TaxTMI 
TaxTMI 
1950 (12) TMI 1
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.... force on 1st April, 1944, the Income-tax Officer, Dacca Range, sent by registered post, a notice to the Manager of the Zamindary Estate called Chakla Roshanabad belonging to the Tripura State but situated in Bengal outside the territories of that State, calling upon him to furnish a return of the total income derived in the previous year from lands in the Estate used for agricultural purposes. The notice was received by the Manager at Agartalla in Tripura State. Thereupon, the State, by its then Ruler Maharaja Sir Bir Bikram Bahadur, instituted the suit in question on 12th June, 1945, against the Province of Bengal and the Agricultural Income-tax Officer, Dacca Range, 2 in the Court of the First Subordinate Judge, Dacca, contesting the validity of the notice and the proposed assessment on the grounds that the "Provincial Legislature of Bengal had no authority to impose tax on any income of an Indian State or its Ruler" and that, in any case, "the Income-tax Officer, Dacca Range, had no authority or jurisdiction to issue the said notice to the Manager of the Estate outside British India." The cause of action of the suit was alleged to have arisen in the town of Dacca within the jur....
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....arty to the suit. On the 13th December, 1947, the Province of East Bengal was substituted as the defendant in the place of the Province of Bengal which had ceased to exist, and the written statement filed on behalf of the former was accepted. Thereupon the Subordinate Judge framed a preliminary issue on the question of jurisdiction and, as stated already, found it for the plaintiff relying on Section 9 of the Indian Independence Act and Article 4 of the Indian Independence (Legal Proceedings) Order, 1947. It may be mentioned in passing that the assessment of the plaintiff was proceeded with by the Agricultural Income-tax Officer, Comilla Range (East Bengal), who, by his order dated the 22nd December, 1947, imposed on the plaintiff a tax of Rs. 1,79,848-12-0 for 1944-45 and Rs. 1,34,326-7-0 for 1945-46, but the recovery of the amounts has been deferred under orders of the Court pending the decision on the preliminary issue. As pointed out by the Federal Court in Midnapore Zemindary Co. Ltd. v. Province of Bengal and Others the orders promulgated on the 14th August, 1947, by the Governor-General of India before the partition in exercise of the powers conferred under Section 9 of ....
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....ve been transferred by the Indian Independence (Rights, Property and Liabilities Order, 1947, from the Province of Bengal to the Province of East Bengal, and they took the view that neither any property nor rights nor liabilities were so transferred under that Order and that, therefore, the continuation of the proceedings against the Province of East Bengal, which was now part of an Independent Sovereign State, was governed by the principles of international law and comity of nations, and that, according to those principles, East Bengal, being a Province of a Sovereign State, could not be sued against its will in the municipal courts of India, with the result that the suit pending in the Court at Alipore must abate. They also negatived a further contention raised before them, apparently for the first time, to the effect that by reason of the petition filed on behalf of the Province of East Bengal for acceptance of its written statement condoning the delay involved and also by reason of sundry other proceedings for interim relief sought by the plaintiff which were actively resisted by the Province of East Bengal, that Province must be taken to have submitted to the jurisdiction of t....
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....iability in respect of an actionable wrong other than breach of contract") referred to in sub-section (1) that liability shall where the cause of action arose wholly within the territories which, as from that day, are the territories of the Province of East Bengal, be a liability of that Province." It was contended that the Province of Bengal was, according to the plaintiff's case, liable to be restrained from proceeding with the illegal and unauthorised assessment on the basis of the notice issued under the Bengal Act of 1944, and that liability, in respect of which the cause of action arose wholly in Dacca (where the assessment proceeding had been initiated) within the territories of the Province of East Bengal, became a liability of that Province. The High Court rejected this contention on the ground "that Article 10(2) is concerned with the liability for an actionable wrong other than breach of contract and it is impossible to say that by serving a notice on the plaintiff under the Bengal Agricultural Income-tax Act through one of its officers the Province of Bengal had committed an actionable wrong. Assuming that it exceeded its power or acted under an invalid provision of law....
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.... to leave no gap or lacuna in relation to the matters sought to be provided for. There is no reason, accordingly, why the words "liability in respect of an actionable wrong" should be understood in the restricted sense of liability for damages for completed tortious acts. We consider that the words are apt to cover the liability to be restrained by injunction from completing what on the plaintiff's case was an illegal or unauthorised act already commenced. The service of the notice on the plaintiff under Section 24(2) of the Bengal Act amounts to much more than a mere threat in the abstract to impose an illegal levy. It is the actual initiation of an illegal assessment proceeding which, in the normal course, will in all probability culminate in an illegal levy of tax. The failure to make a return as required by the notice would result under Section 25(5) of the Act in the Income-tax Officer making an ex parte assessment to the best of his judgment and determining the sum payable by the assessee on the basis of such assessment. Such failure would also expose the plaintiff under Section 32(1) of the Act to the imposition of a penalty which may equal the amount of the tax assessed on ....
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....rn of income was a wrongful act, it was not "actionable," as Section 65 of the Bengal Act barred suits in civil courts "to set aside or modify any assessment made under this Act." The short answer to this contention is that the suit in question is not a suit "to set aside or modify an assessment" made under the Act, as no assessment had yet been made when it was instituted, and the subsequent completion of the assessment was made by the Pakistan Income-tax authorities on terms agreed to between the parties and sanctioned by the Court. The decision of the Privy Council in Raleigh Investment Co. Ltd. v. Governor-General in Council relied on in support of the contention is distinguishable, as the main relief claimed there was repayment of the tax alleged to have been wrongfully levied under colour of an ultra vires provision in the Indian Income-tax Act. Their Lordships observed :--- " In form the relief claimed does not profess to modify or set aside the assessment. In substance it does, for repayment of part of the sum due by virtue of the notice of demand could not be ordered so long as the assessment stood. Further, the claim for the declaration cannot be rationally regarded as ....
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....e briefly stated. In 1944, the Bengal legislature passed an Act called the Bengal Agricultural Income-tax Act, 1944 (Bengal Act IV of 1944), which enabled it to impose a tax on the agricultural income of various classes of persons including "every Ruler of an Indian State", holding lands within the territory of Bengal. The appellant, who is the Ruler of the State of Tripura, holds a zamindary called Chakla Roshanabad Estates, which was situated in the Province of Bengal and in the District of Sylhet formerly appertaining to the Province of Assam. On the 28th February, 1945, the Agricultural Income-tax Officer, Dacca Range, issued a notice under Section 24(2) of the Bengal Act to the Manager of the Chakla Roshanabad Estates calling upon him to furnish a return of the appellant's total agricultural income for the previous year, derived from lands situated within the Province of Bengal. On the 12th June, 1945, the appellant instituted a suit in the Court of the Subordinate Judge at Dacca, against the Province of Bengal and the Agricultural Income-tax Officer, Dacca Range, claiming the following reliefs :--- (1) For a declaration that the Bengal Agricultural Income-tax Act, 1944, s....
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....Court at Calcutta under Section 115 of the Code of Civil Procedure, against the order of the Subordinate Judge, and a Bench of the High Court consisting of Harries, C.J., and Chakravarthi, J., allowed the application and set aside the order of the Subordinate Judge, giving effect to the objection of the respondent that the Court at Alipore was not competent to try the suit against the Province of East Bengal. One of the points raised on behalf of the appellant before the High Court was that the Province of East Bengal had submitted to the jurisdiction of the Subordinate Judge's Court, but this point was negatived. The appellant was thereafter granted a certificate under Section 205(1) of the Government of India Act, 1935, and on the basis of it he has preferred this appeal. On a reference to the judgments of the learned Subordinate Judge and the High Court, it appears that 3 provisions were relied upon by the appellant in support of his contention that the Court at Alipore had jurisdiction to try the suit, these being Section 9 of the Indian Independence Act, 1947, Article 4 of the Indian Independence (Legal Proceedings) Order, 1947 [hereinafter referred to as the 'Legal Proceedi....
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....rtious liability :--- "Tortious liability arises from the breach of a duty primarily fixed by the law: this duty is towards persons generally and its breach is redressible by an action for unliquidated damages." In Underhill's law of torts, the definition runs as follows :---- "A tort is an act or omission which is unauthorized by law and independently of contract infringes (a) some absolute right of another, etc. and (ii) gives rise to an action for damages at the suit of the injured party". The learned author after attempting to define a tort in this way goes on to state: "A tort is described in the Common Law Procedure Act, 1852, as a wrong independent of contract. If we use the word 'wrong' as equivalent to violation of a right recognised and enforced by law by means of an action for damages, the definition is sufficiently accurate, but scarcely very lucid; for it gives no clue to what constitutes a wrong or violation of a right recognized and enforced by law. It does, however, emphasize the fact that an essential characteristic of a tort is that the appropriate remedy for it is an action for damages. An act or omission which does not give rise to an action for damages is not a....
