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TMI Blog1951 (3) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 26A of the Income-tax Act. The applications were made in different years and were refused. Hence these references. The assessee firm consisted of two partners, Rao Bahadur Revula Subba Rao and Hariprasada Rao, Chirala, who are brothers. The partnership was formed under a deed of partnership of the 10th February, 1941. Prior to that, Subba Rao was carrying on business as sole proprietor and he later took in his brother as a partner. On 1st July, 1940, he executed a general power-of-attorney in favour of Hariprasada Rao as he then intended to go on a pilgrimage. The power-of-attorney authorised Hariprasada Rao inter alia, "to carry on my business, viz., Burmah Shell Agency at Chirala, Bezwada, Guntur and Chilakalurpet, Parry & Co., (Madras) Agency, etc., and other businesses to conduct and manage the affairs of all of my movable and immovable properties, including buying and selling thereof, to collect the outstandings and pay liabilities of the abovesaid businesses to sign on my behalf vakalathnamas, petitions and plaints for filing suits against the defaulting debtors, to sign and present on my behalf all papers to be filed in Courts in connection with suits pend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in such particulars and shall be in such form, and be verified in such manner as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed." Section 59 of the Act empowers the Central Board of Revenue, subject to the control of the Central Government, to make rules for carrying out the purposes of the Act and for the ascertainment and determination of any class of income. Sub-section (2) of that section enacts:- "Without prejudice to the generality of the foregoing power, such rules may-* * (e) provide for any matter which by this Act is to be prescribed." Section 2(10) defines the word "prescribed" as meaning "prescribed by rules made under this Act". Sub-section (2) of Section 26A, it will be seen, empowers the rule-making authority to prescribe by rules the conditions to be complied with for making an application under Section 26A of the Act. In pursuance of the authority vested under Section 59 of the Act, the Central Board of Revenue made among others two rules in that behalf, viz., Rules 2 and 6. Rule 2 provides that "any firm constituted under an Instrument of Partnership specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doing any other act which she might herself execute or do. The power to appoint an agent is conferred upon a person who has attained the age of majority by Section 183 of the Indian Contract Act, 1872. Section 2 of the Powers-of-Attorney Act recognises and confers upon the donee of a power-of-attorney power to execute or do any assurance, instrument or thing in and with his own name and signature by virtue of the authority of the donor of the power and the effect of such execution is to make such execution and the act done in exercise of the power as effectual in law as if it was executed or done by the donor himself. The section proceeds on the assumption that the donor is a person who is competent under law to act through an agent. If the substantive law prohibits by a specific provision or otherwise a person from acting through an agent in any particular matter, Section 2 of the Powers-of-Attorney Act does not validate such acts by the agent and does not treat them as the acts of the principal. The validity of the act in question is a matter to be determined entirely by the substantive law relating to the particular matter. All that Section 2 intends to lay down is that in matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the legislature has neither the time nor the material to consider and enact rules relating to various details as they may not be acquainted fully with the facts and circumstances relating to the subject-matter and may have no time even to consider such details. In my judgment in Kalyanam Veerabhadrayya, In re [1949] 2 M.L.J. 663, at 668, I have adverted to this form of legislation and attempted to draw the line of demarcation between a legislative power, which cannot be delegated and a nonlegislative power, though it cannot be said that it is always easy to fix the boundary between the two. However, as there is no dispute regarding the validity of the delegation it does not require further consideration. The short point, therefore, is whether a subordinate legislative power of this nature can be exercised so as to alter or affect or abrogate a legislative provision in other statutes. If such a power is recognised, it would lead to very serious and perhaps disastrous consequences. An executive government or some other authority upon whom the power of making rules is conferred may under the guise of the exercise of such a power repeal or affect or alter the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which they are made. (d) That they are uncertain. (e) That they are unreasonable. He also recognises, like Maxwell, that rules and by-laws should not be repugnant to the laws of England and should not be repugnant to the statute under which they are made. There is a further requirement