard to the whole or any part of their turnover. These restrictions upon the power of the taxing authorities are imposed expressly by the statute itself : the other restrictions, to which we have already referred, are restrictions which are implied by the constitutional limitations. But on that account there is no real difference between the quality of the restrictions. The definition clause and the charging section operate only on sales which may appropriately be called sales of goods, under the general law, of goods which are not exempted by the Act, and are not taken out of the taxing power of the State by the constitutional or other provisions. Apparently wide words of the definition clause and the charging section will not on account of these restrictions be rendered ultra vires or invalid : the words will be construed so as to confer power upon the taxing authorities in assessing tax only within the limited field. Ordinarily a taxing authority has power to ascertain whether the transaction before, him is taxable, and for that purpose he may determine facts which have a bearing on the taxability of t....
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....ginning with the filing of the return and ending with an order of assessment, falls within the jurisdiction of the appropriate authority and no part of it can be said to constitute a collateral activity not specifically and expressly included in the jurisdiction of the appropriate authority as such." The Deputy Commercial Tax Officer had, therefore, jurisdiction to determine whether the particular transactions in respect of which tax was sought to be levied were assessable under the Act. He may have committed a mistake, even a grievous mistake, but he had jurisdiction to decide the question arising before him in the manner he did. Exercise of his jurisdiction is not conditioned by the correctness of his conclusion. The Act contains a complete machinery for levying, assessing and collecting tax : it also contains machinery for rectification of mistakes. The rules framed under the Act contain machinery for making refund of tax collected in excess of the amount legitimately due. The entire machinery for levy, assessment, collection and refund is within the Act and has to be administered by the authorities entrusted with power in that behalf. To expose this machinery and the adju....
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....r passed by the assessing authority may in fact be incorrect or wrong does not affect the position that, in law, the said order has been passed by an appropriate authority and the assessment made by it must be treated as made under this Act. Whether or not an assessment has been made under this Act will not depend on the correctness or the accuracy of the order passed by the assessing authority "; and at page 761 : ". . there can be no doubt that where an order of assessment has been made by the appropriate authority under the provisions of this Act, any challenge to its correctness and any attempt either to have it set aside or modified must be made before the appellate or the revisional forum prescribed by the relevant provisions of the Act." A question which is closely analogous to the question raised in this appeal fell to be determined in Kamala Mills' case. The assessee sold goods inside and outside the then State of Bombay. On the turnover of the assessee, general sales tax and special sales tax were levied by the sales tax authorities exercising power under the Bombay Sales Tax Act, 1946. After learning about the decision of this court in Bengal Immunity Co. Ltd. v....
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....y being of the view that they were taxable charged the turnover to tax. Appeals lay against the decisions of the taxing authority, but they were not filed in respect of four out of the five years and in the remaining only the question as to the quantum of turnover was raised. In the case of Kamala Mills the transactions were, it was apparently claimed, sales falling within the meaning of article 286(1)(a), Explanation, and not taxable by the State in view of a constitutional prohibition. This court held that a plea that tax levied pursuant to an erroneous decision as to the applicability of the Sales Tax Act to transactions which, if the true position were appreciated, were not liable to be taxed could not be raised in a suit for refund of tax paid. Ratio of that decision applies to the present case in which tax was levied in respect of transactions which the taxing authority erroneously regarded as works contracts and taxable on the footing that they involved sale of goods strictly so called. An erroneous decision of the taxing authority that they are taxable transactions, when on a correct view of the law they would not have been, did not affect the power entrusted to him by the ....
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....ions under that ultra vires provision is outside the Act. A taxing authority is undoubtedly a creature of the statute under, which he is appointed but ordinarily by the statute he is invested with authority to decide all questions which have a bearing on the taxability of a transaction. He is entitled to decide that the transactions submitted to his scrutiny are taxable. When the taxing authority levies tax on a transaction, he holds either expressly or by the clearest implication that the transaction is in his opinion taxable. Investment of authority to tax involves authority to tax transactions which, in exercise of his authority, the taxing officer regards as taxable, and not merely authority to tax only those transactions which are, on a true view of the facts and the law, taxable. The taxing officer in exercising his power may err; but he has authority to err in exercise of his jurisdiction. It matters little that the error he commits is in the interpretation of a constitutional prohibition and not a statutory prohibition applying to the transaction submitted to his scrutiny. It would be confusing the issue to press into aid illustrations of cases in which the taxing author....