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....ds that liability by the Dominion or Province would arise. It will be also instructive to refer to Part VII, Chapter III, of the Government of India Act, 1935, the heading of which is "Property, Contracts, Liabilities, and Suits", and upon which the Rights, etc. Order appears to have been modelled. In Section 179 of the Government of India Act, 1935, which occurs in this Chapter, the clue to the meaning of the word "liability" is furnished by the provision that "any sum ordered to be paid by way of debt, damages or costs in any such proceedings, and any costs or expenses .................... shall be paid out of the revenues of the Federation or the Province, as the case may be .............." I think that it will be quite a fair construction to hold that what is contemplated in Section 10 of the Rights etc. Order is that the liability referred to therein would be met out of the revenues of the Province concerned. The construction I have suggested appears to me to represent what the framers of the Order must have intended to convey by the words "liability in respect of an actionable wrong", but, lest it should be said that it is too narrow a construction, I shall deal with the ma....
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....rd Wright, M. R., in Nicholls v. Ely Beet Sugar Factory). Such cases, are often described as cases of absolute liability or cases where a tort is actionable per se without proof of damage. Let us then see whether the two elements of an actionable wrong are present in this case. For this purpose, we must examine the best and most plausible statement of the appellant's case which may be put more or less in the following way :---- The issue of a notice, which has been referred to in paragraph 5 of the plaint calling upon the appellant to furnish a return of his total agricultural income derived from lands situated within the Province of Bengal, was the first step in the initiation of an illegal assessment proceeding which was likely to lead to an illegal levy of tax, and the commencement of an illegal proceeding in this manner gave a right of action to the appellant and entitled him to claim an injunction restraining the defendants from completing the proceeding. Such being the position, the case is covered by Section 10 of the Order under consideration, the words used there being wide enough to cover liability to be restrained by an injunction from completing an illegal or unauth....
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....the person should have sustained some harm or injury, is also wanting in this case. It is not the case of the appellant that the notice has in any way caused any actual damage to him. Nor is it suggested that this is one of those cases in which damage should be presumed. All that is said is that the notice was likely to entail trouble and harassment to the appellant, but that by itself will not constitute a wrong. The matter may be tested in another way. As Underhill points out, "an act or omission which does not give rise to an action for damages is not a tort." To the same effect is the following observation in Salmond's Law of Torts :--- "No civil injury is to be classed as a tort unless the appropriate remedy for it is an action for damages. Such an action is an essential characteristic of every true tort." Again, Professor Winfield says that an action for unliquidated damages is the one sure test of tortious liability and has cited cases where this statement has received judicial approval. I think these statements will be equally true if we drop the word "tort" and substitute the words "actionable wrong" in its place. It follows that one of the tests of an actionable wrong....
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....rious wrongs, such as continuing trespasses and nuisances, where a wrongful act has been done and there was an intention to continue doing it". (See Addison's Law of Torts, 8th Edn. p. 111). Injunction will also be granted to prevent a threatened injury or wrong, if it can be shown that the threatened act if carried into execution will lead to violation of a right and such will be the inevitable result. As was pointed out in an English case, the interference of the court in these cases is founded on its jurisdiction to give relief in the shape of preventive justice in order to protect properties and rights from that which, if completed, would give a right of action. These two cases in which an injunction may be issued stand on two different footings, and the liability to an injunction does not necessarily and always amount to "liability in respect of an actionable wrong". The two liabilities may possibly coincide where there is a continuing wrong and the injunction is intended to stop its continuance. But, as I have already stated, where no wrong has been committed, it would require considerable straining of the meaning of familiar legal expressions to say that "liability in respec....
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.... now been definitely held that he may be liable in certain cases. So far as the present discussion is concerned, the following three points which emerge from a careful persual of a large number of cases bearing on the subject, seem to be material :---- (1) The principles of the law of torts have been consistently applied in all cases dealing with the liability of the Secretary of State for wrongs committed by the servants or agents of the Crown or the Government. (2) It is settled law that the Secretary of State cannot be held, liable for wrongs committed by the servants of the Crown in the performance of duties imposed by the Legislature. [See Shivabhajan v. Secretary of State for India ; James Evans v. Secretary of State ; Tobin v. Reg ; Ross v. Secretary of State, in which this principle is fully explained and the reasons upon which it is based are clearly set out.] (3) It is also well-settled that where a statute specially authorizes a certain act to be done by a certain person, which would otherwise be unlawful or actionable, no action will lie for the doing of the act. On these principles, it would appear that neither the Agricultural Income-tax Officer, who has now b....
