TaxTMI 
TaxTMI 
1953 (12) TMI 3
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to income-tax, and subsequently was also asked to produce the relevant account books before the Income-tax Officer, Jodhpur, on 11th August, 1950. Thereupon the respondent presented the petition, out of which this appeal arises, on 23rd August, 1950, invoking the jurisdiction of the High Court under Article 226 of the Constitution for the issue of "a writ of mandamus or certiorari or other appropriate writ" directing the appellant not to take any action under the Indian Income-tax Act, 1922, (hereinafter referred to as the Indian Act) as amended by the Indian Finance Act, 1950, for the assessment or levy of income-tax on the income which accrued or arose to the respondent or was received by him prior to 1st April, 1950, on the ground that such income was not liable to be charged "under the provisions of any law validly in force in Rajasthan." The petition was heard by a Division Bench of the High Court (Nawal Kishore and Kanwarlal Bapna, JJ.) who accepted the petition and issued a writ as already stated, overruling sundry preliminary objections to which no reference need be made as they have not been raised by the appellant before us. As is well known, after the Indian Inde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as from the first day of April, 1950. Meanwhile the framing of the Constitution of India by the Constituent Assembly, which also included duly appointed representatives of the Acceding States, was nearing completion, and in November, 1949, the Rajpramukh, in exercise of his powers as the duly constituted head of the State, issued a Proclamation whereby he declared and directed that the "Constitution of India shortly to be adopted by the Constituent Assembly of India shall be the Constitution for the Rajasthan State as for the other parts of India, and shall be enforced as such in accordance with the tenor of its provisions and that the provisions of the said Constitution shall, as from the date of its commencement, supersede and abrogate all other constitutional provisions inconsistent therewith which are at present in force in this State." The Constitution of India then came into force on 26th January, 1950. It repealed the Government of India Act, 1935, including Section 101 thereof, and brought all the Part B States, including Rajasthan, within the Union of India, incorporating the territories of all those States in the "territory of India" as defined in Article 1(2). It cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....radictory. For instance, (leaving out the State of Jammu and Kashmir altogether in this discussion) whereas clause (d) excludes the Patiala and the East Punjab States Union from the taxable territories as respects the period from 1st April, 1950, to 12th April, 1950, sub-clause (ii) of clause (b) of the proviso would seem to include that State also within such territories as respects the same period, and while clauses (d) and (e) of the substantive part of the definition when read together seem apt by themselves to bring the territory of India within the taxable territories as respects the period after 31st March, 1950, sub-clause (ii) of clause (b) of the proviso apparently seeks to bring about the same result by means of a fiction. Now, the scheme of the Indian Act is to tax a person resident in the taxable territories during the previous year on all his income of the previous year whether accruing within or without the taxable territories, and to tax a person not resident in the taxable territories upon his income accruing within the taxable territories during the previous year. Residence in the taxable territories has to be determined in accordance with the provisions of Sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., bring the income of the year 1949-50 into charge under the Indian Act. This argument found favour with the learned judges in the High Court but we are unable to accept it. A short answer to it is provided by sub-clause (i) of clause (b) of the proviso under which the whole of the territory of India including Rajasthan is to be deemed taxable territory for the purpose of Section 4A of the Indian Act "as respects any period". The words "any period" cannot be taken to mean "any period after 31st March, 1950", for, the period referred to in the next clause is expressly limited in that sense. Those limiting words cannot be read into sub-clause (i) which must, therefore, be understood as referring to any period before or after 31st March, 1950. As already indicated, residence in the taxable territories within the meaning of Section 4-A can, in some cases, relate back to as many as five years before the year of assessment, and that is obviously the reason why the period mentioned in sub-clause (i) is not limited as in sub-clause (iii) of clause (b) of the proviso. Indeed, if the words "any period" in sub-clause (i) were intended to mean any period after 31st March, 1950, that sub-cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case within proviso (b)(iii) in order to sustain the charge on the respondent's income accruing in Rajasthan during the year 1949-50, we are of opinion that the construction placed by the learned Judges on that clause cannot be supported. They assume that proviso (b)(iii) is a provision authorising assessment of income-tax, and proceed to discuss what the word "assessment" in that context should be taken to mean. Charge of income to tax and its computation are matters governed by other provisions of the Indian Act. All that Section 2(14-A) does is to define what the expression "taxable territories" means in certain cases and for certain purposes wherever that expression is used in the various provisions of the Indian Act. And as the expression is used in the charging Section 4 in connection with the conditions which are to determine liability to tax, sub-clause (iii) of clause (b) of the definition must, when read with Section 4 of the Indian Act, have reference to chargeability of income. The result is that Sections 3 and 4 of the Indian Act, in the light of the definition in proviso (b) to the amended Section 2(14-A) and Section 2 of the Indian Finance Act, 1950, authorise the im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng proceeds is that Section 13 of the Finance Act, 1950, saves the operation of the State laws relating to income-tax in Part B States in the year 1949-50 for the purpose of levy, assessment and collection, and it is those laws that imposed the liability to tax on the income accruing in those States during that year. This is a misapprehension of the true meaning and effect of Section 13. That section, so far as it is material here, runs thus :--- "Repeals and savings. --- (1) If immediately before the 1st day of April, 1950, there is in force in any Part B State other than Jammu and Kashmir or in Manipur, Tripura or Vindhya Pradesh or in the merged territory of Cooch-Behar any law relating to income-tax or super-tax or tax on profits of business, that law shall cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922, for the year ending on the 31st day of March, 1951, or, for any subsequent year ........." A close reading of that provision will show that it saves the operation of the State law o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion of keeping any such liability alive could arise in the present case as admittedly no State law of income-tax was in operation in the territory of Rajasthan, except the former State of Bundi. On this view the whole basis of the reasoning of the learned Judges below falls to the ground. Even so, it was contended, the Finance Act, 1950, in so far as it purports to authorise such levy is ultra vires and void as Parliament was not competent under the Constitution to make such a law. The argument was put in two ways. In the first place, it was said broadly that as the Constitution could not operate retrospectively as held by this Court in Kesavan Madhava Menon's case, the power of legislation conferred by the Constitution upon Parliament could not extend so as to charge retrospectively the income accruing prior to the Commencement of the Constitution. This is a fallacy. While it is true that the Constitution has no retrospective operation, except where a different intention clearly appears, it is not correct to say that in bringing into existence new Legislatures and conferring on them certain powers of legislation, the Constitution operated retrospectively. The legislative powers....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mencement of the Constitution. But, it was insisted, such a power should be given in clearly expressed terms. There is, however, no question here of the Constitution operating retrospectively in bringing into existence the Union Parliament or the legislatures of the States. The only question is what powers have been conferred upon these legislatures by the representatives of the people who framed the Constitution and, in determining that issue, the principles laid down in cases like Queen v. Burah apply in full force. The observations in the Australian case, to which reference has been made, seem to us to go too far and cannot be accepted as sound constitutional doctrine. Nor can it be said, in strictness, that the Finance Act, 1950, is retroactive legislation. That Act, as already noticed, purports by Section 2 to charge income-tax and super-tax at specified rates "for the year beginning on the 1st day of April, 1950". The case is thus one where the statute purports to operate only prospectively, but such operation has under the scheme of the Indian income-tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking....