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TMI Blog1963 (1) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the learned counsel, a temporary measure, the provisions of section 6 of the General Clauses Act, 1897, have no application. On the other hand, the contention of Mr. G. Rama Iyer, learned counsel for the revenue, is that notwithstanding the fact that section 35(10) had ceased to be in force when the notices for reassessment were issued and when the orders under attack were passed, there is jurisdiction in the officer to pass the orders in question, by virtue of the provisions contained in section 6 of the General Clauses Act. According to the learned counsel, the principles applicable to the expiry of a temporary enactment have no application to the statute in question. Therefore, it will be seen that a decision on this question will really depend upon the view that is taken by this court as to whether section 35(10) of the Indian Income-tax Act is a temporary enactment or not. In order to appreciate the contentions of the learned counsel on both sides, it is desirable to set out a few facts, which will show the circumstances under which these orders, under attack, came to be passed. It is also necessary to state briefly the history regarding the enactment of sub- sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch the rebate of income-tax was allowed as aforesaid is availed of by the company, wholly or partly, for declaring dividends in any year, the amount or that part of the amount availed of as aforesaid, as the case may be, shall, by reason of the rebate of income-tax allowed to the company and to the extent to which it has not actually been subjected to an additional income-tax in accordance with the provisions of clause (ii) of the proviso to paragraph B of Part I of the Schedules to the Finance Acts above referred to, be deemed to have been made the subject of incorrect relief under this Act, and the Income-tax Officer shall recompute the tax payable by the company, by reducing the rebate originally allowed, as if the recomputation is a rectification of a mistake apparent from the record within the meaning of this section and the provisions of sub-section (1) shall apply accordingly, the period of four years specified therein being reckoned from the end of the financial year in which the amount on which rebate of income-tax was allowed as aforesaid was availed of by the company wholly or partly for declaring dividends. The substance of section 35(10) appears to be that when a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1950-51 corresponding to the accounting year ending with October 31, 1949. O.P. No. 1291 of 1961 relates to the assessment year 1951-52 corresponding to the accounting year ending with November 9, 1950, and O.P. No. 1294 of 1961 relates to the assessment year 1952-53 corresponding to the accounting year ended October 30, 1951. [Note.--Section 19 of the Finance Act which expressly provides that the amendments made by section 13 of that Act shall come into force only from 1-4-1960 has evidently not been brought to the notice of the learned judge--Ed.] There is no controversy that for all these years, originally, orders of assessment were passed allowing a rebate of one anna in the rupee on the undistributed profits of the company under clause (1) of the proviso to paragraph B of Part 1 of the relevant Schedules in the Finance Acts. There is also no controversy that at the general body meeting of the company, held on July 19, 1958, the company declared further dividends out of the undistributed profits of the previous years in respect of which they had previously obtained a rebate of one anna in the rupee on such undistributed profits. As the notices issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 35 was that rebate should be taken away if subsequently dividend is distributed out of the profits in respect of which the rebate was granted. The assessee states that whatever may have been the original intention, the legislature has discarded that principle by omitting section 35(10) from the statute altogether and whatever rebate has been granted once on the undistributed dividend, will enure in favour of the assessee, notwithstanding the subsequent distribution of dividend. The petitioner further takes up the position that the provisions contained in sub-section (10) of section 35 relate to matters of procedure and that procedure is not available from April 1, 1960, in view of the repeal of section 35(10). The petitioner also avers that there is no provision authorising the Income-tax Officer to start proceedings afresh after April 1, 1960, under the repealed provisions. At this stage, I may mention that the date April 1, 1960, given as the date of repeal of section 35(10) in this reply is evidently a mistake for April 1, 1959. I have already pointed out that the omission of section 35(10) of the Income-tax Act by section 13 of the Finance Act, 1959, takes effect from Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequence levies the additional tax for the assessment year 1949-50 in the sum of ₹ 5,250.56. Similarly, it will be seen that for the assessment year 1950-51, the Income-tax Officer levies an additional tax of ₹ 5,491.37. Again, for the assessment year 1951-52, the Income-tax Officer levies an additional tax of ₹ 1,291.62. Again, for the assessment year 1952-53 the Income-tax Officer levies an additional tax of ₹ 2,200.44. I may also state that excepting the question of jurisdiction of the officer to initiate proceedings by issue of notice on September 15, 1960, and to make the orders of assessment under attack on February 21, 1961, no other questions have been raised by the learned counsel for the petitioner in these matters. It may also be necessary to briefly indicate as to how exactly the rebate of one anna in the rupee on the undistributed profits of the company came to be given. Such a relief was afforded for the first time by the Indian Finance Act, 1948 (Act XX of 1948). The Finance Minister in his Budget Speech for 1948- 49, extracted in [1948] 16 I.T.R. (Journal Section), page 14, has dealt with the subject of Tax on undistributed profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax actually borne by such excess (hereinafter referred to as the 'excess dividend') falls short of the amount calculated at the rate of five annas per rupee on the excess dividend. The other parts of paragraph B are omitted as being unnecessary for the present purpose. There is no controversy that there were similar provisions in the Finance Acts of 1949 to 1955 inclusive. That is why there is significance when section 35(10) refers to the years beginning on the 1st day of April of the years 1948 to 1955 inclusive, during which period a rebate may have been obtained on the undistributed