# D:R. Madhtwakrishnaiak v. The Income-tax Offim

- **Citation:** [1954] 1 S.C.R. 541
- **Court:** Supreme Court of India
- **Decided:** 1951-01-16
- **Case number:** Case No. 296 of 1951
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/d-r-madhtwakrishnaiak-v-the-income-tax-offim-316
- **Pages:** 18

## Headnote

S.C.R.
SUPREME COURT REPORTS
541
was obviously necessary and desirable that the changeover frorri the Mysore income-tax
law to
the
Indian
Income-tax Act should be in the way provided by section 13 of the
Indian Finance
Act,
1950.
We find
nothing in article 277 of the Constitution to preclude
Parliament making a law providing for the levy and
collection of income-tax and
super-tax
under
the
Mysore Act through authorities appointed under the
Indian Income-tax
Act.
Accordingly,
we
hold
that
the
Income-tax Officer,
Special Survey
Cirde, Bangalore, had jurisdiction to assess
the appellant to incometax and super-tax in respect of the income of
the
period prior to the commencement of the Constitution.
The appeals fail and are dismissed with costs.
Appeals dismissed.
Agent for the appellant : M. S. K. Sastri.
Agent for the respondent : G. H. Rajadhyaksha.
THE UNION OF INDIA
tJ.
MADAN GOPAL KABRA.
(PATANJALI SASTRI C.J., MEHR CHAND MAHAJAN,
S. R. DAs, GHULAM HASAN and
JAGANNAD
0
HADAS JJ.J
Indian Income-tax Act (XI of 1922) as amended by Finance Act
(XXV of 1950), s. 3-Taxable territories-Meaning of-Section
2
(14-A) proviso ( b) (i) and (iii)-Income accruing to assessee in State of
Rajasthan in 1949-50-Liability to income-tax-Sections 3 and 4 of
Indian Income-tax Act and s. 2 of Finance Act
and proviso to the
amended s. 2 (14-A)-Constitution of Indian, Arts. 245 and 246
read with entry 82 of List I of Seventh Schedule-Parliament competent to make laws with respect to taxes for the tvho/e of lndiaConstitution competent to make laws having retrospective operation
for pre-Constitution period.
Respondent
was·
residing
and
carrying on business in the
District of Jodhpur in Rajasthan, a Part B State. His income
arising therein during the accounting year 1949-50
was sought to
be assessed to income-tax for
the year 1950-51 under the Indian
!nCQme-tax Act as
amended by
the Indian Finance Act. He
presented a petition under art. 226 to the High Court praying
1953
D:R.
Madhtwakrishnaiak
v.
The Income-tax
Offim,
I
Bangalore.
'·;
PataT/jali Sastri
C.J.
1953
Dec. 16.
1953
The Unit1n of
India
v.
Madan GnjJtJl
Kabra.
542
SUPREME COURT REPORTS
[1954}
for the issue of a writ directing the
Union of India not to assess
income-tax on his income which had accrued to him prior to April
1, 1950, because no income-tax
was leviable
in Rajasthan (except
in the State of Bundi)
un<lcr any provision of law in force there.
The High Court having accepted his
petition, the Union of India
preferred the present appeal to the Supreme Court.
Section 3 of the Finance Act 1950 (Act XXV of 1950) made
certain amend1nents in the
Indian
Income-tax Act "with
t:ffect
from the !st day of April, 1950" and substituted therein the present
cl. (14-A) in s. 2 in place of previous cl. (14-A) defining "taxable
territories".
Held, that under sub-cl. (i) of cl. (b) of the proviso, the
whole of the territory of India including Rajasthan is to be deemed
taxable
territory
for
the
purpose of s. 4-A of the
Indian Income-tax
Act "as respects
any period". The words uany period'~
mean any period before or after March 31, 1950.
Respondent
Wa<
therefore resident in the taxable
territories
during the
accounting
year 1949-50 and his income, \vhether derived within or without the
taxable territories was taxable under s. 4 sub-s. (I) cl. (b) sub-cl. (ii)
of the Indian Income-tax Act.
Further, all
that
s. 2 ( 14-A) does is to define what the expression "taxable territories" means
in certain cases and for certain
purposes wherever that expression is used
in
the
various provisions of the Indian Income-tax Act,
and as the expression is used
in the charging s. 4 in connection with the conditions which arc
to determine liability to tax, sub-cl. (iii) of cl. (b) of the definition
must,
when read
\Vith
s. 4 of
the
Indian Income-tax
Act,
have reference to chargeability of Income
and not merely to its
computation, and therefore ss. 3 and 4 of the
Indian Income-tax
Act read in the light of the definition in proviso

## Text

_Characters 0–39,483 of 40,156. This is a partial read: ask again with offset=39483 for what follows._

