1950 (12) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of the Payment of Taxes (Transfer of Property) Act, 1949 to leases.
2. Constitutional validity of the Payment of Taxes (Transfer of Property) Act, 1949.
3. Interpretation and effect of Section 9 of the Payment of Taxes (Transfer of Property) Act, 1949.

Issue-wise Detailed Analysis:

1. Applicability of the Payment of Taxes (Transfer of Property) Act, 1949 to leases:

The petitioner, Hind Estates, Ltd., sought a writ of mandamus to prevent the respondents from enforcing notices issued under Section 4(1) of the Payment of Taxes (Transfer of Property) Act, 1949. The petitioner argued that the Act does not apply to leases. The Court examined the language of Sections 3 and 4 of the Act. Section 3 prohibits the registration of certain documents unless a tax clearance certificate is obtained, but leases are excluded from this requirement. The Court noted that Section 4 uses the term "the transfer," which implies the types of transfers mentioned in Section 3, for which a certificate would be necessary. The Court concluded that Section 4 applies only to the class of transfers mentioned in Section 3 and does not extend to leases. Therefore, the Income-tax Officer's action in issuing notices under Section 4 for leases was beyond the scope of the Act.

2. Constitutional validity of the Payment of Taxes (Transfer of Property) Act, 1949:

The petitioner contended that the Act was ultra vires the Constitution of India as it violated fundamental rights. However, the Court did not find it necessary to decide on this issue due to the conclusion reached on the applicability of the Act to leases. The Court mentioned that if it had been necessary to address this constitutional question, it would have referred the matter to a Special Bench of three judges for a more satisfactory resolution.

3. Interpretation and effect of Section 9 of the Payment of Taxes (Transfer of Property) Act, 1949:

The petitioner argued that Section 9 of the Act, which applies Section 6 of the General Clauses Act, kept the previous Ordinance XXI of 1948 alive, thus affecting the current proceedings. The Court rejected this contention, stating that Section 9 merely ensures that proceedings initiated under the previous Ordinances continue to be valid. It does not extend the applicability of the Ordinance to the present Act. Therefore, the Court did not find merit in the petitioner's argument based on Section 9.

Conclusion:

The Court concluded that Section 4(1) of the Payment of Taxes (Transfer of Property) Act, 1949 does not authorize the Income-tax Officer to issue notices in the case of leases. Consequently, the actions taken by the Income-tax Officer were beyond his powers. The rule was made absolute, and the respondents were prohibited from taking any further steps in pursuance of the notices issued. The petitioner was awarded the costs of the application. The application was allowed.