profits by virtue of the relevant Finance Acts referred to above. I may also refer again to the speech of the Finance Minister when section 35(10) was introduced and omitted from the main Act by the Finance Acts of 1956 and 1959 respectively. In the Budget Speech for 1956-57, the relevant extract from which appears in [1956] 29 I.T.R. 40 (Journal Section), the Finance Minister again refers to the rebate that was being granted up to then in respect of undistributed profits and indicates that the said rebate will be withdrawn. The Finance Minister states: The other field of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of taxation on the whole total income of the company. I will also advert to the omission of section 35(10) by section 13(2) of the Finance Act of 1959. Here again, in the Budget Speech made by the Finance Minister for 1959-60 extracted in [1959] 35 I.T.R. 57 (Journal Section), it is seen that the Government intends to effect some proposals for changing the then existing system of assessment and the inconvenience which resulted from it are noted and ultimately it is said by the Finance Minister that the scheme he proposes to introduce will avoid all that inconvenience. A part of the scheme appears to be that the overall rate applicable to Indian companies will be so fixed that the yield will be equal to the then annual gross yield less than the annual credit given to the shareholders. I have already indicated that section 13(2) of the Finance Act of this year omits section 35(10) of the Income-tax Act. Here again in paragraph B of Part I of the Schedule dealing with companies, income-tax at the rate of thirty per cent. of the whole of the total income of the company is levied. I am conscious of the fact that the speeches made at the time when a measure is being discussed ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 951] S.C.R. 621, 628; A.I.R. 1951 S.C. 301, 304, Mr. Justice Patanjali Sastri states the rule regarding temporary statutes thus: The general rule in regard to a temporary statute is that, in the absence of special provision to the contrary, proceedings which are being taken against a person under it will ipso facto terminate as soon as the statute expires. Again, the Supreme Court had to consider the applicability of section 6 of the General Clauses Act, where a repeal of a statute is followed by a fresh legislation on the same subject. Mr. Justice Mukherjea, speaking for the court, in the decision in State of Punjab v. Mohar Singh [1955] 1 S.C.R. 893, 898; A.I.R. 1955 S.C. 84, 87 observes: Of course, the consequences laid down in section 6 of the Act will apply only when a statute or regulation having the force of a statute is actually repealed. It has no application when a statute, which is of a temporary nature automatically expires by efflux of time. The Ordinance in the present case was undoubtedly a temporary statute but it is admitted that the period during which it was to continue had not expired when the repealing Act was passed. The repeal, therefore, was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Act has expired, no proceedings can be taken upon it and it ceases to have any further effect and the Supreme Court also adverts to the fact that the said principle has been accepted by the Supreme Court in S. Krishnan v. State of Madras [1951] S.C.R. 621. Therefore, it will be seen that if Mr. Surianarayana Iyer is able to satisfy this court that the provisions of section 35(10) are a purely temporary or analogus to a temporary legislation, then he will be well- founded in his contention that after the said sub-section has ceased to be in force, no action can be taken upon it. But the question is whether this contention of Mr. Surianarayana Iyer, learned counsel for the petitioner, can be accepted. After having due regard to the various matters adverted to above, I am not satisfied that the provisions of section 35(10) can be considered to be a temporary enactment in the circumstances of the case. If it is a temporary enactment it will certainly expire automatically at the end of the period fixed unless earlier repealed. The expression that is used in section 6 of the General Clauses Act is repeals any enactment hitherto made or hereafter to be made . The expression e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner intended to be purely temporary, nor is there anything to indicate that such provision will expire automatically at the end of any particular period. In fact, if the said sub-section had continued to be in the statute book and not omitted by the Finance Act of 1959, it would be perfectly within the jurisdiction of the Income-tax Officer to recompute the tax within the period mentioned therein when once any part of the undistributed profits which have earned a rebate during the years 1948 to 1955 is availed of in any subsequent years for the purpose of declaring dividends. The fact that section 35(10) was introduced in the Income-tax Act by the Finance Act of 1956 and that the Finance Acts are passed every year, is in my view no indication that section 35(10) was intended to be a temporary provision. In fact, a reference to the various Finance Acts, and in particular to the Finance Act of 1956, whereby section 35(10) was incorporated in the Indian Income-tax Act, will clearly show that apart from provisions being made regarding the rate of tax, etc., there are several provisions therein, which substantially make amendments to the Indian Income-tax Act itself, and it is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the learned counsel for the revenue. The orders of reassessment were passed on February 21, 1961, and it is seen that the petitioner moved the Appellate Assistant Commissioner challenging all these orders. But it is averred in the affidavit that the said officer by his order dated March 28, 1961, held that there is no provision in the Act for an appeal to him against an order passed under section 35(10) and, therefore, the appeals are not valid and maintainable. These writ petitions have been filed in this court on June 30, 1961. In the circumstances, the contention that there is delay is absolutely without merits. I express no opinion as to whether the view of the Appellate Assistant Commissioner that no appeal lies is correct or not. I also make it clear that I do not accept all the reasons given by the Income-tax Officer in the orders in question for holding that he has got jurisdiction to pass the orders in question. From the above discussion it will be seen that my approach to the question of jurisdiction of the officer is entirely different. But I agree with his final conclusion that he has got jurisdiction to pass the orders in question. As I mentioned earlier, no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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