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....issioner of Income-tax and K. S. Ramamurthy Reddiar v. Chief Commissioner, Pondicherry and in other cases. Is a quasi-juidicial authority deliberately to violate fundamental rights of a citizen who is subjected to his jurisdiction and to act in a manner transparently unjust because for some vague reason it is said that within the amplitude of his jurisdiction is not included the right to determine whether a part of the statute he is called upon to administer is ultra vires ? What one may ask is the principle underlying such a rule ? It is common ground that a High Court entertaining an appeal or revision against the decision of a tribunal exercising quasi-judicial authority with exclusive jurisdiction, or entertaining a reference made by that tribunal, is subject to the same restrictions to which the original tribunal was subject. In a large number of cases in which proceedings relating to taxation have reached the High Courts by way of a reference, appeal or revision, the question of vires of the statute under which the authority functioned was raised, entertained and decided, and in some cases statutory provisions were declared ultra vires. The first case to which attention ma....
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.... Governor-General in Council the basic facts were closely parallel to the facts of this case. A joint stock company having its main office in England was assessed to income-tax and super-tax as a non-resident on income which included dividend income received from companies some of which were incorporated in England and others in the Isle of Man, and carrying on business in British India. The company paid the tax assessed, and instituted a suit in the High Court of Calcutta claiming a declaration that Explanation 3 and other provisions of section 4 of the Indian Income-tax Act, 1922, which purported to authorise assessment of, and charging to tax, a non-resident on dividends declared or paid outside British India but not brought into British India, were ultra vires the legislative power of the federal legislature, and that the assessment was "illegal ands wrongful" and for an injunction restraining the income-tax authorities from making future assessments in respect of such dividends. The High Court of Calcutta held that the impugned provisions were ultra vires and the jurisdiction of the civil courts to entertain a suit was not excluded, either by section 67 of the Income-tax Act o....
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....ced on the assessment. The section on the appellant's construction is robbed of all practical content. Second, on the appellant's construction, in order to ascertain whether a civil court is barred by the section from reviewing an assessment brought before it, the legal merits of the assessment have first to be considered and decided. For if the assessment is determined to be right in law, the jurisdiction of the civil court to entertain the suit is excluded. The assessment is, on the appellant's construction, made under the Act. If, on the other hand, the assessment is determined to be wrong, the jurisdiction of the civil court to entertain the suit arises. The result of an inquiry into the merits of the assessment is, on the appellant's construction, to determine whether jurisdiction existed to embark on the inquiry at all. Jurisdiction is made to depend not on subject-matter, but on the correctness of the suitor's contention as respects subject-matter. The language of the section is inapt to justify any such capricious method of determining jurisdiction." This is weighty authority in support of the view that the taxing officer is competent to entertain a plea about the vires ....
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.... this court that the Act does not set up machinery for entertaining a claim for refund or repayment in cases of the nature before the court, and that no finality was apparently given to the decision rendered by an authority under section 83 refusing to refund a tax improperly or illegally assessed or recovered. Dealing with Raleigh Investment Company's case it was observed : "But, with respect, we find it difficult to appreciate how taking into account an ultra vires provision which in law must be regarded as not being a part of the Act at all, will make the assessment as one 'under the Act'. No doubt the power to make an assessment is conferred by the Act and, therefore, making an assessment would be within the jurisdiction of the assessing authority. But the jurisdiction can be exercised only according, as well as with reference, to the valid provisions of the Act. When, however, the authority travels beyond the valid provisions it must be regarded as acting in excess of its jurisdiction." On the view taken by the court that there was no machinery for granting refund of tax unlawfully levied, and on that account the suit was not barred under section 85 of the Central Provin....
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....eyond observing at page 151 "we wish to make it very clear that it is not the province of the department or even the statutor tribunal, which is really the creation of the statute to entertain any objection to a piece of legislation, as being ultra vires or unconstitutional . . . ", nothing else was stated. It was submitted that this court in State of Tripura v. Province of East Bengal has refused to accept Raleigh Investment Company's case as correctly decided. In the State of Tripura's case, the Income-tax Officer, Dacca, served a notice upon the manager of an estate belonging to the Tripura State but situate in Bengal, calling upon the latter to furnish a return of the agricultural income under the Bengal Agricultural Income-tax Act, 1944. The State by its Ruler sued the Province of Bengal and the Income-tax Officer in the Court of the Subordinate Judge of Dacca for a declaration that the Act, in so far as it purported to impose liability to pay agricultural income-tax on the plaintiff was ultra vires and void, and for a perpetual injunction restraining the defendants from taking any steps to assess the plaintiff. After the partition of India the suit was tried by the Subordi....