1. Levy of surcharge under the Kerala Surcharge on Taxes Act, 1957, on agricultural income-tax for an assessment year where the Act commenced after the financial year began. (Para 1 , 2 )
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1965 Supreme(SC) 363
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., K.N. WANCHOO, M. HIDAYATULLAH, V. RAMASWAMI AND P. SATYANARAYANA RAJU, JJ.
The Karimtharuvi Tea Estate Ltd., Appellant
Versus
The State of Kerala, Respondent.
Civil Appeal No. 980 of 1964.
Advocates appeared
Mr. M. C. Setalvad, Senior Advocate, (M/s. O. P. Malhotra and V. O. Abraham, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Appellant; M/s. P. Govinda Menon, A. Sreedharan and M. R. K. Pillai, Advocates, for Respondent.
Advocates:
A.S.NAMBIYAR, J.B.DADACHAN, M.C.SETALVAD, M.R.Krishna Pillai, O.C.MATHUR, O.P.MALHOTRA, P.GOVINDA MENON, Ravindra Narayan, V.O.ABRAHAM
A.S.NAMBIYAR, J.B.DADACHAN, M.C.SETALVAD, M.R.Krishna Pillai, O.C.MATHUR, O.P.MALHOTRA, P.GOVINDA MENON, Ravindra Narayan, V.O.ABRAHAM
Law applicable to tax assessments for a financial year is the law in force on April 1 of that year. Amendments coming into force after April 1 do not apply to that year's assessment unless the statute expressly or by necessary implication provides for retrospective operation.
Headnote:(A) Surcharge on Taxes Act, 1957 - Section 1(3) and Section 6 - Agricultural Income-tax Act, 1950 - Levy of surcharge - Assessment year 1957-58 - Surcharge Act came into force on September 1, 1957 - Law applicable to assessments for a financial year is the law in force on the first day of April of that year - Amendments coming into force after the first day of April do not apply to the assessment for that year unless they have retrospective effect - In the absence of express enactment or necessary intendment, provisions affecting existing rights are not applied retrospectively. (Paras 8, 12, 14)
Facts of the case:
An assessee was assessed to agricultural income-tax for the assessment year 1957-58. A surcharge was levied and collected under an Act that came into force on September 1, 1957. The assessee challenged the imposition on the ground that the law applicable to the assessment for 1957-58 was the law in force on April 1, 1957, and since the Surcharge Act was not retrospective, it could not be levied for that year.
Findings of Court:
The Surcharge Act, not being retrospective by express intendment or necessary implication, cannot be made applicable from April 1, 1957. Since it was not the law in force on the commencement of the assessment year, no surcharge could be levied against the assessee for the assessment year 1957-58.
Issues: Whether a surcharge could be levied on agricultural income-tax payable for the assessment year 1957-58 when the governing Surcharge Act came into force after the commencement of the said assessment year.
Ratio Decidendi: The law to be applied to assessments for a financial year is the law in force on the first day of April of that year. Any amendment coming into force after April 1 does not apply to that year's assessment unless it is retrospective. As the Surcharge Act lacked retrospective operation, it could not be regarded as law in force at the commencement of the assessment year 1957-58.
Result: Appeal allowed with costs.
Legal Category Hierarchy
Table of Contents
2. Whether a surcharge act coming into force after the commencement of the assessment year can be applied retrospectively in the absence of express enactment or necessary intendment. (Para 3 , 6 )
3. Amendments to tax laws coming into force after the first day of the financial year do not apply to that year's assessment unless they are expressly retrospective. (Para 8 , 9 , 10 , 11 , 13 )
4. A tax statute not retrospective by express intendment or necessary implication cannot be applied to an assessment year if it was not in force at the year's commencement. (Para 12 , 14 )
5. Appeal allowed; surcharge held not leviable for the assessment year as the Surcharge Act was not in force at the commencement of that year. (Para 15 )
