The liability to pay tax on escaped profits continues even after the repeal of the Excess Profits Tax Act, 1940, by virtue of Section 6 of the General Clauses Act.

Judgment

RAMASWAMI, J. : This appeal brought, by special leave, from the judgment of the Mysore High Court, dated March 20 1962 dismissing writ petition No. 109 of 1960. The appellants had prayed therein for the grant of writ for quashing a notice dated January 16, 1960 issued by the respondent under S. 15 of the Excess Profits Tax Act, 1940 (Act XV of 1940), hereinafter called the Act , calling upon the appellants to submit a return of the standard profits and the profits actually made during the chargeable accounting period from October 30, 1943 to October 30, 1944 on the ground that the profits had been under-assessed.

2. The appellants carried on a business constituting themselves into a partnership called "Guduthur Thimmappa and Brothers" in 1934. On the date of commencement of the business the partners were G. Thimmappa, G. Ekambarappa and G. Padmanabhan, each of the partners representing their respective joint families. The business of the firm was in Bellary town and the partners of the firm were residents of Bellary town during the period the firm was carrying on business. The firm was dissolved on October 16, 1944. Thimmappa, one of the partners, died on April 13, 1955. For the chargeable accounting period from October 30, 1943 to April 30, 1944, the Excess Profits Tax Officer had taken steps to assess the "escaped" profits of the firm. He issued the necessary notices to G. Padmanabhan and G. Ekambarappa as the partners of the dissolved firm He also issued notices to G. M. Prabhu and G. Lakshmidevamma as the representatives of G. Thimmappa. The contention of the appellants before the High Court was that as from November 1, l956 the Act must be deemed to have been repealed so far as Bellary district is concerned and, therefore, the respondent was not competent to take any proceedings for determining the escaped income under S. 15 of that Act. The High Court rejected the contention on the ground that, though the Act stood repealed by reason of the inclusion of Bellary district in Mysore State, the liability to pay tax on the escaped profits continued by virtue of S. 6 of the General Clauses Act.

3. The question to he considered in this appeal in whether the appellants continued to be liable to be proceeded against under S. 15 of the Act on the profits which had escaped taxation.

4. The present Bellary district was a part of the old Madras State which was a Part "A" State under the Constitution of India till its merger with the Mysore State on October 1. 1953 which was a Part "B" State. The Mysore State continued to be a Part "B" State till November 1, l956. The Act extended, when first promulgated, to the territory of former British India. After the Constitution came into force, S. 1 (2) of the Act was adapted so as to extend the operation of the Act "to the whole of India except Part B State" by the Adaptation of Laws Order, 1350. After the formation of new States in pursuance of the States Reorganisation Act, 1956 (Act 37 of 1956), sub-s. (2) of S. 1 of the Act was adapted by the President by Adaptation of Laws (No.3) Order, 1956, dated December 31, 1956. Section 1 (2) of the Act as adapted read as follows :

It extends to the whole of India except the territories which immediately before the 1st November 1956 were comprised in Part B State."

The result of the adaptation was that all the provisions of the Act stood repealed so far as the district of Bellary was concerned with effect from December 31, 1956. It was contended on behalf of the appellants that it is not a case of repeal of the Act and so the provisions of S. 6 of the General Clauses Act could not be invoked to sustain the validity of the notices issued by the respondent under S 15 of the Act. It was argued that so far as the Act was concerned, the Adaptation of Laws Order, 1956 only modified the provisions of S. 1 (2) of the Act and did not repeal the Act as such and the effect of the modification was that the provisions of the Act were no longer applicable