2003 (1) TMI 73 - HC - Income Tax

Whether rule 2 was not purely procedural, neither Schedule III is a procedural law and, therefore, omission of rule 2 will not deprive the petitioner of his rights and absolve the liabilities and hence the writ petition requires determination on the merits and cannot be dismissed as infructuous? - We find that the reliefs claimed can no more be availed of or, in other words, it is already achieved by reason of omission of rule 2 and as such the petitioner cannot press this petition any further which has since become infructuous by reason of omission of rule 2 and insertion of Schedule III.

Summary

Issues:
Interpretation of rule 2 of the Wealth-tax Rules in connection with a writ petition challenging its validity and applicability during the subsistence of a partnership.

Analysis:
The judgment delves into the application of rule 2 of the Wealth-tax Rules in a case involving the valuation of a partner's interest in a firm during the partnership's existence. The petitioner sought a declaration that rule 2 is inapplicable and ultra vires, emphasizing that the first part of the rule conferred accrued rights that could not be taken away by its omission. The court examined the nature of rule 2 and Schedule III, determining that they pertained to procedural matters related to valuation. Notably, the court cited precedents to establish that procedural rules, such as those concerning valuation, do not confer substantive rights and liabilities. Consequently, the omission of rule 2 and its replacement by Schedule III did not impact the substantive rights under the Wealth-tax Act. The court also highlighted that the Department would proceed based on Schedule III, rendering the challenge to rule 2 moot.

The judgment further explored the application of the General Clauses Act, emphasizing that section 6 of the Act applies to repeals, not omissions, and does not extend to rules. Citing a Supreme Court decision, the court clarified that the provision of section 6 does not encompass cases of rule omissions. Additionally, the court addressed the petitioner's reliance on unamended section 7 and its alleged contradiction with rule 2, noting that any inconsistencies arising from Schedule III would warrant a separate cause of action. Ultimately, the court concluded that the relief sought by the petitioner had already been achieved due to the omission of rule 2 and the introduction of Schedule III, rendering the petition infructuous. Consequently, the court declined to grant the interim order and dismissed the appeal, deeming it unnecessary to further deliberate on the matter.

In summary, the judgment elucidates the procedural nature of rule 2 and Schedule III in the context of valuation under the Wealth-tax Act. It underscores that procedural rules do not confer substantive rights and liabilities, thereby affirming the impact of the omission of rule 2 on the petitioner's claims. By analyzing relevant legal principles and precedents, the court effectively addresses the issues raised in the petition, ultimately leading to the dismissal of the appeal due to its rendered infructuous nature.