This is an appeal by The Raleigh Investment Co., Ltd., from a judgment of the Federal Court of India1 in its Civil Appellate Jurisdiction reversing a decree passed by a Special Bench of the High Court of Calcutta2 in its Ordinary Original Civil Jurisdiction.

The suit in which that decree was passed was brought by the appellant against the respondent, the Governor-General in Council, claiming repayment of Rs. 4,35,295-5-0, part of a larger sum paid by the appellant under an assessment to income-tax made upon it. The basis of this claim was that in the computation of assessable income effect has been given to a provision of the Income-tax Act, which in the submission of the appellant was ultra vires the Indian Legislature, and that the assessment was therefore wrong.

The respondent contended first, that the impugned provision was not ultra vires the Indian Legislature and second that, whether the impugned provision was or was not ultra vires, the High Court in its ordinary civil jurisdiction was precluded from entertaining the suit by reason of section 226 of the Government of India Act, 1935 and also by reason of section 67 of the Indian Income-tax Act, 1922.

The High Court held that the provision was ultra vires and that jurisdiction to entertain the suit was not denied by either of these two sections. An order for repayment of the sum in question was therefore made. The Federal Court held that section 226 of the Act of 1935 barred the maintenance of the suit before the High Court in its ordinary civil jurisdiction and they expressed their view that the impugned provision was not ultra vires the Indian Legislature. The Federal Court accordingly ordered the dismissal of the suit.

In the proceedings before the Federal Court the point as to jurisdiction arising under section 67 of the Act of 1922 was not taken. But jurisdiction cannot be given by consent. It is pars judicis to take jurisdiction into consideration and the section has to be considered. Their Lordships, having come to the conclusion that this section bars the maintenance of the suit, do not think it proper to express any opinion on the effect of section 226 of the Act of 1935 or on the validity of the impugned provision. The views of the High Court and the Federal Court upon the latter topic stand only as dicta receiving neither assent nor dissent from their Lordships.

The material facts so far as relevant are as follow:-

The appellant is a joint stock company incorporated in the Isle of Man, having its registered office in that island, and its main office in England. At all material times it held the bulk of the shares in eleven companies, carrying on business in British India. Two of these companies are companies incorporated in British India, having their registered offices and headquarters in Calcutta. The nine remaining companies (called the sterling companies) are, as to some of them incorporated in the Isle of Man and, as to the rest, incorporated in England. The business of the sterling companies in India is managed by local Boards, but the ultimate control lies with the London Boards. The meetings of the sterling companies are held in England.

All the dividends that were received by the appellant from the sterling companies were declared paid and received in England. No part of them was ever remitted to British India.

On the 6th January, 1939, the proper Income-tax Officer by notice required the appellant to make a return of its total income (and total world income) for the assessment year 1939-40. A return was made on the 18th May, 1939. In the correspondence which followed the appellant raised the point that Explanation 3 to para. 4(1) of the Income-tax Act 1922, as amended, if it applied to dividends declared and paid outside British India to persons not resident in British India was ultra vires the Indian Legislature.

By an assessment order dated the 23rd December, 1940, the Income-tax Officer assessed the appellant as a non-resident upon a total i