9911796707
TMI Blog1966 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... der an agreement concluded between the company and the Government of the Bhopal State, the company was exempted from payment of " any sum by way of taxation to the State " for a period of ten years from the date on which it took over the land granted to it by the State for business purposes. This agreement was acted upon and the period of immunity from taxation expired on 31st October, 1948. During this period no assessment on the company was made under the Income-tax Act, 1936 (No. VIII of 1936), of the Bhopal State. According to the applicant, in this period it did not even file any return of its total income before the income-tax authorities of the Bhopal State. The Bhopal State merged in India on 1st August, 1949, and became a Chief Commissioner's Province. On 26th August, 1949, the Taxation Laws (Extension to Merged States) Ordinance, 1949 (hereinafter referred to as the Ordinance), was promulgated. Section 3 of the Ordinance extended to all the Merged States the Indian Income-tax Act, 1922, along with all the rules and orders made thereunder, with effect from 1st April, 1949. By virtue of section 3 of the Finance Act, 1950, the Merged States' territories became " taxable ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually allowed under any laws or rules of a Merged State relating to income-tax and super-tax, shall be taken into account in computing the aggregate depreciation allowance referred to in sub-clause (c) of the proviso to clause (vi) of sub-section (2), and the written down value under clause (b) of sub-section (5), of section 10 of the said Act: Provided that where in respect of any asset, depreciation has been allowed for any year both in the assessment made in the Merged State and in British India, the greater of the two sums allowed shall only be taken into account. " The Ordinance of 1949 was replaced by the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (hereinafter referred to as the 1949 Act). Section 3 of this Act extended, inter alia, the Indian Income-tax Act, 1922, along with all the Rules and Orders made thereunder, to all the Merged States with effect from 1st April, 1949. Section 6 contains a provision for removal of difficulties. It says: "6. If any difficulty arises in giving effect to the provisions of any Act, rule or order extended by section 3 to the Merged States, the Central Government may, by order, make such provisions or give such d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant Commissioner took the view that " depreciation actually allowed could not imply depreciation allowed by a mental phenomenon ". The order of the Appellate Assistant Commissioner was upheld by the Appellate Tribunal. When the matter came up to this court, on a reference under section 66(1) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax, the answer which we rendered in terms of the question posed was that " in the circumstances of this case, the correct basis for computing the written down value of depreciable assets of the company is the one adopted by the Appellate Assistant Commissioner." Thereafter, the Commissioner of Income-tax, after obtaining special leave from the Supreme Court, filed an appeal from our judgment delivered on the reference made under section 66(1) of the Indian Income-tax Act, 1922. During the pendency of this appeal before the Supreme Court, the Central Government, in exercise of its powers under section 6 of the 1949 Act, passed another order called the Taxation Laws (Merged States) (Removal of Difficulties) (Amendment) Order, 1962 (hereinafter referred to as the 1962 Order). This order runs as follows: " 1. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. It is, in these circumstances, that the company has now filed this application contending that the 1962 Order is unconstitutional and ultra vires and that, as it could not raise this contention before the Supreme Court in the appeal filed by the Commissioner of Income-tax, it is now entitled to raise the same independently by an application under article 226 of the Constitution. Shri Siddhartha Ray, learned counsel appearing for the petitioner, assailed the validity of the 1962 Order on five grounds, namely, first, that the power under section 6 of the 1949 Act could be exercised only in the case of any difficulty arising in giving effect to the provisions of any Act, Rule or Order extended by section 3 thereof to the Merged State; that no such difficulty had arisen in giving effect to the provisions either of the Indian Income-tax Act, 1922, or the provisions of the Removal of Difficulties Order, 1949; and that, therefore, in the absence of any such difficulty, the power under section 6 of the 1949 Act could not be exercised for the purpose of passing the 1962 Order. Secondly, the 1962 Order purported to amend substantially the Indian Income-tax Act, 1922 ; that section 6 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 949 Act to the Merged States; and that even the return filed by the respondents did not disclose the difficulty or difficulties for the removal of which the impugned Order was passed. It was said that at the time of the making of the 1962 Order no difficulty existed in giving effect to the provisions of the Indian Income-tax Act, 1922 ; that the 1962 Order was passed solely for the purpose of bringing into the sweep of section 2 of the Removal of Difficulties Order, 1949, the assessees whose income had been exempted from tax under any laws or rules in force in a Merged State or under any agreement with a Ruler; that the fact that certain classes of persons did not fall under the Removal of Difficulties Order, 1949, was not any " difficulty " contemplated by section 6 of the 1949 Act ; and that assuming that this was a difficulty, then it was not a difficulty arising in giving effect to section 2 of the Removal of Difficulties Order, 1949. Learned counsel relied on Mahalaxmi Mills Ltd. v. Commissioner of Income-tax to support his contention that before an Order could be made by the Central Government under section 6 of the 1949 Act, the Central Government had to be satisfied