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TMI Blog1953 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the High Court of Rajasthan directing by writ issued under Article 226 of the Constitution that the Union of India, appellant herein, should not levy income-tax on the income of the respondent accruing, arising or received in Rajasthan (excluding the area of the former covenanting State of Bundi) prior to 1st April, 1950. The respondent resides and carries on business in the District of Jodhpur in Rajasthan which is one of the States specified in Part B of the First Schedule to the Constitution (hereinafter referred to as Part B States). In May, 1950, the respondent was required to file a return of his income for the previous year, that is the year ending 31st March, 1950, for assessment to income-tax, and subsequently was also asked to produce the relevant account books before the Income-tax Officer, Jodhpur, on 11th August, 1950. Thereupon the respondent presented the petition, out of which this appeal arises, on 23rd August, 1950, invoking the jurisdiction of the High Court under Article 226 of the Constitution for the issue of "a writ of mandamus or certiorari or other appropriate writ" directing the appellant not to take any action under the Indian Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce Act, 1947. That section provided that nothing in this Act shall be construed as empowering the Dominion Legislature to make laws for an Acceding State otherwise than in accordance with the Instrument of Accession of that State and any limitations contained therein." The position thus was that the Dominion Legislature had no power to make any law imposing any tax or duty in the territories of the United State of Rajasthan. In July, 1949, however, the Indian States Finances Enquiry Committee appointed by the Government of India submitted their Report recommending, among other things, the financial integration of the Acceding States and the imposition of the Indian income-tax in their territories as from the first day of April, 1950. Meanwhile the framing of the Constitution of India by the Constituent Assembly, which also included duly appointed representatives of the Acceding States, was nearing completion, and in November, 1949, the Rajpramukh, in exercise of his powers as the duly constituted head of the State, issued a Proclamation whereby he declared and directed that the "Constitution of India shortly to be adopted by the Constituent Assembly of India shall be the Constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Jammu and Kashmir : Provided that the taxable territories shall be deemed to include --- (a) ...... (b) the whole of the territory of India excluding the State of Jammu and Kashmir --- (i) as respects any period, for the purposes of Sections 4A and 4B, (ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act, and (iii) as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year." The definition, it may be observed in passing, is by no means a model of perspicuity. Parts of it seem redundant and even mutually contradictory. For instance, (leaving out the State of Jammu and Kashmir altogether in this discussion) whereas clause (d) excludes the Patiala and the East Punjab States Union from the taxable territories as respects the period from 1st April, 1950, to 12th April, 1950, sub-clause (ii) of clause (b) of the proviso would seem to include that State also within such territories as respects the same period, and while clauses (d) and (e) of the substantive part of the definition when read together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48-49 but also on the income of 1949-50 which is the previous year for assessment for the year ending 31st March, 1951, (i. e., 1950-51). The result, therefore, according to him, was that where any State law of income-tax was in force in any Part B State before 1st April, 1950, so as to make the income of 1949-50 chargeable to tax, the amended clause (14A) authorised the computation of such income for the purpose of taxation as, for example, in the State of Bundi. But where, as in the rest of the territory of Rajasthan, no income-tax was leviable on the income of the year 1949-50, the amendment by the Finance Act, 1950, which took effect only from 1st April, 1950, did not, on its true construction, bring the income of the year 1949-50 into charge under the Indian Act. This argument found favour with the learned judges in the High Court but we are unable to accept it. A short answer to it is provided by sub-clause (i) of clause (b) of the proviso under which the whole of the territory of India including Rajasthan is to be deemed taxable territory for the purpose of Section 4A of the Indian Act "as respects any period". The words "any period" cannot be taken to mean "any period af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment on the income of that year." This, as pointed out above, is a misconception. It may well be that proviso (b)(iii) was designed to bring the income, profits and gains of the year 1949-50 into charge under Section 4(1)(a) and Section 4(1)(c), in which cases receipt or accrual, as the case may be, in the taxable territories is the test of chargeability. It may be mentioned here that the exemption from tax under Section 14(2)(c) of the Indian Act of income accruing within Part B States was abrogated, except as regards the State of Jammu and Kashmir, by the amendment of that provision with effect from the first day of April, 1950. Even assuming it were necessary for the Revenue