TMI Blog1951 (1) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout reasonable cause to furnish the return required by this notice or fails without reasonable cause to furnish it within the time allowed or in the manner required is liable under Section 28 of the said Act to a penalty not exceeding one a half times any tax payable by him. 2. Underneath the notice were published the names of various Income-tax Officers with their addresses jurisdictions. Thereafter, on 7-8 1950, a notice was served upon the petnr. requiring him to produce his account books on 11-8-1950 in connection with the income-tax assessment. The constitution of India came into force on 26-1-1950 giving the Dominion Parliament power to legislate in matters relating to income-tax for the whole of India, while according to the Finance Act of 1950, Rajasthan became taxable territory from 1-4-1950. The petnr. has approached this Ct. with an appln, under Article 226, Const. Ind. objecting to his income being assessed to income-tax which accrued prior to 1-4-1950 has based it on two principal grounds, namely: (1) That Rajasthan became taxable territory on 1-4-1950 therefore, income accruing or arising before that date was not assessable to income-tax. (2) That the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1-4-1950 , therefore, incomes accruing or arising prior to that date were not liable to income-tax. (2) Whether the Parliament had no power to make law relating to the imposition of income-tax on incomes accruing prior to 26-1-1950. (3) Whether the petnr. was not competent to ask for a Writ of Prohibition because a specific adequate remedy was available to him under the provisions of the Income-tax Act. 7. Along with the above, two other points were agitated on behalf of the resp., these are : (a) That the Union of India had done no judicial act in respect of which a writ of prohibition may be issued against it further that in any case, since the Income-tax Comr. or the Income tax Officer, Jodhpur, were not parties to the petn., a writ could not be issued against them, (b) That the Instrument of Accession was a contract between the Govt. of India the Rajpramukh of Rajasthan while it was open to either of them to claim enforcement of its provisions, the subject was not competent in law to do so. 8. In connection with the first question it may be pointed out that the Income. tax Act, 1922 was not applicable in Rajasthan prior to 1-4-1950 barring the covenanting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n behalf of such person or (b) if such person is resident in taxable territories during such year, (i) accrue or arise or deemed to accrue or arise to him in the taxable territories during such year or (ii) accrue or arise to him -without the taxable territories during such year or (c) if such person is not resident in the taxable territories during such year accrue or arise or deemed to accrue or arise to him in the taxable territories during such year. 10. Reading these two sections together, two important principles emerge, namely : (1) That the income should have accrued during the previous year, that is, the year previous to the year of assessment, (i) That this income should have been received or accrued or deemed to have been received or accrued to the assessee in the taxable territory during the previous year or the assessee should be a resident of the taxable territory during the previous year. 11. The contention of the learned counsel for the resp. is, that it is the unascertained income of the current year which is actually taxed that the income of the previous year is used merely as a yard stick or measure. It, however, runs counter to the plain language of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of clearing away a certain confusion of thought which appeared to affect the contentions in the case. In the first place, their Lordships held that under the express terms of Section 3, Income-tax Act, the Subject of charge was not the income of the year of assessment but the income of the previous year. This was in direct contrast to the English Income-tax Acts under which the subject of assessment was the income of the year of assessment though the amount was measured by a yard-stick based on previous years. Their Lordships referred to the able judgment of Bankin C. J. in In re Beharilal Mullick, 54 Cal. 630 : (A.I.R. (14) 1927 Cal, 553) agreed with it. In the second place, it was observed by their Lordships that the Income-tax Act, as amended from time to time, formed a Code which had no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. In re Rawji Dhanji Co.. 1940-6; I.T.R. 1 (Bom.) the assessees, who were merchants carrying on business at Bombay Rangoon were assessed in the year 1937-38 on their total income for their previous year which ended on 14-11-1936. In assessing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the passing of the Finance Act not what it was in the previous year. This argument was not accepted by Leach C.J. who held that: while the Income-tax Act could not be applied in any year until the Finance Act had been passed, the Act could not be treated as a statute which is passed annually. It was a permanent enactment may not been forced in any particular year until Finance Act had been passed. It was further held that Section 4 of the Act could not be divorced from Section 3 that as Section 3 charged the tax on the income of the previous year, it must be charged on the income received in what was British India during the previous year. Accordingly, it was held that since Burma was a part of British India during the financial year, the loss must be deemed to have been sustained in British India. The above observations by Leach C. J. are sufficient also to dispose of the contention of the learned counsel for the reap, that the taxing enactment was the Finance Act not the Income-tax Act. Reference may also be made to the statement of law by Lord Dunedin in Whitney v. Inland Revenue, Commrs. (1926) A.C. 37 : (96 L. J. K. Rule 165) that there were three stages i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union, and (e) as respects any period after the 12th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir ; Provided that the taxable territories shall be deemed to include: (a) the merged territories : (i) as respect any period after the 31st day of March 1949, for any of the purposes of this Act, and (ii) as respects any period included in the previous year, for the purpose of making any assessment for the year ending on the 31st day of March, 1950, or for any subsequent year; and (b) the whole of the territory of India excluding the State of Jammu and Kashmir : (i) as respects any period, for the purposes of Sections 4A and 4B, (ii) as respects any period after the 31st day of March, 1950, for any of the purposes of this Act, and (iii) as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year; 16. The territory of India was rapidly changing after the Indian Independence Act, 1947, instead of defining India separately for the different periods of its expansion, the Legislature provided different meanings t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the year ending on 31-3-1951. It was contended that as under Section 3, Income-tax Act, the assessment is made for the income of the previous year, the assessment made for the year ending 31-8-1951, i.e., the year beginning on 1-4-1950, ending on 31-3-1951, will be made in respect of the income of the previous year, i. e, 1-4-1949, to 31-3-1950. In other words, the argument is that the said proviso makes Rajasthan a taxable territory during the period of the year previous to 1-4-1950. On the other hand, it was contended by the learned counsel for the petnr. that there was a difference in the language used in the different parts of the Section, which was important. Attention was drawn to cl. (ii) of proviso (a), where the words used are for the purpose of making any assessment for the year ending on the 3lst day of March, 1950. It was pointed out that the language used in cl. (iii) of proviso (b) is slightly different. The words used are for the purpose of making any assessment of the year ending on the 3lst day of March, 1951. Leaving aside the difference of date, the difference in language is that while in proviso (a) cl. (ii) the words used are assessment for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 12th April, although according to cl. (e) in the definition, it was not declared to be taxable territory in that clause. Clause (ii) of the proviso was obviously enacted in order to get over the difficulty of separate assessment of tax for the period from 1st April to 12th April as regards individuals in Patiala East Punjab States Union. In this second clause the words for any of the purposes of -this Act clearly signify that the aforesaid territory including Rajasthan is a taxable territory for the purposes of levy, assessment collection of income-tax. In the third clause, the whole of the territory of India (excluding Jammu Kashmir) is declared to be taxable territory as regards any period included in the previous year for the purpose of: making any assessment of the year ending on 31-3-1951 or for any subsequent year. Assuming for the moment that the words assessment of the year mean the same thing as 'assessment for the year,' assuming that the previous year of the individuals affected, runs from 1st of April of any year to 31st day of March of the succeeding: year, the previous year referred to in the clause for the purpose of making any assessment in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod not included in the previous year for the purpose of assessment under the Income-tax Act, 1922, for assessment year 1950-51. In plain language it means that for the period which remains excluded from the previous year for purposes of assessment under the Income-tax Act for year 1950-51 the levy, assesment collection will be done according to the old State Act. The 'previous year' would be the period from 1-4-1949 to 31-3-1950, assuming that the accounting period in respect of the assessee is from 1st April to 31st March 1960. The period 'not included in the previous year, would thus be prior to 1-4-1949. Section 13 thus authorises levy, assessment collection of Income-tax in respect of income arising, accruing etc. in the year from 1-4-1948 to 31-3-1949 in B States where Income-tax law existed prior to 1-4 1950. It has already been seen that the whole of India (except Jammu Kashmir) has been defined to be taxable territory from 1-4-1950 income accruing etc from 1-4-1950 become taxable by virtue of the provisions in Sections 3 4 of the Act. In order that persons may not escape taxation during the intervening period from 1-4-1949 to 31-3-1950 in areas wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b). cl. (iii) would become applicable for such period as he was not charged but the liability had accrued, the territory would become taxable territory for the purpose of making any assessment of the year 1950-51. The existence of this proviso only makes those persons liable whose income was chargeable to income-tax under any law in force in those territories, but that law was superseded by the Income-tax Act. According to the information given in the Report of the Indian States Finance Enquiry Committee, part II, only one of the Covenanting States of Rajasthan, namely, Bundi had law relating to levy of income-tax. In Bikaner though an Income-tax Act existed in 1941, it was repealed in 1943, but in the rules for licensing of minor factories provision was made for levy of income-tax at the rate of 12 1/2% on the net profits of any Company. As discussed above, while el. (d) would only make Rajasthan a taxable territory from 1-4-1950, the territory of the former Covenanting State of Bundi would be taxable territory for the purpose of assessment in the year 1950-51 in respect of the income of the previous year. It may be pointed out that even if there was any doubt in the interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptance of an instrument of accession executed by the rules thereof whereby the ruler, for himself, his heirs