that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in understanding the provisions of the Acts extended to Merged States by section 3 of the 1949 Act. It is clearly an obstacle or an impediment in giving effect to the provisions of any Act, Rule or Order extended by section 3. The language of the section clearly shows that it is for the Central Government to decide, as a pure act of administration, whether an obstacle or impediment exists in giving effect to the provisions of the Act, Rule or Order referred to in section 6 which calls for an Order for surmounting the obstacle or removing the impediment. No doubt section 6 does not expressly say that the Central Government should be satisfied as to the existence of any " difficulty " for the removal of which the making of an Order is necessary. But it is implicit in the language of section 6 that the Central Government should be satisfied that a difficulty exists in giving effect to the provisions of any Act, Rule or Order extended by section 3 to the Merged States. If the existence of any " difficulty " depends on the satisfaction of the Central Government, then it follows that the condition about the existence of any difficulty, for the removal of which the Central Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondents to state the difficulty in their return is of no consequence. The difficulty, for the removal of which the 1962 Order was passed, manifests itself if the said Order is examined along with the earlier Order, namely, the Removal of Difficulties Order, 1949. It has been stated earlier that as the laws relating to income-tax in force in the Merged States were repealed not by the Indian Income-tax Act, 1922, but by the 1949 Ordinance, an initial difficulty arose in giving effect to the provisions of clause (b) of section 10(5) of the Indian Income-tax Act, 1922. That difficulty was removed by the Removal of Difficulties Order, 1949, making it possible to take into account all depreciation actually allowed under any laws or rules of a Merged State relating to income-tax and super-tax in computing the aggregate depreciation allowance referred to in sub-clause (c) of the proviso to clause (vi) of sub-section (2), and the written down value under clause (b) of sub-section (5), of section 10 of the Indian Income-tax Act, 1922. Thus the Removal of Difficulties Order, 1949, gave effect to the scheme of depreciation embodied in section 10(5)(b) of the Act of 1922, under which depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifficulty in giving effect to the provisions of the Removal of Difficulties Order, 1949. If the provisions now inserted in the Removal of Difficulties Order, 1949, by the 1962 Order had been incorporated originally in the Removal of Difficulties Order, 1949, itself when it was made, it could not have been then contended with any degree of force that those provisions were not for the purpose of removal of a difficulty arising in giving effect to the provisions referred to earlier of the Indian Income-tax Act, 1922. The fact that the provisions contained in the 1962 Order were not embodied in the Removal of Difficulties Order, 1949, originally but were inserted subsequently cannot, however, alter the purpose of those provisions. The amendment made in the Removal of Difficulties Order, 1949, by the 1962 Order is only the mode by which the difficulty arising in giving effect to the provisions of the Act of 1922 has been removed. The amendment cannot be construed in any way as implying that thereby a difficulty arising in giving effect to the provisions of the Removal of Difficulties Order, 1949, has been removed. Again, it may be that the effect of the 1962 Order is to remove the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull effect to the provisions of any Act, Rule or Order extended by section 3 of the 1949 Act. The application of a provision regarding depreciation is one thing and removal of a difficulty so as to make computation of the aggregate depreciation in consonance with section 10(5)(b) of the 1922 Act is quite different. The fact that the Central Government took nearly thirteen years for removing the difficulty that it did by passing the 1962 Order is only a comment on the Government's inaction. But, as we have endeavoured to point out earlier, the questions whether any difficulty spoken of in section 6 of the 1949 Act has arisen and whether that difficulty should be removed by an Order under that provision, and if so, when and how, are matters for the Government to decide. It would be pertinent to refer at this stage to the decision of the Supreme Court in Commissioner of Income-tax v. Dewan Bahadur Ramgopal Mills, where the question of the validity of the Explanation added to paragraph 2 of the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, by an order made on the 8th May, 1956, by the Central Government in exercise of the power conferred on it by section 12 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt repelled this contention after pointing out how there was a difficulty in the application of section 10(5)(b) to an assessee in a Part B State and the object of paragraph 2, and the Explanation thereto, of the 1950 Order. It was held by the Supreme Court that by giving effect to paragraph 2 of the 1950 Order, as originally passed, a disparity was created and depreciation would have had to be allowed against the scheme of the Indian Income-tax Act, 1922, and it was, therefore, necessary to explain paragraph 2 and the Explanation was intended to remove the difficulty. It was further held that under section 12 of the Finance Act, 1950, it was for the Central Government to determine if any difficulty of the nature indicated in the section had arisen and then to make such order, or give such direction, as appeared to it to be necessary to remove the difficulty, and Parliament had left the matter to the executive ; but that did not make the notification of 1956 bad. In the case of Mahalaxmi Mills Ltd. v. Commissioner of Income-tax, the Supreme Court reiterated this construction of section 12 of the Finance Act, 1950, and made the following observations: " What is necessary in law is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1922, was