to bring the case within proviso (b)(iii) in order to sustain the charge on the respondent's income accruing in Rajasthan during the year 1949-50, we are of opinion that the construction placed by the learned Judges on that clause cannot be supported. They assume that proviso (b)(iii) is a provision authorising assessment of income-tax, and proceed to discuss what the word "assessment" in that context should be taken to mean. Charge of income to tax and its computation are matters governed by other pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1951-52 is the year 1950-51 and the period not included therein would be the year 1949-50 and the State law is directed to apply if the income remains untaxed under the Indian law ...... Therefore, if somebody is liable to income-tax in any territory where such law was in force prior to 1st April, 1950, but certain period has not been included while assessing him to income-tax but the chargeability existed, the proviso (b), clause (iii), would become applicable for such period as he was not charged but the liability had accrued, and the territory would become taxable territory for the purpose of making any assessment of the year 1950-51." It will be seen that the basis on which this reasoning proceeds is that Section 13 of the Finance Act, 1950, saves the operation of the State laws relating to income-tax in Part B States in the year 1949-50 for the purpose of levy, assessment and collection, and it is those laws that imposed the liability to tax on the income accruing in those States during that year. This is a misapprehension of the true meaning and effect of Section 13. That section, so far as it is material here, runs thus :--- "Repeals and savings. --- (1) If immedia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estly repugnant to the policy underlying the Finance Act, 1950. No argument, therefore, could be logically based on the words "or for any subsequent period", which evidently were added with a view to catch the income of any broken period prior to 1st April, 1950, which might otherwise escape assessment both under the repealed State law and the newly introduced Indian Act. Nor can Section 6 of the General Clauses Act, 1897, serve to keep alive the liability to pay tax on the income of the year 1949-50 assuming it to have accrued under the repealed State law, for a "different intention" clearly appears in Sections 2 and 13 of the Finance Act read together as indicated above. In any case, no question of keeping any such liability alive could arise in the present case as admittedly no State law of income-tax was in operation in the territory of Rajasthan, except the former State of Bundi. On this view the whole basis of the reasoning of the learned Judges below falls to the ground. Even so, it was contended, the Finance Act, 1950, in so far as it purports to authorise such levy is ultra vires and void as Parliament was not competent under the Constitution to make such a law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power of making a law having retrospective operation in relation to a period prior to its birth unless the Constitution itself clearly and explicitly conferred such power. In support of this argument certain observations of one of the judges in an Australian case [Ex parte Walsh and Johnson ; In re Yates] were relied on. We are unable to accept the argument. Our Constitution, as appears from the preamble, derives its authority from the people of India, and learned counsel conceded that it was open to the people to confer on the legislatures established by the Constitution, which they framed through their representatives, power to make law having operation in relation to periods prior to the commencement of the Constitution. But, it was insisted, such a power should be given in clearly expressed terms. There is, however, no question here of the Constitution operating retrospectively in bringing into existence the Union Parliament or the legislatures of the States. The only question is what powers have been conferred upon these legislatures by the representatives of the people who framed the Constitution and, in determining that issue, the principles laid down in cases like Queen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but there are obvious difficulties in the way of its acceptance. For one thing, Section 101 of the Government of India Act created no right or privilege in the subjects of the United State of Rajasthan which, notwithstanding the repeal of that section, could be regarded as still enuring for their benefit. Section 101 merely imposed a restriction upon the power of the Dominion Legislature to make laws for an acceding State inconsistent with the stipulations contained in the Instrument of Accession. When that section along with the rest of the Government of India Act, 1935, was repealed by the new Constitution, which has created new legislatures with power to make retroactive laws, it is idle to suggest that rights or privileges acquired while the old Constitution Act was in force are preserved for ever---for that must be the result of the argument-by Section 6 of the General Clauses Act, which can have no application to such cases. Furthermore, it will be recalled that the Proclamation made by the Rajpramukh as Ruler of Rajasthan on 23rd November, 1949, declared and directed that the Constitution of India when brought into force "shall be the Constitution for the Rajasthan State" a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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