TMI Blog1974 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... etition of the respondent-firm was accepted on May 9, 1967. Shanti Swaroop Sharma, one of the partners of the respondent-firm, filed an application on May 31, 1967, for refund of the amount deposited by it in view of the order of this court, which was allowed. It was refunded to the respondent on August 5, 1967. A return was filed by the respondent-firm and exemption was claimed in respect of the amount of Rs. 39,489 on the ground that the liability to pay the aforesaid amount to the Punjab Government existed under the Punjab General Sales Tax (Amendment and Validation) Act, 1967, and, therefore, its receipt cannot be deemed to be income under section 41 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The Income-tax Officer made an assessment on the dissolved firm and brought to tax the amount of Rs. 39,489 as the assessee's income under section 41 of the Act. The respondent went up in appeal before the Appellate Assistant Commissioner who accepted the same on July 15, 1970, and reduced the amount of Rs. 39,489 from the income of the assessee. The revenue filed an appeal against the order of the Appellate Assistant Commissioner to the Income-tax Appellate Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of groundnuts by the Punjab General Sales Tax Act, 1948, but the stage at which it was to be assessed was not prescribed by the Act. Its imposition was challenged. The Supreme Court in Bhawani Cotton Mills Ltd. decided the question and held that the provisions of the Punjab General Sales Tax Act, 1948, as they stood on April 1, 1960, levying purchase tax on declared goods specified in Schedule "C" contravene the provisions of section 15(a) of the Central Sales Tax Act, 1956, as the stage at which purchase tax was levied was neither definite nor ascertainable, and there was a possibility of the tax being levied at more than one stage. In view of the aforesaid observations, the imposition of purchase tax was struck down. The refund was taken by the respondent-firm on August 5, 1967. On September 28, 1967, the State of Punjab promulgated two Ordinances, namely, the Punjab General Sales Tax (Amendment) Ordinance, 1967 (Punjab Ordinance No. 1 of 1967), and the Punjab General Sales Tax (Amendment and Validation) Ordinance, 1967 (Ordinance No. 12 of 1967), by virtue of which the assessments made in the case of groundnuts under the provision of the Punjab General Sales Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, levy and collection of any tax on the purchase of groundnuts made under the Punjab General Sales Tax Act, 1948, before the commencement of the Amendment and Validation Act is to be deemed to be as valid and effective as if such assessment and collection had been taken or done under the principal Act as amended by the Amendment and Validation Act. It is provided in clause (a) of sub-section (1) of section 20 of the Amendment and Validation Act that all actions taken by the State Government or by any of its officers or by any authority in connection with assessment and collection of tax shall be deemed to be and to have always been done or taken in accordance with law. It is also stated that the court shall not enforce any decree or order directing the refund of any such tax. In the aforesaid Amendment and Validation Act, the stage at which the purchase tax was to be paid was also prescribed. By virtue of the aforesaid amendment, the liability of the respondent was created retrospectively. In view of the provisions of the Amendment and Validation Act, there was no cessation in the liability of the respondent-firm to pay the tax on the date when the tax was refunded to it. The Am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting legislation is to declare valid what has been held invalid by courts and once the legislature declares such action valid all steps taken in connection therewith are validated to the extent of validation. The result of the validation is that notifications or other steps taken which may otherwise have been invalid become valid. Further, an acquisition also even though it may have been struck down by a court would be validated if it has been made in the sense that property in the land to be acquired has vested in Government either under section 16 or section 17(1) of the Land Acquisition Act." All the aforesaid observations clearly show that the liability to pay tax by the respondent did not cease on the date when the judgment was pronounced by the Supreme Court. The tax which had become invalid on account of the judgment of the Supreme Court became valid after enforcement of the Amendment and Validation Act. The learned counsel for the petitioner has argued that the position is to be seen as on April 10, 1967, when the decision in Bhawani Cotton Mills was given by the court and on August 5, 1967, when the refund was taken by the respondent. He submits that the Amendment and V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s affirmed by the Supreme Court in Chowringhee Sales Bureau P. Ltd. v. Commissioner of Income-tax. The facts of the above case are distinguishable. In that case, the question was whether the amount recovered was a trading receipt or not. In the case before us, the question involved is regarding the interpretation of section 41 of the Act. In our view, Mr. Awasthy cannot derive any benefit from the aforesaid observations. He has then referred to a Division Bench judgment of the Allahabad High Court in Jagatnarain Durga Prasad v. Commissioner of Income-tax. In this case, the assessee collected sales tax believing that sales tax was leviable on forward contracts and deposited the amount in the treasury. Subsequently, in view of a decision of the High Court that such sales tax was not leviable, the State Government refunded the amount deposited by him. The Income-tax Officer included the amount in the assessee's income for that assessment year. This view was confirmed on appeals. In reference, the High Court observed that as the amount had previously been allowed as a deduction in computing its business income and as the amount had been refunded to the assessee, such amount was deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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