with reference to the invalidity of by-laws made by public bodies in exercise of statutory powers such as municipalities, local boards etc., viz., that the by-laws should not be unreasonable, but such a restriction is not recognised in the case of rules framed by virtue of a statutory power by an authority on whom such a power is conferred by the statute. Of the cases cited by Maxwell at page 303 in footnote (n) most of them seem to relate to by-laws made by public bodies and are not therefore of much assistance. The decision cited by him in footnote (e) Paul Ltd. v. The Wheat Commission [1937] A.C. 139 is of assistance. In that case, the Wheat Act of 1932 empowered by Section 5, sub-section (i), the Wheat Commission to make by-laws for giving effect to the provisions of the Act and sub-section (ii) of that section inter alia empowered the Wheat Commission to make by-laws for the final determi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates as follows:- "The legislature can, as we have already indicated, under certain circumstances, delegate to executive officers and administrative boards, the authority to adopt and promulgate rules and regulations. Before such a delegation is lawful, however, the legislature must declare the policy of the law and fix the legal principles which are to control in given cases; that is, a definite or primary standard must be provided to guide those empowered to execute the law. So long as a policy is laid down and a proper standard established by statute, there is no unconstitutional delegation of legislative power when the legislature leaves to selected instrumentalities, the duty of making subordinate rules, within the prescribed limits, even though there is conferred upon the officer or board a large measure of discretion. As can be readily seen, there is a distinction between the delegation of power to make a law and the conferring of an authority or discretion to be exercised under and in pursuance of the law, as the power to make law necessarily involves a discretion as to what it shall be. The authority to make rules and regulations in order to carry out an express leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t; The decision in Commissioner of Income-tax v. Subba Rao [1946] 14 I.T.R. 232; I.L.R. 1947 Mad. 167 was also noticed. The question whether a rule-making authority could abrogate by a rule made in pursuance of that authority the statute law or a common law rule did not arise directly for consideration before their Lordships. The examination of the provisions of the statute itself in that case disclosed an intention on the part of the legislature to exclude the intention of treating the signature of an agent as equivalent to the signature of the principal and the rule was in consonance with that intention. It was, therefore, not necessary for the Supreme Court to consider the question where the Act does not so indicate whether under a rule making power a rule could be made so as to affect a statutory provision as under the Powers-of-Attorney Act. Though the decision in Commissioner of Income-tax, Madras v. Subba Rao [1946] 14 I.T.R. 232; I.L.R. 1947 Mad. 167 was referred to, the effect of the rules on the provisions of that Act was not considered and no contention seems to have been raised based on the Powers-of-Attorney Act. Impliedly, however, the decision -it has been pressed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and in favour of the Department; but as the rule itself is ultra vires, the applications made by the assessee for renewal of registration are valid. This is my answer to the questions referred to us. I regret I have to differ from my learned brother whose judgment I had the privilege of reading. Under Section 66A of the Income-tax Act his judgment prevails and the questions referred to us have to be answered in the manner proposed by my learned brother in his judgment. Viswanatha Sastri, J. The facts have been set out in the judgment now delivered. I regret to have to differ from my learned brother and I do so with great diffidence. The two questions that have been referred to us are:- (1) Whether Rules 2 and 6 of the Income-tax Rules preclude an agent of a partner or one of the partners acting as agent for the others, from signing an application for registration of a firm or for renewal of a certificate of registration; and (2) Whether in the event of the first question being answered in the affirmative, Rules 2 and 6 are ultra vires and inoperative by reason of their repugnancy to the provisions of Section 2 of the Powers-of Attorney Act (VII of 1882). Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " I am clearly of opinion that Rules 2 and 6 of the Income-tax Rules are explicit and mandatory and require all the partners, other than minors, personally to sign their application for registration of the firm or for renewal of a certificate of registration and that an application cannot be validly signed by a duly authorised agent on behalf of a partner. It was so held by this Court in Commissioner of Income-tax v. Subba Rao [1946] 14 I.T.R. 232; I.L.R. 1947 Mad. 167. See also Commissioner of Income-tax v. Gelli Krishnamurthy [1940] 8 I.T.R. 121. A firm seeking the statutory privileges conferred upon it by registration must strictly comply with the requirements of Section 26A and Rules 2 and 6 exclude the common law rule "qui facit per alium facit per se" in the matter of the signature of the partners to an application for registration of the firm or renewal of a certificate of registration. Mr. Bhimasankaran, the learned Advocate for the assessee, argued that it was not competent to the legislature to delegate to an outside body the power to make rules which might have the effect of abrogating pro tanto the existing law, whether it was the common law or the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the issue of a notification on a petition by the majority of electors. The contention that the provision in question was ultra vires the legislature as constituting a delegation of legislative power was overruled in these words:- "The short answer to this objection is that the Act does not delegate any legislative powers whatever. It contains within itself the whole legislation on the matters with which it deals. The provision that certain parts of the Act shall come into operation only on the petition of a majority of electors does not confer on these persons power to legislate. Parliament itself enacts the condition and everything which is to follow upon the condition being fulfilled. Conditional legislation of this kind is in many cases convenient, and is certainly not unusual, and the power so to legislate cannot be denied to the Parliament of Canada, when the subject of legislation is within its competency." In Ma Mi v. Kallander Ammal [1927] I.L.R. 5 Rang. 7; A.I.R. 1927 P.C. 22 the Judicial Committee recognised that Section 1 of the Transfer of Property Act empowering the Provincial Government to extend the provisions of the Act of Provinces to which the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld the validity of an Act of the Ontario Legislature which entrusted to a local authority the power of enacting regulations with respect to the Liquor License Act, 1877, by creating offences for breach of these regulations and annexing penalties thereto. The argument based on the incapacity of local legislatures to delegate legislative power to extraneous bodies was thus met:- "When the British North America Act enacted that there should be a legislature for Ontario, and that its Legislative Assembly should have exclusive authority to make laws for the Province and for Provincial purposes in relation to the matters enumerated in Section 92, it conferred powers not in any sense to be exercised by delegation from or as agents of the Imperial Parliament, but authority as plenary and as ample within the limits prescribed by Section 92 as the Imperial Parliament in the plenitude of its power possessed and could bestow. Within these limits of subjects and area, the local legislature is supreme and has the same authority as the Imperial Parliament, or the Parliament of the Dominion, would have had under like circumstances to confide to a municipal institution or body of its own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slatures, Provincial, Dominion and Imperial, have entrusted various persons and bodies with similar powers to those contained in this Act." The principle behind the cases above referred to is the same. Within the prescribed limits, the Indian Legislature has plenary powers of legislation as large and of the same nature as those of the British Parliament. Within the area of powers entrusted to it, the legislature has unrestricted authority. There is no objection, therefore, in principle to a delegation of legislative powers to a public body under an Act of the legislature. There is no need for any alarm at the sight of "delegated legislation". According to English Constitutional Law, delegation of legislative power under an enactment of the legislature would be unconstitutional if, and only if, a parallel legislature is set up by the side of the legislature erected by the Constitution, or if there is abdication or surrender of legislative power in favour of an outside body. Instances of such objectionable delegation have been very rare indeed. The only limitation suggested to the extent of the power of delegation is found in the following observation of Lord Selborne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility to delegate power entrusted to it to another body. Delegate potestes non potest delegare. This doctrine or dogma had so many exceptions engrafted on it by later day decisions in America that it is now difficult to say whether the dogma or the exceptions embody the American rule today. Without digressing into an examination of the American cases, it is enough to say that recent decisions show a marked tendency to regard constitutional power as implying a power of delegation of authority under it sufficient to effectuate its purposes. In Crawford on "Statutory Construction" it is observed at page 13:- "It is therefore apparent that the division of Governmental departments into legislative, executive and the judicial is an abstract and general division and probably was never intended to be strictly adhered to in actual operation." The result of the foregoing discussion is that delegation of legislative