An amendment to a taxing statute with retrospective effect can abrogate an exemption granted under the statute prior to the amendment.

Judgment

HIDAYATULLAH, J. : This is an appeal with the special leave of this Court against the judgment of the High Court of Rajasthan dated April 22, 1954. The appellant is a private limited Company, which was incorporated in 1945 in the former Kotah State. The income-tax authorities sought to tax its profits and income for the assessment year 1950-51 corresponding to the previous year, 1949-50. The appellant claimed exemption under S. 14 (2) (c) of the Indian Income-tax Act, 1922, as it stood before the amendment in 1953, contending that the exemption stood good even after the amendment. This claim was rejected by the High Court, which was moved under Art. 226 of the Constitution. Hence this appeal.

2. Prior to the integration of Koath State into the United State of Rajasthan in 1949, there was no income-tax law in force in Kotah State. Till the formation of the State of Rajasthan, there was no such law in force in any part of Rajasthan, except Bundi State. The Indian Finance Act of 1950 made the Indian Income-tax Act, 1922, applicable to the whole of India, except the State of Jammu and Kashmir, and suitably amended the Indian Income-tax Act. Rajasthan then became, from April 1, 1950, a taxable territory.

3. For the assessment year 1950-51, income-tax was sought to be imposed in the State of Rajasthan. One Madan Gopal Kabra moved the High Court under Art. 226 of the Constitution to restrain the taxing authorities from claiming tax for the period prior to April 1, 1950, contending that inasmuch as Rajasthan was not a taxable territory before April 1, 1950, no tax for a period prior to that date could be demanded. This Court in an appeal by the Department against the decision of the High Court of Rajasthan, which had accepted the contention, held that the tax was leviable. It is not necessary to give the details of the decisions on that occasion. The judgment of this Court is reported in The Union of India v. Madan Gopal Kabra, 1954 SCR 541.

4. The present appellant and fourteen others filed petitions under Art. 226 of the Constitution, urging fresh grounds by a later amendment. Their contention was that S. 14 (2) (c) of the Indian Income-tax Act, as it stood on April 1, 1950, granted an exemption, and that this exemption was not affected by the amendment of the said provision in 1953 even though the amendment was retrospective from April 1, 1950, unless the Finance Act, 1950, which applied the Income-tax Act to this area was also amended. This contention was not accepted by the High Court which dismissed the petition under Art. 226, holding inter alia that this point was also decided by this Court against Madan Gopal Kabra.

5. In this appeal, this point alone is argued, and it is contended that the point is still open for decision. Section 14 (2) (c), as it stood before the amendment in 1953, read as follows:

" The tax shall not be payable by an assessee-

(c) in respect of any income, profits or gains accruing or arising to him within Part B State unless such income, profits or gains are received or deemed to be received in or are brought into the taxable territories in the previous year by or on behalf of the assessee, or are assessable under section 12-B or section 42.

The amendment provided :-

" In section 14 of the principal Act in clause (c) of sub-section (2), for the words and letter Part B State the words the State of Jammu and Kashimir shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1950.

The result of this amendment was described by this Court in Kabra s case, 1954 SCR 541 to be as follows:

" It may be mentioned here that the exemption from tax under S. 14 (2) (c) of the Indian Act of income accruing within Part B State was abrogated, except as regards the State of Jammu and Kashimir, by the amendment of that provision with effect from the first day of April, 1950.

6. Mr. N. C. Chatterjee appearing for the appellant contends that the point cannot be considered