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TMI Blog1953 (6) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... about four to five times larger than the portion occupied by the assessee for the purposes of its banking business. In its assessment to excess profits tax for the chargeable accounting period ending on 31st March, 1946, the assessee was assessed on this rental income. The Excess Profits Tax Officer purported to make the assessment under sub-rule (4) of Rule 4 of Schedule I to the Excess Profits Tax Act, but when an appeal was taken to the Appellate Assistant Commissioner, he upheld the assessment by reference to sub-rule (2). On further appeal the Tribunal reverted to sub-rule (4) and it based its decision on the finding that the house had been built partly with a view to using it as the head office of the assessee and partly with a view to letting it out to tenants. In other words, in part there was an investment in immovable property. The Tribunal accordingly held that the letting out of so much of the building as was not occupied by the assessee for its own business was a part of its business and the rental income fell to be included in the business income of the assessee under sub-rule (4) of Rule 4 of Schedule I to the Act. Therefore, the assessee: required the Tribunal to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property was a part of the assessee company's business, it could not be said that clause (e) brought the income from the building in question within the mischief of the Excess Profits Tax Act, because the building not having been constructed or acquired for the purpose of the business of the company, as required by sub-clause (e) of clause 3 of the memorandum of association, the construction or the letting out of the building could not be a part of the assessee's business. In my opinion, the first contention of Mr. Pal is sound and ought to be accepted. Before I proceed to deal with the first question, I might point out that, as framed, it is limited to sub-rule (4) of Rule 4 of Schedule I to the Excess Profits Tax Act and all that we are required to say is whether the decision of the Tribunal to the effect that the income in question was chargeable under that sub-rule was correct. Mr. Meyer submitted to us that he would prefer to rely rather on sub-rule (2) of Rule 4 and invited us to admit an argument on that, sub-rule so that we might answer the question in favour of his client, if sub-rule (2) was found to justify the assessment even if sub-rule (4) did not. It was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er approach to the question and a quicker arrival at the decision is possible, if one simply travels along the track of the relevant sections of the Act and that of the Rules contained in the Schedule. The charge of excess profits tax is laid by Section 4 of the Act which says that the tax shall be charged, "in respect of any business to which this Act applies", on the profits of a chargeable accounting period, computed in a certain manner. All that is necessary to notice in the provisions of the charging section is that the levy is imposed only "in respect of any business". It is, therefore, necessary to enquire what the term "business" in the vocabulary of the Act means. The definition is to be found in Section 2(6) where the main clause defines the term in a general way. Broadly speaking, it is said to include "any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture or any profession or vocation". We are not here concerned with the general definition contained in the main clause of Section 2(5) which follows the concept of business under the Indian Income-tax Act. There is, however, a proviso to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proviso has no application. So has it no application, if investments or other property are held by an incorporated company or a society, but such holding is not its sole or primary concern. It appears to me that the first matter to which we must address overselves in answering the question before us is: are the functions of the assessee company such that the holding of the building in question or buildings or other property and investments in general must be deemed to be its business for the purposes of the Excess Profits Tax Act under the first proviso to Section 2(5)? In order that that question may be answered in favour of the Revenue, it is necessary that the holding of investments or other property should be the only or the principal function of the assessee company. As I have said, the assessee company is a banking company in a large way of business. It is hardly disputable, and indeed it was not disputed before us, that the holding of investments or other property was not its sole or primary occupation, much less the holding of the particular building in question. If such be the position, no other question in my view arises. The Revenue is, if I may use the expression, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appear, inasmuch as the proviso spoke of the function of a company or a society consisting "wholly or mainly" in the holding of investments or other property, whereas sub-rule (4) spoke of a business consisting "wholly or partly in the letting out of property". The effect of that repugnancy, it was further contended, was not that the proviso would prevail over the sub-rule, but the sub-rule being contained in the Schedule and being equally a part of the Act and being