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High Court Of Madhya Pradesh
P. V. Dixit, C. J. and K. L. Pandey, J.
STRAW PRODUCTS LIMITED - Appellant
Versus
INCOME-TAX OFFICER, a WARD - Respondents
Misc. Petn. 4 Of 1966
Decided On : 04/04/1966
The validity of the Taxation Laws (Merged States) (Removal of Difficulties) Amendment Order, 1962 was challenged by the assessee - Company incorporated in former Bhopal State when provisions about depreciation allowance were applied while assessing its income, on the grounds that it was unconstitutional and ultra vires. It was urged (i) that the powers under section 6 of the Taxation Laws (Extension to Merged States and Amendments) Act, 1949, could be exercised only if, difficulty arose in giving effect to the provisions of any Act, rule or order extended by section 3 thereof to the merged State, that no such difficulty had arisen and the power could not be exercised for the purpose of passing the Order, (ii) that Income-tax Act, 1922, could not be amended by the Order, as, inter alia that Act was repealed by Income tax Act, 1961, (iii) that if such power to amend was conferred by section 6 of the Act of 1949 that section would be ultra viles and void amounting to unauthorised delegation of legislative power (iv) that the Order amended the Removal of Difficulties Order, 1949 and section 6 did not confer on the Government the power to remove any difficulty arising in giving effect to the provisions of the Ordinance or the Order of 1949, and (v) that the Order violated Article 14 of the Constitution in that it made a discrimination between the same class of assessees residing in the former State of Bhopal which merged in India on 1-8-1949. On 26-8-1949 the Taxation Laws (Extension to Merged States) Ordinance, 1949 was promulgated. This was replaced by Taxation Laws (Extension to Merged States and Amendment) Act, 1949 section 3 of which extended, inter alia the Income-tax Act, 1922 to all merged States from 1-4-1949.
Held: The questions whether any difficulty spoken of in section 6 of the 1949 Act had arisen and whether that difficulty should be removed by an Order under that provision, and if so, when and how, are matters for the Government to decide. The contention that the impugned 1962 - Order is invalid for the reason that in the making of that Order under section 6 of the 1949 Act the condition for the exercise of power under that provision was not fulfilled was not sound. (1963) 50 ITR 741, (1961) 41 ITR 280, referrer to.
As to the second ground, the Income-tax Act, 1922 was not repealed totally. It was saved to the extent specified in subsection (2) of section 297, and applied, inter alia, to any proceeding pending on the commencement of the 1961 - Act before an Income-tax authority or any Court by way of appeal, reference or revision, as if the 1961 - Act had not been passed. For purposes for which the 1922 - Act continued to operate, it could be amended.
As to the third objection, the Order did not effect any essential change in the Income-tax Act, 1922, or an alteration in its policy and it could not be struck down as unauthorised delegated legislation. It is not unconstitutional for the Legislature to leave it to the Executive to determine details relating to the working of taxation laws.
As to the fourth ground, the Order does not purport to remove any difficulty in giving effect to the provisions of the Removal of Difficulties Order, 1949; it only removed a difficulty which arose in giving effect to the depreciation allowance provisions in the Income Tax Act, 1922; and the amendment made in the Removal of Difficulties Order, 1949 by the 1962 - Order is only the mode by which the difficulty has been removed. Section 6 of the 1949 Act, when it says that the Government may make such provisions or give such direction as appear to it to be necessary for the removal of the difficulty indicated therein, does not preclude the Government from amending the Removal of Difficulties Order, 1949 for that purpose.
As to the attack under Article 14 of the Constitution, the Order applied to all persons who came within its ambit from the date on which it became operative. The explanation added to paragraph 2 of the Removal of Difficulties Order, 1949, by the Order is no doubt retrospective it applies to pending proceedings and does not affect assessments which have become final. But it is well settled that it is for the Legislature to decide from what date a law should be given operation. The law cannot be challenged as discriminatory if it does not affect the prior or closed transactions and affects only pending proceedings or post• enactment transactions. AIR 1957 SC 510, AIR 1960 SC 923 and AIR 1951 SC 97, referred to. [Paras 8 & 23]
(2) Interpretation of Statutes – repeal - amendment of repealed Act – can - not be made unless the repealed Act is first revived. [Para 17]
( 1 ) BY this application under Article 226 of the Constitution, the petitioner Straw products Ltd. a public company incorporated in the former State of Bhopal, prays that the Taxation Laws (Merged States) (Removal of Difficulties. Amendment order, 1962, be declared ultra vires, inoperative and of no effect whatsoever, and seeks a writ of certiorari for quashing assessments of income-tax made on it on 43-1958 for the years 1952-53 and 1953-54, as also the assessments made for the assessment years 1954-55 to 1960-61. The petitioner also seeks a direction restraining the respondents from proceeding with the assessments for the assessment years 1961-62 to 1965-66.
( 2 ) THE matter arises thus. The petitioner is a public limited company engaged in the manufacture of straw-boards and other allied products. It was incorporated in the quondam State of Bhopal in 1938. Under an agreement concluded between the company and the Government of the Bhopal State, the Company was exempted from payment of "any sum by way of taxation to the State" for a period of ten years from the date on which it took over the land granted to it by the State for business purposes. This agreement was acted upon and the period of immunity from taxation expired on 31st October 1948. During this period no assessment on the company was made under the Income-tax Act, 1936, (No. VIII of 1936) of the bhopal State. According to the applicant, in this period it did not even file any return of its total income before the income-tax authorities of the Bhopal State.
( 3 ) THE Bhopal State merged in India on 1st August 1949 and became a Chief commissioner's Province, On 26th August 1949 the Taxation Laws (Extension to merged States) Ordinance, 1949, (hereinafter referred to as the Ordinance), was promulgated. Section 3 of the Ordinance extended to all the merged States the indian Income-tax Act, 1922, along with all the Rules and Orders made thereunder, with effect from 1st April 1949. By virtue of Section 3 of the Finance act, 1950, the merged States' territories become "taxable territories" for any of the purposes of the Indian Income-tax Act, 1922, as respects any period after 31st March 1949. The result was that the Company became liable to pay income-tax under the Indian Income-tax Act, 1922, with effect from the assessment year 1949-50. Under Section 10 (I) of the Indian Income-tax Act, 1922, the tax payable by an assessee under the head "profits and gains of business, profession or vocation' is in respect of the profit or gains of any business, profession or vocation carried on by him. Sub-section (2) of Section 10 laid down that such profit or gains shall be computed after making certain allowances, and one of these allowances is in respect of depreciation of such buildings, machinery, plant etc. as are used for the purpose of the business (vide Clause (vi) of Section 10 (2) ). The depreciation, except in certain cases, is calculated on the "written down value" as explained in Section 10 (5 ). Clause (b) of this Sub-section (5) states "in the case of assets acquired before the previous year the actual cost to the assessee less all depreciation actually allowed to him under this act, or any Act repealed thereby, or under executive orders issued when the Indian Income-tax Act, 1886 (II of 1886), was in force. " This Clause (b) could not be applied to an assessee in a merged State as before the extension of the Indian Income-tax Act, 1922, to merged States no depreciation could have been actually allowed to any assessee under the indian Income-tax Act, 1922, or any Act repealed by the Act of 1922. The Bhopal Income-tax Act was repealed by the Ordinance of 1949, and not by the Indian Income-tax Act, 1922. This and other difficulties led to the making of the Taxation Laws (Merged States) (Removal of difficulties) Order, 1949, (hereinafter called the Removal of Difficulties order, 1949), by the Central Government in the exercise of the powers conferred on it
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