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....dance with the rules of practice of this Court, cannot ordinarily be entertained. The second point urged by Mr. Setalvad is based on Section 65 of the Bengal Act, which runs as follows :--- " No suit shall be brought in any Civil Court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Crown for anything in good faith done or intended to be done under this Act. " Strictly speaking, this section does not apply to the present case, as there has yet been no assessment and ex facie the appellant's suit cannot be regarded as a suit to set aside or modify any assessment. Mr. Setalvad however contends that this section must be read with the decision of the Privy Council in Raleigh Investment Co. v. Governor-General in Council. That was a case under the Indian Income-tax Act, 1922, the provisions of which are similar to the provisions of the Bengal Act and which contains a (Section 67) which is almost identical in terms with Section 65 of the latter Act. In that case, an assessee paid under protest the tax assessed on him and then brought a suit for the following reliefs :--- (a) a declaration....
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....t date, did give the assessee the right effectively to raise in relation to an assessment made upon him the question whether or not a provision in the Act was ultra vires. Under Section 30, an assessee whose only ground of complaint was that effect had been given in the assessment to a provision which he contended was ultra vires might appeal against the assessment. If he were dissatisfied with the decision on appeal---the details relating to the procedure are immaterial---the assessee could ask for a case to be stated on any question of law for the opinion of the High Court and, if his request were refused, he might apply to the High Court for an order requiring a case to be stated and to be referred to the High Court ........... It cannot be doubted that included in the questions of law which might be raised by a case stated is any question as to the validity of any taxing provision in the Income-tax Act to which effect has been given in the assessment under review. Any decision of the High Court upon that question of law can be reviewed on appeal. Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is....
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....t, their Lordships added: "The only doubt, indeed, in their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a civil court to set aside or modify an assessment." I think that, for the purpose of understanding the full scope of Section 65, we must read not only the first part of the section which bars suits to set aside or modify an assessment, but also its latter part which provides that "no suit or other proceeding shall lie against any officer of the Crown for anything in good faith....intended to be done under this Act." The latter part of the section clearly excludes the jurisdiction of the Court to prevent the Income-tax Officer from proceeding with an assessment which has already been started. Reference may here be made to Secretary of State v. Meyyappa Chettiar where it was held that the expression "intended to be done" signified furturity so as to preclude suits for injunction in respect of proceedings "intended" to be taken by the Income-tax Officer. It is true that in terms the provision concerns the Income-tax Officer only, but it could hardly have been the intention of the Legislature that though that officer is not liab....
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....nt, but the only statement made by it was that the Court had no jurisdiction to proceed with the suit. It cannot therefore be had that it held submitted to the jurisdiction of the Court. I have tried to deal with the question posed in this appeal in all its material aspects, but it can, I think, be disposed of on the simple ground that the mere issuing of a notice under Section 4 of the Bengal Agricultural Income-tax Act by the Agricultural Income-tax Officer cannot be held to be an actionable wrong, because no right known to law can be said to have been infringed thereby. One of the recognized tests of an actionable wrong is that, while other remedies may also be open to the person to whom the wrong is done, he can always maintain an action for damages, on the principle that every injury imports damage. I am however certain that no action for damages can be maintained on the allegations made by the appellant in his plaint. I think that the entire argument urged on behalf of the appellant has been sufficiently answered by the High Court in the following passage, which appears to me to sum up the legal position accurately and concisely : " Nor was Dr. Sen Gupta right in relying ....
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....e Judge at Alipore can be continued against the Province of East Bengal which has come into existence, as a part of the Dominion of Pakistan, upon the partition of Bengal under the Indian Independence Act ; and whether the Court of the Subordinate Judge of Alipore which is a Court in the Dominion of India has any jurisdiction to proceed with and try such suit. The Subordinate Judge decided these questions in favour of the plaintiff-appellants basing his decision entirely upon Article 4(1) of the Indian Independence (Legal Proceedings) Order, 1947, read with Section 9 of the Indian Independence Act. The High Court in revision set aside the order of the Subordinate Judge holding inter alia that neither Article 4(1) of the Legal Proceedings Order nor Article 12(2) of the Indian Independence (Rights, property and Liabilities) Order, 1947, could confer upon the plaintiff any right to continue the suit against the Province of East Bengal. The Alipore Court, it has been held, has no jurisdiction to proceed with the suit and no jurisdiction has been conferred upon it by reason of the Province of East Bengal appearing in the suit and putting in a written statement only for the purpose of ....