also a later provision, would prevail over the definition section. In support of the latter proposition, a reference was made to certain observations in Craies on Statute Law and also to the decision of the Supreme Court in Commissioner of Excess Profits Tax, Bombay City v. Shri Lakshmi Silk Mills Limited [1951] 20 ITR 451 , a decision of the Madras High Court in Parry & Co. Limited, Madras v. Commissioner of Income-tax and Excess Profits Tax, Madras [1951] 20 ITR 304, and a decision of the Allahabad High Court in Bareilly Gorporation Bank Ltd. v. Commissioner of Income-tax, United Provinces [1952] 22 ITR 470 . In my opinion, it is impossible to say that the word "business", as occurring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the further contentions of Mr. Meyer. Since, however, the contentions were urged at some length, I shall deal with them as briefly as I may. A question which seems to have troubled this Court in the case of Bengal Jute Mills Co. Ltd. v. Commissioner of Income-tax, Central Calcutta [1949] 17 ITR 308 , and also the Madras High Court in the case of Parry & Co. Limited, Madras v. Commissioner of Income-tax and Excess Profits Tax, Madras [1951] 20 ITR 504 , is that of a supposed repugnancy between sub-rule (4) of Rule 4 and the first proviso to Section 2 (5) of the Act. Speaking for myself, I see no repugnancy whatever. This Court said that there was a repugnancy, but the rules in the Schedule had to be read in such manner as would make it consistent with the provisions of the Act and therefore the word "partly" in sub-rule (4) should be read as "mainly". The Madras High Court thought that an explanation of the word "partly" could be found in the second proviso to Section 2(5) of the Act which required all the businesses carried on by the same person to be treated as one business for the purposes of the Act. Having found that explanation for the use of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules (2) and (2A) seem to be concerned with "investments" and sub-rule (4) with "other property", a distinction between which is clearly made in the first proviso to Section 2(5). To my mind, the true meaning of sub-rule (4) is as follows: Rule 4, is as follows: Rule 4, as I have said, deals with investment income and provides by sub-rule (1) that income received from investments shall be included in the profits in the cases and to the exent provided in sub-rules (2), (2A) and (4) and not otherwise. Any investment income, not coming under one or another of those rules, would not be a part of the profits at all for the purposes of the tax. Sub-rule (2) is concerned with businesses of certain specified kinds and then generally with "business consisting wholly or mainly in the dealing in or holding of investments". Sub-rule (2A) is concerned with certain kinds of business to which sub-rule (2) does not apply and a part of which consists in banking, insurance or dealing in investments. No reference is necessary to sub-rule (3). Coming now to sub-rule (4), it is concerned, in the first place, with a business which consists wholly in the letting out of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word "partly" comes into operation and falls to be considered only when the business, taken as a whole, is found to be concerned wholly or mainly with the holding of investments and property or with the holding of property and the part contemplated, consisting in letting out, is a further sub-division of such a business. There is thus no conflict between the word "mainly" in the proviso and the word "partly" in sub-rule (4), because the two words have reference to the business at different levels. On that basis I see no inconsistency in the use of the word "partly" in sub-rule (4) and no need to consider it repugnant to the first proviso to Section 2(5). As I have said, however, it is not really necessary for the purpose of this case to explain what sub-rule (4) really means and what its scope will be in cases where it may be applicable, but where, as here, the sub-rule is excluded, because there is no business as contemplated by the proviso, it is not necessary to embark upon an examination of its true scope and import. I am accordingly of opinion that so far as the first question is concerned, the contention of the assessee ought to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1950, which gave retrospective effect to the explanation of Section 9(1)(iv) was ultra vires of the Indian Legislature?" The argument accepted by the Tribunal, which was repeated before us, is that Article 372(1) of the Constitution excludes, by its own words, the power of Parliament to enact such retrospective legislation with respect to existing laws. The article, so far as is material, reads thus:- "...all the law in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority". The whole argument on behalf of the assessee was centered on the use of the word "until". It was contended that while the Indian Parliament had been given power to alter or amend or repeal existing laws, it had at the same time been made clear that till and up to the date on which such amendment or alteration or repeal was made, the existing laws would continue to be operative. The precise point was considered and decided by the Federal Court in the case of United Provinces v. Aliqua Begum [1940] FCR 110; 45 C.W.N. 27 F. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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