TMI Blog1993 (12) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 is an individual, while the writ petitioner in W. P. No. 18137 of 1989 is a partnership firm. Both of them carry on the business of producing feature films in Kannada. The petitioner firm in the second petition is also carrying on exhibition on cinematograph films. The petitioners have been employing a regular system of accounting, that is, the mercantile system of accounting. The petitioner firm came into existence for the assessment year 1984 - 85 and for the first time during the assessment year 1986 - 87, the second petitioner firm produced a feature film. For the assessment years 1977 - 78 to 1983 - 84, in the case of the individual petitioner-assessee, the Income-tax officer accepted the method of accounting employed by the said petitioner and the income or loss of the petitioner-assessee was computed on the basis of the accounts maintained by the petitioner. For the assessment year 1984 - 85, corresponding accounting year being 1983 - 84 wherein the year ended on December 31, 1983, for the petitioner-assessee who is an individual, the Income-tax officer being the Deputy Commissioner of Income-tax, resorted to the rule 9A of the Income-tax Rules, 1962, framed by the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns canvassed by the advocates for the respective parties. Before we deal with the referred questions, it will be apposite to have a bird's eye view of the relevant statutory provisions governing the field. Section 4 of the Income-tax Act, 1961, deals with charge of income-tax and provides that where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions including provisions for the levy of additional income-tax under this Act in respect of the total income of the previous year of every person. Section 5 deals with scope of total income. Sub-section (1) lays down that subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which (a) is received or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year ; or (c) accrues or arises to him outside India during such year... Section 9 deals with income that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Second Amendment) Rules, 1986. By these Second Amendment Rules, certain sub-rules of rule 9A were omitted and the word "regional language" was deleted. The effect of this amendment was that with effect from April 2, 1986, there remained no distinction between regional language films and non-regional language films in the matter of computation of deductions of permissible business expenses from the income of producers of such films. It is now time for us to deal with the referred questions seriatim. Question No. 1 : So far as this question is concerned, it becomes clear that rule 9A(1) of the Income-tax Rules, which was operative since 1976, was modified by the Income-tax (Second Amendment) Rules, 1986, whereby certain then existing sub-rules of rule 9A were amended and/or replaced by new sub rules. Therefore, rule 9A got substantially modified by the new rule 9A of the Rules. The short question for our consideration is whether enactment of new rule 9A(1) which replaced old rule 9A(1) amounted to repeal of the latter and whether such repeal would attract the General Clauses Act especially section 6 thereof, as learned counsel for both the sides stated to us that the referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word 'substitution' is to indicate that the process cannot be split up into two pieces like this. If the process described as substitution fails, it is totally ineffective so as to leave intact what was sought to be displaced. That seems to us to be the ordinary and natural meaning of the words 'shall be substituted'. This part could not become effective without the assent of the Governor-General. The State Governor's assent was insufficient. It could not be inferred that what was intended was that, in case the substitution failed or proved ineffective, some repeal, not mentioned at all, was brought about and remained effective so as to create what may be described as a vacuum in the statutory law on the subject matter. Primarily, the question is one of gathering the intent from the use of the words in the enacting provisions seen in the light of the procedure gone through. Here, no intention to repeal, without a substitution, is deducible. In other words, there could be no repeal if substitution failed. The two were a part and parcel of a single indivisible process and not bits of a disjointed operation." Thereafter, in para 23 of the report, it has been laid down as under : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and had substituted a modified rule in 1955 in its place, could revive. In the case of State of Orissa v. Mangalji Mulji Khara, AIR 1985 SC 1293, the Supreme Court had to consider the effect of supersession of earlier Government notifications by the Orissa Government notifications dated December 29, 1977. It was held that the word "supersession" in this notification was used in the same sense as the words "repeal and replacement" whereby under the previous notifications all that was done by using the words "in supersession of all previous notifications" in the notifications dated December 29, 1977, was that they repealed and replaced previous notifications and did not wipe out any liability incurred under the previous notifications. Attention was also invited to a