1964 (4) TMI 23 - SC - Income Tax

Whether effect of the provision contained in article 295(1)(b) of the Constitution and have held that in view of the position emerging on April 1, 1950, by the extension of the Income-tax Act to the territory of the Part B State of Madhya Bharat by the Finance Act of 1950 and in view of the Concessions Order, the concessions granted by the Government of the former State of Madhya Bharat, which became the obligation of the Government of India under article 295(1)(b), must be held to have been superseded by the legislative provisions made as from April 1, 1950, and that corporations or individuals who had any concessions before April 1, 1950, would thereafter, be entitled only to such concessions as would be permissible under the Concessions Order? Held that - In the circumstances the respondents cannot rely on the agreement with the former State of Madhya Bharat, which must be deemed to have been superseded by the legislative provisions which came into force from April 1, 950, and can only get such concessions as may be allowed to them under the Income-tax Act read with the Concessions Order. We have already pointed out that the Government of India allowed concessions for five years, which the respondents have already availed of. They are not entitled to any further concession by virtue of the agreement with the Government of Madhya Bharat. We, therefore, allow the appeal and set aside the order of the High Court and dismiss the writ petition.

Summary

Issues:
1. Whether the respondents are entitled to exemption from income tax for a period of seven years based on an agreement with the former State of Madhya Bharat.
2. Whether the concessions granted by the former State of Madhya Bharat were superseded by legislative provisions after the extension of the Income-tax Act to the territory.
3. Whether the respondents can rely on the agreement with the former State of Madhya Bharat for further concessions beyond what was granted by the Government of India under the Concessions Order.

Analysis:
The respondents filed a petition seeking a writ to prevent the Income-tax Officer and the State of Madhya Pradesh from levying income tax on their Biscuit and Confectionery Factory at Gwalior for the financial years 1956-57 and onwards. The respondents had an agreement with the former State of Madhya Bharat, granting them concessions if they set up their factory in Gwalior. The High Court held that the agreement entitled the respondents to exemption from income tax for seven years, despite legislative provisions introduced post the extension of the Income-tax Act to the territory. The High Court granted a writ restraining the Income-tax Officer from taking action against the respondents until June 30, 1958.

In the subsequent appeal, the Supreme Court considered the scope of article 295(1)(b) of the Constitution and the effect of legislative provisions post the extension of the Income-tax Act. The Court held that the concessions granted by the former State of Madhya Bharat were superseded by the legislative provisions in force from April 1, 1950. The Court emphasized that corporations or individuals could only avail of concessions permissible under the Income-tax Act read with the Concessions Order. As the respondents had already availed of concessions for five years, they were not entitled to further concessions based on the agreement with the former State of Madhya Bharat. Therefore, the Court allowed the appeal, set aside the High Court's order, and dismissed the writ petition, directing each party to bear their own costs.