1966 (2) TMI 10 - HC - Income Tax

Summary

Issues Involved:
1. Whether the application for refund was barred by time.
2. The scope and effect of Section 13 of the Finance Act, 1950.
3. The enforceability of obligations and liabilities devolving under Article 295 of the Constitution.
4. The applicability of the bar of limitation provided in Section 43 of the Jaipur Act.
5. The impact of delay on the writ petition.

Issue-wise Detailed Analysis:

1. Whether the application for refund was barred by time:
The appellants claimed a refund of Rs. 2,352 out of the payment made on 7th May, 1948. The last date for applying for this refund under Section 43 read with Sections 42 and 44 of the Jaipur Act was 7th May, 1950. The appellants applied for the refund on 18th December, 1951, which was beyond the stipulated period. The Assistant Secretary to the Government of Rajasthan communicated that the application was time-barred, and the amount had lapsed to the Government. The single judge initially dismissed the writ petition on this ground, but the appeal court found that the claim was not time-barred due to the repeal of the Jaipur Act by the Finance Act, 1950, which did not save the provisions dealing with the refund of tax.

2. The scope and effect of Section 13 of the Finance Act, 1950:
Section 13 of the Finance Act, 1950, repealed all laws relating to income-tax, super-tax, or tax on profits of business in Part B States, except for the purposes of levy, assessment, and collection of such taxes for specified periods. The court held that the term "collection" did not include claims for refunds by assessees. Consequently, the provisions of the Jaipur Act dealing with refunds were not saved and ceased to exist from 31st March, 1950.

3. The enforceability of obligations and liabilities devolving under Article 295 of the Constitution:
Article 295(1)(b) of the Constitution transferred all rights, liabilities, and obligations of the Government of any Indian State to the Government of India if they related to matters in the Union List. The court held that the obligations and liabilities with respect to the refund of tax became the obligations and liabilities of the Government of India. The appellants had an enforceable right to claim the refund, which was not barred by the limitation provided in Section 43 of the Jaipur Act after the repeal of the Act.

4. The applicability of the bar of limitation provided in Section 43 of the Jaipur Act:
The court found that the repeal of the Jaipur Act on 31st March, 1950, left no authority to whom the appellants could apply for a refund. The bar of limitation in Section 43 did not apply to the enforcement of obligations arising under Article 295 of the Constitution. Therefore, the appellants' claim for a refund was not time-barred.

5. The impact of delay on the writ petition:
The respondents argued that the writ petition should be dismissed due to delay. However, the court found that the delay was sufficiently explained as the appellants were following up the matter in the Rajasthan High Court. The court was not inclined to dismiss the petition on this ground, considering the circumstances of the case.

Conclusion:
The appeal was allowed, and a mandamus was issued directing the respondents to refund the sum of Rs. 2,352 to the appellants. The court left the parties to bear their own costs.