authority has been a feature of the Indian Constitution and Government in the present form cannot go on without delegation of wide legislative authority. According to English constitutional doctrines on which lawyers and Judges in India have been nurtured f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry rules now in question are intra vires or ultra vires, it is necessary to look at the terms of the authorising statutory provisions and find out whether the subsidiary or subordinate legislation in the shape of rules is within the limits of the mandate given to the rule-making authority. Ignoring, for the moment, the Powers-of-Attorney Act (VII of 1882), it cannot be suggested that Rules 2 and 6 of the Income-tax Rules requiring an application for the registration of a firm or for renewal of a certificate of registration to be signed personally by all the partners (other than minors) transgress the limits of subordinate legislation delegated to the Central Board of Revenue by Sections 26A and 59 of the Act. The rules made in accordance with these provisions are, to quote the language of Section 59(5), "to have effect as if enacted in this Act." The result is that a statutory rule, if validly made, has precisely the same effect as if it were part of the Income-tax Act itself. Every person must conform himself to the provisions of the rule. If a rule framed under Section 26A and 59 of the Income-tax Act is challenged as ultra vires all that the Court has to do is to put t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to only when the provisions of the later enactment are so inconsistent or repugnant to those of the earlier that the two cannot stand together. The right to have a partnership registered under the Act is a special statutory right conferred by Section 26A introduced in 1930 and this can be availed of only on strict compliance with the provisions of that section and the rules authorised to be made thereunder. The Powers-of-Attorney Act was a general enactment passed in 1882. In an apparent conflict between general and special legislation, the rule of construction to be adopted is that the special enactment overrides the general enactment in those particular cases to which the special enactment applies. The earlier general legislation is indirectly derogated from by the later special legislation. In cases coming within the latter, the special or particular provision must be deemed to be an exception to the general provision. Section 2 of the Powers-of-Attorney Act proceeds on the assumption that there is a power of delegation available or exercisable under the existing law and provides that the donee of a power might act for and in the name of the principal. It docs not empower an ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax v. Keshab Chandra, Mandal [1950] S.C.R. 435; 18 I.T.R. 569 Das, J., speaking for the majority of the Supreme Court, observed that there were many indications in the Bengal Agricultural Income-tax Act, 1944, and the Rules framed thereunder, excluding the common law rule that "where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it." It was held in that case that the personal signature of the assessee was required on his return of income or petition of appeal from an assessment under that Act. An examination of the decision shows that Rules 11, 13, 15 and 17 relating to returns, appeals and applications for refund were all framed under Section 57 of the Bengal Agricultural Income-tax Act. There was no provision either in the Act or in the rules specifically enjoining the personal signature of the assessee in returns, appeals or applications for refund. Nevertheless on an examination of the scheme of the rules, the Supreme Court held that the personal signature of the assessee was essential to their validity. I am unable to say, however, whether the argument now advanced by Mr. Bhimasankara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion it is to be presumed that it intends them to be referred to arbitration in accordance with the general law as to arbitrations, with all attendant rights which the general law confers. I do not think that when Parliament enacts by one statute that disputes under it are to be referred to arbitration it can be presumed to have empowered by implication the abrogation of another statute which it has enacted for the conduct of arbitrations. Rather the contrary. If this is intended, express words to that effect are in my opinion essential, and there are here no such express words." I consider that the legislature in enacting Section 26A conferred a special right to get a firm registered subject to such conditions and limitations as were contemplated by that section and left to be provided for by rules framed by the Central Board of Revenue under the powers expressly conferred. I am, therefore, of opinion that Rules 2 and 6 preclude an authorised agent of a partner from signing an application on his behalf for the registration of a firm or for the renewal of a certificate of registration and that these rules are intra vires the rule-making authority, I would therefore answer th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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