and successors, declares that he accedes to the Dominion with the intent that Governor General, the Dominion Legislature, the S. C. any other Dominion authority shall, by virtue of the Instrument of Accession, but subject always to the terms thereof, exercise in relation to the State such functions as may be vested in them under the Government of India Act. According to Section 6 (2), and Instrument of Accession shall specify the matters which the ruler accepts as matters with respect to which the Dominion Legislature may make laws for his State the limitations, if any, to which the power of the Dominion Legislature to make laws for the State are to be subject. How, while Section 100, Government of India Act, confers the power on the Dominion Legislature to legislate with respect to any matters enumerated in Lists I III in sch. vii, according to Section 101, this power is to be exercised only in accordance with the Instrument of Accession of the State any limitation contained therein. The items relating to taxes are items 44, 45, 46, 54 to 59 in List I items 17, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tim repetition of cl. (3) of the Instrument of Accession relating to the former Rajasthan. By means of a proviso attached to this clause, a limitation was imposed upon the power of the Dominion Legislature to legislate thereby impose a tax or duty in the territories of the United State of Rajasthan. This was final Instrument of Accession which restricted the power of the Dominion Legislature to legislate, thereby excluded its authority to impose any tax in the territories of Rajasthan. This state of things continued till 26 1-1950 when the constitution of India was promulgated. By Article 395, Government of India Act, 1935, together with all enactments amending or supplementing it, was repealed by Article 245(1) the power to make laws for the whole or any part of the territory of India from 26.1-1950 was conferred on the Parliament subject to the provisions of the Constitution. This, of course, included the power to make laws for the imposition of income tax which is item 82 of List I but only from 26-1-1950 onwards not retrospectively. According to Article 367, unless the context otherwise requires, the General Clauses Act, 1897 shall, subject to any adaptations modifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was urged that the Report of the Indian States Finances Enquiry Committee 1948-49 was accepted by the Rajpramukh of Rajasthan, under that Report levy of income-tax by the Union of India was recommended for the assessment year 1950-51 in respect of the income of the previous year 1949-50 accruing, arising or received in Rajasthan. It was further argued that the agreement between the President of India the Rajpramukh of Rajasthan dated 25-2-1950, could be taken as a fresh Instrument of Accession referred to in sub p. (3) of Section 6, Government of India Act, as authorising the levy of income-tax even for the period prior to 26-1-1950. The agreement dated 25-2-1960, can not be a fresh Instrument of Accession as after the enforcement of the Constitution the provisions of the Government of India Act stood repealed by Article 395 the agreement was entered into in accordance with the provisions of Articles 278, 291, 295 306 of the Constitution as 13 mentioned in the Preamble to the agreement. Article 268 of the Constitution clearly lays down that no tax is to be levied or collected except by authority of law the limitation on the legislative power of the Parliament has alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion regarding the issue of a writ of prohibition, where an alternative remedy is available, is concerned, we consider that the position has been well settled for a long time. The law is summed up on this question in Halabury's Laws of England (Hailsham Edn.) vol. 9, Articles 1396 1397 with certain exceptions mentioned in Articles 1401 to 1404. The issue of the writ of prohibition, though not of course, is of right not discretionary. Prohibition lies not only for excess of or absence of jurisdiction, but also for the contravention of some statute or the principles of the common law; it does not, however, lie to correct the course, practice, or procedure of an inferior tribunal, or a wrong decision on the merits of the proceedings. The Ct. in deciding whether or not to grant a writ of prohibition will not be fettered by the fact that an alternative remedy exists to correct the absence or excess of jurisdiction or an appeal lies against such absence' or excess. These are what have been held to be immaterial objections to the issue of a writ of prohibition. In Farquharson v. Morgan, (1894) 1. Q. B. 652 at p. 556; (68 L. J. Q, B. 174) Lord Halsbury expressed his views in ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain scheme which they had in hand for effecting improvements for the supply of electricity, notwithstanding that the order embodying the scheme could not come into operation until confirmed by the Minister of Transport approved by resolution of the Houses of Parliament, Rex v. Kensington Income tax Commrs., (1914) 3 K.B. 429 (83 L.J.K.B.. 1439) is a case of a writ having been issued to Kensigton Income-tax Comrs. The appct. in this case carried on business in the City of London but resided in Kensington he contended that he was liable to assessment in the City of London only. Thi9 contention was rejected in the Ct. below but the lit. of Appeal reversed the order issued a writ prohibiting the Income-tax Comrs. from proceeding on an assessment to income-tax. The contention for the Grown that the appct. should have filed an appeal against the assessment made by Kensington Comrs. was, therefore, not entitled to writ wag not accepted. The decision of the Of; of Appeal was affirmed by the House of Lords in Remington Income-Tax Gommrs. v. Aramayo, (1916) A c. 215: (84 L.J.K.B 2169). In view of the above, where there is complete lack of jurisdiction no dispute as to facts, a wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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