1953 Supreme(SC) 122

SUPREME COURT OF INDIA
Union of India
Versus.
Madan Gopal Kabra
Decided on December 16, 1953

Headnote:Section 2 (14-A), (as amended by Finance Act, 1950) Proviso (b) (i) and ( iii), 3, 4-Validity. - Articles 245, 246 and Schedule VII, List I-Income-tax Act (1922) S. 2 (q-A), (as amended by Finance Act, 1950)- Validity.

       The respondent resided and carried on business in the District of Jodhpur in Rajasthan. In May 1950 he was required to file a return of his income for the year ending March 31, 1950, for assessment to income tax. He made an application to the Rajasthan High Court under Article 226 of the Constitution for a writ on the ground that the income which accrued or arose to him or was received by him prior to April 1, 1950 was not liable to be charged "under the provisions of any law validly in force in Rajasthan". The petition was accepted by the High Court and the High Court issued a writ directing the appellant not to take any action under the Indian Income-tax Act, 1922, as amended by the Indian Finance Act, 1950.

       Held (allowing the appeal)2: (I) The words "any period" in S. 2 (14-A), proviso (b) (1)3 must be understood as referring to any period before or after 31-3-1950.

       (2) All that S. 2 (14-A) does is to define what the expression "Taxable territories" means in certain cases and for certain purposes wherever that expression is used in the various provisions. of the Indian Act. And as the expression is used in the charging section 4 in connection with the conditions which are to determine liability to tax, subclause (iii) of clause (b) of the definition must, when read with S. 4 of the Indian Act, have reference to chargeability of income. The result is that Ss. 3 and 4 of the Indian Act, in the light of the definition in proviso (b) to the amended S. 2 (14.A) and S. 2 of the Indian Finance Act, 1950 authorise the imposition of the Indian Income-tax and supper-tax on the income derived by the respondent in the year 1949-50 in the territory of Rajasthan.

       (3) Section 13 of the Finance Act 1950 saves the operation of the State law only in respect of 1948-49 or any earlier period which is not

       1.Per Das J. A.I.R. 1950 S.C. 27, p. 109.

       2.From A.I.R. 1951 Raj. 94 (2).

       3.Clause (14-A) of section 2 of the Income-tax Act. 1922, as substituted by S.3 of the

       Finance Act, 1950, reads as follows :

       "(l4-A) "taxable territories" means-

       (a)………

       (b)………..

       (c)...........

       (d) as respects any period after the 31st day of March, 1950, and before the 13th day of April. 1950, the territory of India excluding the State of Jammu and Kashmir and the Patiala and East Punjab States Union, and

       (e) as respects any period after the 12th day of April, 1950, the territory, of India excluding 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 Ss. 4-A and 4-B.

       (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.

       Included in the previous year (1949.50) for the purposes of assessment for the year 1950-51. In other words there remained no State law of income opinion in any Part B State in the year 1949-50. The words "or for any subsequently period" evidently were added with a view to catch the of any broken period prior to April I, 1950 which might otherwise escape assessment both under the repealed State law and the newly introduced Indian Act. Nor can S. 6 of the General Clauses Act, 1897, serve to keep alive the liability to pay tax on the income of the year 19491950 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.

       (4) "While it is true that the Constitution has no retrospective operation, except where different intention clearly appears, it is not Correct to say that in bringing into existence new legislatures and Confer_ ring on them certain powers of legislation, the Constitution operated retrospectively. The legislative powers conferred upon Parliament under

       Art. 245 and Art. 246 read with List I of the Seventh Schedule could obviously be exercised only after the Constitution came into force and no retrospective operation of the Constitution is involved in the conferment of those powers. But it is a different thing to say that Parliament in exercising the powers thus acquired is precluded from making a retroactive law. The question must depend upon the scope of the powers conferred, and that must be determined with reference to the "terms of the instrument by which affirmatively, the legislative Powers were created and by which, negatively, they were restricted." Nor can it be said, in strictness, that the Finance Act, 1950 is retroactive legislation. That Act, as already noticed, purports by S. 2 to charge income-tax and super-tax at specified rates "for the year beginning on the 1st day of April 1950." The case is thus one where the statute purports to operate only prospectively, but such operation has, under the Sc4eme of the Indian income tax law, to take into account income earned before the statute came into force. Such an enactment cannot, strictly speaking, be said to be retroactive legislation, though its operation may affect acts done in the past.

       (5) S. 101 of the Government of India Act created no right or privilege in the subjects of the United State of Rajasthan which, not with standing 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 in consistent with the stipulations contained in the Instrument of Accession. When that section along with the rest of the Government of India Act, 1935, will 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 the General Clauses Act, which can have no application to Such case.

       (6) It follows the he amendment of S. 2, d. (14.A) of the Indian Act, by, the finance Act, 1950, so as to authorise the levy or tax on income accruing in the territory of Rajasthan in the year 1949-50 is within the competence of Parliament and therefore valid.