Judgement

KAPUR, J. - This is an appeal under certificate of the Pepsu High Court and the question for decision relates to the applicability of the Indian Income Tax Act, 1922 to the erstwhile Pepsu area in the years of assessment 1948-49 and 1949-50.

2. The assessee company (the respondent before us), was incorporated in the Patiala State and had its registered office at Surajpur in Pepsu. For the year of assessment 1948-49 the company failed to deduct from out of the remuneration paid to its Managing Agents, who were non residents, the income-tax and the super tax which, it, under the law, was required to do. It also paid to its auditors auditing fees and from out of this sum also it did not deduct the income-tax and super-tax under the provisions of the Patiala Income Tax Act. The two sums in dispute were Rs. 59,787-1-0 and Rs. 581-4-0 respectively.

For the assessment year 1949-50 also the assessee company failed to make the deduction from the remuneration paid to its Managing Agents and the income-tax deductable was Rs. 52,484-14-0 and super tax Rs. 21,611-6-0. The Income Tax Officer took action against the assessee company under Ss. 18 (3a) and 18(7) of the Patiala Income Tax Act and consequently issued two demand notices for the amounts above mentioned. Against this order of the Income Tax Officer the assessee company took an appeal to the Appellate Assistant Commissioner who reduced the amount demanded but did not decide the question whether the assessee company was bound to make the deductions or not.

The Assessee. Company then appealed to the Income tax Appellate Tribunal and it held that under S. l8(7) of the Patiala Income Tax Act no order was required to be passed by the Income Tax officer and that no appeal lay to the Appellate Assistant Commissioner against the order under S. 18(3a) as there was no provision for it under the Patialal Income Tax Act. Before the tribunal it was contended that at the time when the appeals were decided by the Appellate Assistant Commissioner, the Patiala Income Tax Act had ceased to be in force and therefore the appeals were sustainable under the provisions of the Indian Income Tax Act which had been extended to all Part B States by S. 13, Indian Finance Act of 1950 (25 of 1950) but this contention was repelled and the Tribunal held that the only remedy for the assessee company was to take a revision under S.33 of the Patiala Income Tax Act to the Commissioner. The Tribunal at the request of the assessee company referred the following three questions for the opinion of the High Court:

(1) Whether the appeals before the Appellate Assistant Commissioner fell to be decided in accordance with the provisions of the Patiala Income Tax Act or the Indian Income Tax Act?

(2) Whether the appeals before the Appellate Tribunal fell to be decided in accordance with the provisions of the Patiala Income Tax Act or the Indian Income Tax Act?

(3) Whether, on the assumption that the assessee company was not bound to deduct tax, its appeals before the Appellate Assistant Commissioner were competent in law?

The High Court decided that in regard to the assessment year 1948- 49, the law applicable was the Patiala Income Tax Act and therefore no appeal lay to the Appellate Assistant Commissioner but in regard to the assessment year 1949-50 the Indian law became applicable and therefore the order of the Income Tax Officer was appealable. The Revenue have come up in appeal under a certificate of the High Court and the submission is that to the assessment year 1949-50 also the Patiala Income Tax Act applied and not the Indian Income Tax Act and therefore the order of the Income Tax Officer was not appealable.

3. In order to resolve the controversy, reference may be made to certain provisions of the Indian Income Tax Act, 1922 and the Finance Act of 1950. S. 13 of the Finance Act provides:

S. 13. "If immediately before the 1st day of April 1950, there is in force in any Part B State other than Jammu and Kashmir or in Ma