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....hed in very wide language and under it all proceedings pending in any civil or criminal court in the Province of Bengal, the Punjab or Assam immediately before the 15th of August, 1947, would continue as before and be heard and tried by the Courts before which they are pending irrespective of the fact that such proceedings might relate to persons or property situated in the other Dominion. I agree with the High Court in holding that comprehensive though the provision is, by itself, it can render no assistance to the plaintiff-appellant. The suit was commenced here by the plaintiff against the old Province of Bengal as the party defendant and against that defendant the suit may be continued if the plaintiff so chooses under Article 4(1) of the Legal Proceedings Order mentioned above. But this would be of no benefit or advantage to the plaintiff for what he wants is to proceed against the Province of East Bengal which is a part of the Dominion of Pakistan as a substituted defendant in place of the Province of Bengal. Dr. Sen Gupta argues that if the court has jurisdiction to continue to suit, this would necessarily carry with it the power to make proper orders for substitution as the....
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....rovince of East Bengal is proceeding to assess and levy agricultural income-tax upon the plaintiff in respect of a period anterior to 15th of August, 1947, the right to do so can vest in the Province either under an agreement between the two Dominions or the two Provinces or on the basis of an award by an arbitral tribunal as contemplated by Article 3 of the Rights, Property and Liabilities Order. In either case it would amount to transfer of rights under the provisions of the Order and would attract the operation of Article 12(2). This argument is manifestly unsound and cannot be accepted. If the right referred to by the learned Counsel means the right to impose tax on agricultural income earned within its territory, the State of Pakistan did not acquire such right by transfer from the Province of Bengal. It is a right inherent in sovereignty itself which the Dominion of Pakistan got under the Indian Independence Act. Again if the right has been created by the Bengal Agricultural Income-tax Act; the Province of East Bengal would certainly be entitled to avail itself of the provisions of that Act under Section 18(3) of the Independence Act. Apart from this, Dr. Sen Gupta has not ....
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....hed a narrow and somewhat restricted meaning to the words of the Article mentioned above and that the plain language of the provision read in the light of the context would demand and justify a wider and more liberal interpretation. In my opinion, there can be an actionable wrong which does not arise out of a breach of contract and at the same time does not answer to the description of a "tort" as it is understood in English law; and if the plaintiff's allegations are correct, it is an actionable wrong precisely of that type which we have in the present case. " The word "wrong" in ordinary legal language means and signifies "privation of right". An act is wrongful if it infringes the legal right of another, and "actionable" means nothing else than that it affords grounds for action in law. Ordinarily, the word "injury" is used in the same sense of actionable wrong, while "damage" in contrast with injury means loss or harm occurring in fact whether actionable as injury or not. In English law "tort" is a species of civil injury and so is a breach of contract; but it is not quite correct to say that the two together exhaust all forms of actionable wrongs known to English law. It is ....
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....d "wrong" is taken in the restricted and technical sense as "equivalent to violation of a right recognised and enforced by law by means of an action for damages". Taken in, this form, the definition though it gives no clue as to what constitutes a wrong, certainly does lay stress on the essential characteristic of a tort, viz., that the appropriate remedy for it is an action for damages. It is really this characteristic that differentiates a tort from other forms of civil injury or actionable wrong even though the latter are unconnected with any contract. There may be other remedies besides damages available to the plaintiff against a tortfeasor in the shape of restitution, injunction etc., but no "civil injury" as Salmond observes "can be classed as tort unless the appropriate remedy for it is all action for damages. Such an action is an essential characteristic of every true tort". Other remedies like injunction or restitution can be claimed by the plaintiff but it is solely by virtue of a right to damage that the wrong complained of can be regarded as a tort. By way of illustration the author points out that a public nuisance is not to be deemed a tort, because the civil remedy ....
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....basis was made in the claim, the action was dismissed; but liberty was given to the plaintiff to bring an action in the proper form claiming an injunction to restrain the defendant from threatening the plaintiff's customers. This threat to customers was thus held to be an actionable wrong but as the remedy was injunction and not damages, it was not a tort in the legal sense of the term. In the case before us the act of the Province of Bengal complained of by the plaintiff is not a tort according to the technical rules of English law, but is certainly an actionable wrong as it can be sued upon in a court of law and remedied in an effective manner. The appropriate remedy for the wrong is not unliquidated damages which is essential in a tort but an injunction restraining the defendant from proceeding with the illegal assessment or from realising the amount assessed if assessment has actually taken place. If, as the plaintiff alleges, the relevant provision of the Bengal Agricultural Income-tax Act, under which the plaintiff is sought to be assessed, is illegal and ultra vires, the issuing of the notice by the Income-tax Officer is certainly the first and the essential step in the ....