invalid, is altogether unsubstantial. A repealed Act cannot, of course, be amended unless it is first revived. But by section 297 of the Income-tax Act, 1961, the Indian Income-tax Act, 1922, was not repealed totally for all purposes. It was saved to the extent specified in sub-section (2) of section 297, and applied, inter alia, to any proceeding pending on the commencement of the 1961 Act before an income-tax authority or any court by way of appeal, reference or revision, as if the 1961 Act had not been passed. It is not contested that the assessment on the petitioner-company is governed by the 1922 Act. For the purpose for which the 1922 Act continues to operate, it can be amended. Learned counsel for the applicant is no doubt right in his submission that section 6 of the 1949 Act does not empower the Central Government to alter radically or to amend substantially the Indian Income-tax Act, 1922, for the removal of any difficulty arising in giving effect to the provisions of that Act. The power to make a provision or give a direction for the removal of any difficulty arising in giving effect to the provisions of any Act necessarily implies that the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficulty of the nature indicated in the section has arisen and then to make such Order, or give such direction, as appears to it to be necessary to remove the difficulty. Parliament has left the matter to the executive; but that does not make the notification of 1956 bad. In Pandit Banarsi Das Bhanot v. State of Madhya Pradesh, we said at page 435 : ' Now, the authorities are clear that it is not unconstitutional for the legislature to leave it to the executive to determine details relating to the working of taxation laws, such as the selection of persons on whom the tax is to be laid, the rates at which it is to be charged in respect of different classes of goods, and the like.' We are, therefore, of the view that the notification of 1956 was validly made under section 12 and is not ultra vires the powers conferred on the Central Government by that section." The resemblance between the Taxation Laws (Part B States) (Removal of Difficulties) Order, 1950, section 12 of the Finance Act, 1950, and the Removal of Difficulties Order, 1949, and section 6 of the 1949 Act has already been pointed out. On that resemblance, following the decision of the Supreme Court in Ramgopol Mills case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, validly made under section 6 of the 1949 Act. It was further argued by the learned counsel for the petitioner that the 1962 Order amended the Removal of Difficulties Order, 1949, and that section 6 of the 1949 Act did not empower the Central Government to amend the Removal of Difficulties Order, 1949. It was also said that after the replacement of the 1949 Ordinance by the 1949 Act, a reference to the 1949 Ordinance in the recital of the Removal of Difficulties Order, 1949, must, as provided by section 8 of the General Clauses Act, 1897, be construed as a reference to the 1949 Act, and, so construed, the amending Order of 1962 would become one made for removal of certain difficulties arising in giving effect to the provisions of the 1949 Act ; but section 6 of the 1949 Act did not confer on the Government the power to make any Order or provision for removal of any difficulty arising in giving effect to the provisions of the 1949 Act. For these reasons, it was contended that the 1962 Order was bad. This argument is fallacious, and cannot be accepted. It has already been pointed out that the 1962 Order does not purport to remove any difficulty in giving effect to the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings in reference to the hon'ble High Court or the hon'ble Supreme Court will be affected in respect of such assessments even though the period of four years might have elapsed long ago. Thus the second order discriminates between persons falling in the same group and/or belonging to the same class and there is no nexus whatsoever between the object of such discrimination with the said discrimination itself. By reason of the second order, whereas your petitioner will be affected retrospectively for a much longer period of four years, other assessees similarly situated as your petitioner and belonging to the same class can only be affected for a period of four years as aforesaid. There is no reasonable basis or nexus for such discrimination." These averments do not at all give any indication about the assessees similarly situated as the petitioner, who have been said to be treated differently as a result of the 1962 Order, and the manner in which they have been so treated. They only show that the main complaint of the petitioner on this score is that the effect of the 1962 Order is that it discriminates between the assessees against whom assessment proceedings are pending, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution for a writ of certiorari for quashing the assessment made on him on the ground that he had been denied the fundamental right of equality before the law and equal protection of the law guaranteed by article 14 of the Constitution. The Supreme Court rejected the assessee's contention based on article 14 of the Constitution and held that the discrimination, if any, between the assessees of Kapurthala and Nabha was not brought about by the Ordinance by which Patiala laws were extended to Nabha, but by the circumstance that there was no income-tax law in Nabha, and there was no case of assessment pending against any Nabha assessee. It was also observed that the provision that pending proceedings should be concluded according to the law applicable at the time when the rights or liabilities accrued and the proceedings commenced, was a reasonable law founded upon a reasonable classification of the assessees which is permissible under article 14 of the Constitution. In our view, the present case falls within the principle laid down in the case of Ramjilal, and, applying that principle, it must be held that the 1962 Order, which applies to all those who came within its ambit from th ..... 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