1941 (4) TMI 16 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the Bihar Agricultural Income Tax Act, 1938, and its amendment in 1939.
2. Whether the Act affects the rights of zamindars under the Permanent Settlement Regulation, 1793.
3. Whether the Act was enacted in violation of the Government of India Act, 1935.
4. Whether the Act can be questioned in a civil court.
5. Whether the Act requires the previous sanction of the Governor and the Governor General.
6. Whether the Act is an invasion of the rights of landlords under the Permanent Settlement.
7. Whether the notices and assessments under the Act are legal and binding on the plaintiffs.
8. Whether the Permanent Settlement creates a new right or merely recognizes a pre-existing right.

Issue-wise Detailed Analysis:

1. Validity of the Bihar Agricultural Income Tax Act, 1938, and its amendment in 1939:
The plaintiffs argued that the Bihar Agricultural Income Tax Act, 1938, and its amendment in 1939, are ultra vires and not binding on them. They claimed that the Act purports to tax a wider range of income than permissible under the Government of India Act, 1935, and does not tax all agricultural income as defined in the Government of India Act. The court found that the Act does not exceed the powers given to the Provincial Legislature by the Government of India Act, 1935. The omission of certain clauses in the definition of "agricultural income" in the Bihar Act does not render the Act ultra vires because the Provincial Government is entitled to tax a part of the income defined in the Indian Income Tax Act.

2. Whether the Act affects the rights of zamindars under the Permanent Settlement Regulation, 1793:
The plaintiffs contended that the Bihar Agricultural Income Tax Act infringes the rights granted by the Permanent Settlement Regulation, 1793, and is therefore ultra vires. The court held that the Permanent Settlement Regulation contained no assurance that zamindars would be immune from future schemes of property taxation or general taxation of incomes. The court concluded that the Act does not infringe the rights granted to zamindars by the Permanent Settlement Regulations.

3. Whether the Act was enacted in violation of the Government of India Act, 1935:
The plaintiffs argued that the Act was ultra vires as the previous sanction of the Governor under Section 299 and of the Governor General under Section 108(2)(b) of the Government of India Act, 1935, was not obtained. The court found that the Governor's subsequent assent to the Act cured any defect arising from the lack of previous sanction. Additionally, the court held that the Permanent Settlement Regulation is not an Act of Parliament and therefore does not require the previous sanction of the Governor General under Section 108(2)(a).

4. Whether the Act can be questioned in a civil court:
The court decided in favor of the plaintiffs, stating that the validity of the Bihar Agricultural Income Tax Act could be questioned in a civil court.

5. Whether the Act requires the previous sanction of the Governor and the Governor General:
The court found that the Governor's subsequent assent to the Act cured any defect arising from the lack of previous sanction. The court also held that the Permanent Settlement Regulation is not an Act of Parliament, and therefore, the Act does not require the previous sanction of the Governor General under Section 108(2)(a).

6. Whether the Act is an invasion of the rights of landlords under the Permanent Settlement:
The plaintiffs argued that the Act is an invasion of the rights of landlords under the Permanent Settlement and is therefore ultra vires. The court held that the Act does not infringe the rights granted to zamindars by the Permanent Settlement Regulations and is therefore not ultra vires.

7. Whether the notices and assessments under the Act are legal and binding on the plaintiffs:
The court found that the notices and assessments under the Act are legal, operative, and binding on the plaintiffs. The court held that the Act is not ultra vires and does not infringe the rights granted to zamindars by the Permanent Settlement Regulations.

8. Whether the Permanent Settlement creates a new right or merely recognizes a pre-existing right:
The court did not find it necessary to decide whether the Permanent Settlement created a new right or merely recognized a pre-existing right. The court held that the Act does not infringe the rights granted to zamindars by the Permanent Settlement Regulations and is therefore not ultra vires.

Conclusion:
The court dismissed the plaintiffs' suit, holding that the Bihar Agricultural Income Tax Act, 1938, and its amendment in 1939, are not ultra vires and do not infringe the rights granted to zamindars by the Permanent Settlement Regulations. The court granted a certificate to the plaintiffs under Section 205(1) of the Government of India Act, 1935, for the substantial points of construction involved.