6. When does an amendment to a tax act apply to an assessment year?
The Income-tax Act as amended on the first day of April of any financial year applies to the assessments of that year. Amendments coming into force after April 1 do not apply to that year's assessment unless they are retrospective. (Para 8 , 10 )
7. Can a tax statute be applied retrospectively without express provision?
No. In the absence of express enactment or necessary intendment, provisions of a statute affecting rights existing at the time of passing are not applied retrospectively. (Para 6 , 12 )
8. Does the date of actual assessment affect the law applicable to the assessment year?
No. Even if the assessment is actually made after amendments come into force, those amendments do not apply to the assessment for that year if they came into force after April 1. (Para 8 , 10 )
Judgement
SATYANARAYANA RAJU, J.: This appeal, by special leave, against the judgment and order of the Kerala High Court, dated July 25, 1963 in Income-tax Referred Case No. 10 of 1962 (Agricultural) raises the question as to the true scope and operation of S. 2 of the Kerala Surcharge on Taxes Act, 1957 (Ker. Act XI of 1957), hereinafter called the Surcharge Act.
2. The facts which have given rise to this appeal may be briefly stated. For the assessment year 1957-58, the appellant company was assessed to agricultural income-tax under the Kerala Agricultural Income-tax Act, 1950. In the assessment, a surcharge at the rate of 5 per cent on the agricultural income-tax and super tax was also levied and collected from the appellant under the provisions of the Surcharge Act.
3. The appellant appealed to the Deputy Commissioner of Agricultural Income-tax and Sales Tax, South Zone, Quilon, objecting to the imposition of surcharge on the ground that the law applicable to assessment for 1957-58 under the provisions of the Agricultural Income-tax Act was the law in force on April 1, 1957 and as the Surcharge Act which came into force only from September 1, 1957 did not have any retrospective effect the surcharge could not be levied for that year. By his order, dated November 14, 1959, the Deputy Commissioner rejected these objections.
4. Thereupon, the appellant preferred a further appeal to the Kerala Agricultural Income-tax Appellate Tribunal, Trivandrum. By its order, dated August 2, 1961, the appellate Tribunal upheld the contention of the appellant holding that the Surcharge Act could not have retrospective operation unless there was a specific provision therein to that effect.
5. On the application of the respondent, the Tribunal stated a case to the Kerala High Court and referred the following question of law :
"Whether any surcharge can be levied on the agricultural income-tax payable for the assessment year 1957-58?"
By judgment, dated July 25, 1963, the Division Bench of the High Court answered the question in the affirmative, against the appellant. The appellant then applied to this Court and obtained special leave to appeal against the judgment and order of the High Court.
6. It is contended for the appellant, by Mr. Setalvad, learned counsel, that the Surcharge Act having come into force on September 1, 1957 and the said Act not being retrospective in operation, it could not be regarded as law in force at the commencement of the year of assessment, viz., 1957-58. It is also contended that in the absence or express enactment or necessary intendment, the provisions of a statute which affect a right in existence at the time of the passing of that enactment are not to be applied retrospectively and that the interpretation placed by the High Court on the scope of sub-s. (3) of S. 1 of the Surcharge Act is erroneous.
7. Before dealing with these contentions, it would be convenient to read the material provision of the Surcharge Act. Sub-section (3) of S. 1 reads :
"It shall come into force on such date as the Government may, by notification in the Gazette, appoint."
By a notification dated August 27, 1957, the Government of Kerala appointed the first day of September 1957 as the date on which the said Act shall come into force. By a further notification, dated November 28, 1957, the Government of Kerala, in exercise of the powers conferred on it by S. 6 of that Act notified that surcharge shall not be levied on assessments on the turnover or income of the year 1956-57 onwards but that it shall be confined only to assessments made on or after September 1, 1957 and that where the turnover or income for periods prior to 1956-57 is pending assessment, surcharge shall not be levied on such assessments when made. We are not now called upon to determine the validity of these regulations.
8. Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year