Division Bench decision of this court in the case of Jyothi Home Industries v. State of Karnataka [1987] 64 STC 208. In that case, this court was concerned with three notifications issued under the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979. M. N. Venkatachaliah J., as he then was, in that case, had to consider the effect of supersession of earlier Government not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scheme on the topic or give a go-by to it, but on the contrary, maintained it in a modified form. Modifications were effected in the then existing sub-rules of rule 9A. Therefore, it is easy to infer that the rule making authority did not want to repeal whole hog the then existing rule 9A, but wanted to make certain modifications by way of amendments therein. Consequently, it must be held that though in the Income-tax (Second Amendment) Rules, 1986, it is mentioned that new rule 9A(1) will stand substituted for the old rule 9A(1), in substance, it is a case of supersession of the earlier provision or its modification or amendment. It does not amount to wholesale repeal of the earlier provision. In this connection, we may also usefully refer to a Division Bench decision of this court, in the case of Smt. Papabai v. Assistant Commissioner, Chikodi (M. F. A. No. 1200 of 1989, dated July 26, 1993 and September 22, 1993)--[1993] ILR 1993 Kar 3293, consisting of two of us (Ramakrishna and Raveendran JJ.). It was concerned amongst others with the effect of the amendment of article 1 of Schedule I to the Karnataka Court Fees and Suits Valuation (Amendment) Act, 1992, as amended by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraph 15 of the report for coming to that conclusion. Firstly, omission is not repeal and, secondly, section 6 would apply to repeal of a Central Act or Regulation and not of a rule. As in the present case, a statutory rule is replaced by another statutory rule 9A(1) and as the replacement is not of any statutory provision enacted by the Legislature, on the ratio of the decision given in the aforesaid Supreme Court case, it must be held that section 6 of the General Clauses Act would not apply to the facts of this case. Consequently, our answer to question No. 1 is to the effect that when rule 9A(1) of the Income-tax Rules, 1962, was substituted by a new sub rule, that substitution did not amount to repeal of the earlier rule 9A(1) and that, in any case, section 6 of the General Clauses Act will not apply to the facts of the present case. Thus, the answer to the question would be in the negative. Question No. 2 : So far as this question is concerned, it has to be kept in view that the new rule 9A which replaced the old rule 9A(1) by the Income-tax (Second Amendment) Rules, 1986, with effect from April 2, 1986, itself provided as per sub-rule (8) that nothing contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowable under section 37(1). Therefore, whether rule 9A applies in the modified form or unmodified form could not make any impact on the charge created by the Legislature for imposing tax on such income. If a machinery provision in connection with computation of deductions from business income for assessment years commencing from April 1, 1987, is modified as compared to an earlier machinery provision, the liability to pay tax on such income for earlier assessment years would not get adversely affected nor would the earlier machinery provision as applicable to the previous assessment years be rendered otiose. It is not as if new rule 9A(1) repealed the prior existing rule 9A(1) retrospectively and effaced it from the statute book and made it unavailable even for making assessments for earlier assessment years ending up to March 31, 1987. Sub-rule (8) of new rule 9A contra-indicates such a situation. If the rule making authority in express terms has not applied the new rule to assessment years prior to April 1, 1987, it means that it has saved the old machinery provisions of rule 9A(1) in connection with the assessment years up to March 31, 1987. Therefore, it cannot be said b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll Bench of the Gujarat High Court in Saurashtra Cement and Chemical Industries Ltd. v. Union of India [1993] 1 GLR 5. We are in respectful agreement with the aforesaid decision of this High Court as well as the decision of the Madhya Pradesh High Court and Full Bench of the Gujarat High Court. Thus, it is not possible to agree with the contention of learned counsel for the petitioner-assessee that because of the substitution of the old rule 9A(1) by new rule 9A(1) from April 2, 1986, from that date onwards, the Revenue could not fall back upon old rule 9A(1) for making the assessments in connection with the assessment years prior to April 1, 1987. Apart from this contention being contrary to sub-rule (8) of new rule 9A(1), it does not stand to reason as it could not be said that the rule making authority wanted to completely do away with the earlier scheme regarding computation of permissible expenditure in connection with income arising from business of production of feature films. No such intention of the rule making authority is discernible from new rule 9A(1) or for that matter, from any of its sub-rules. No such retrospective repealing of old rule 9A(1) for earlier assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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