S.C.R.
SUPREME COURT REPORTS
541
was obviously necessary and desirable that the changeover frorri the Mysore income-tax
law to
the
Indian
Income-tax Act should be in the way provided by section 13 of the
Indian Finance
Act,
1950.
We find
nothing in article 277 of the Constitution to preclude
Parliament making a law providing for the levy and
collection of income-tax and
super-tax
under
the
Mysore Act through authorities appointed under the
Indian Income-tax
Act.
Accordingly,
we
hold
that
the
Income-tax Officer,
Special Survey
Cirde, Bangalore, had jurisdiction to assess
the appellant to incometax and super-tax in respect of the income of
the
period prior to the commencement of the Constitution.
The appeals fail and are dismissed with costs.
Appeals dismissed.
Agent for the appellant : M. S. K. Sastri.
Agent for the respondent : G. H. Rajadhyaksha.
THE UNION OF INDIA
tJ.
MADAN GOPAL KABRA.
(PATANJALI SASTRI C.J., MEHR CHAND MAHAJAN,
S. R. DAs, GHULAM HASAN and
JAGANNAD
0
HADAS JJ.J
Indian Income-tax Act (XI of 1922) as amended by Finance Act
(XXV of 1950), s. 3-Taxable territories-Meaning of-Section
2
(14-A) proviso ( b) (i) and (iii)-Income accruing to assessee in State of
Rajasthan in 1949-50-Liability to income-tax-Sections 3 and 4 of
Indian Income-tax Act and s. 2 of Finance Act
and proviso to the
amended s. 2 (14-A)-Constitution of Indian, Arts. 245 and 246
read with entry 82 of List I of Seventh Schedule-Parliament competent to make laws with respect to taxes for the tvho/e of lndiaConstitution competent to make laws having retrospective operation
for pre-Constitution period.
Respondent
was·
residing
and
carrying on business in the
District of Jodhpur in Rajasthan, a Part B State. His income
arising therein during the accounting year 1949-50
was sought to
be assessed to income-tax for
the year 1950-51 under the Indian
!nCQme-tax Act as
amended by
the Indian Finance Act. He
presented a petition under art. 226 to the High Court praying
1953
D:R.
Madhtwakrishnaiak
v.
The Income-tax
Offim,
I
Bangalore.
'·;
PataT/jali Sastri
C.J.
1953
Dec. 16.
1953
The Unit1n of
India
v.
Madan GnjJtJl
Kabra.
542
SUPREME COURT REPORTS
[1954}
for the issue of a writ directing the
Union of India not to assess
income-tax on his income which had accrued to him prior to April
1, 1950, because no income-tax
was leviable
in Rajasthan (except
in the State of Bundi)
un<lcr any provision of law in force there.
The High Court having accepted his
petition, the Union of India
preferred the present appeal to the Supreme Court.
Section 3 of the Finance Act 1950 (Act XXV of 1950) made
certain amend1nents in the
Indian
Income-tax Act "with
t:ffect
from the !st day of April, 1950" and substituted therein the present
cl. (14-A) in s. 2 in place of previous cl. (14-A) defining "taxable
territories".
Held, that under sub-cl. (i) of cl. (b) of the proviso, the
whole of the territory of India including Rajasthan is to be deemed
taxable
territory
for
the
purpose of s. 4-A of the
Indian Income-tax
Act "as respects
any period". The words uany period'~
mean any period before or after March 31, 1950.
Respondent
Wa<
therefore resident in the taxable
territories
during the
accounting
year 1949-50 and his income, \vhether derived within or without the
taxable territories was taxable under s. 4 sub-s. (I) cl. (b) sub-cl. (ii)
of the Indian Income-tax Act.
Further, all
that
s. 2 ( 14-A) does is to define what the expression "taxable territories" means
in certain cases and for certain
purposes wherever that expression is used
in
the
various provisions of the Indian Income-tax Act,
and as the expression is used
in the charging s. 4 in connection with the conditions which arc
to determine liability to tax, sub-cl. (iii) of cl. (b) of the definition
must,
when read
\Vith
s. 4 of
the
Indian Income-tax
Act,
have reference to chargeability of Income
and not merely to its
computation, and therefore ss. 3 and 4 of the
Indian Income-tax
Act read in the light of the definition in proviso (b) to the amended
s. 2 (14-A) and s. 2 of
the Finance Act,
1950,
authorise
the
imposition of Indian Inco1ne-tax and super-tax on the income
derived by the respondent
in the year 1949-50
in the territory of
Rajasthan.
1-l e!d also, that while it ts
true that the
Constitution has no
retrospective operation,
except where a different
intention
clearly
appears, it is not correct to say that in bringing into existence
ne\v legislatures
an<l conferring on then1
certain powers of legislation, the Constitution operated retrospectively.
Articles 245
and 246 read with entry No. 82 of List I of the
Seventh Schedule cinpowcr
Parliament to 1nake laws with respect
to taxes on incoine for the whole territory of
India and no limitation or restriction is imposed in
regard to retro-active
legislation
and
it is
therefore competent for
Parliament to make a law
i1nposing a tax on the income of any year prior to the
comn1encen1ent of the Constitution. The arnendment of s. 2,
cl. (14-A), of
the
Indian
Income-tax
Act
by the Finance Act, 1950, so as to
authorise the levy of tax on income accruing
in
the
territorv of
Rajasthan in the year 1949-50 is, therefore, valid.
·
S.C.R.
SUPREME COURT REPORTS
543
CIVIL
APPELLATE
JURISDICTION : Case
No.
296
of 1951.
Appeal against the Judgment and Order dated the
16th January, 1951, of the High Court of Judicature
for the State of Rajasthan at Jodhpur (Nawal Kishore
and Kanwar Lal
Bapna JJ.)
in D. B. Civil Miscellaneous Case No. 15 of 1950.
'
M. C. Setalvad,
Attorney-General for India
( G. N.
Joshi, with him) for the appellant.
N. C. Chatterjee, Senior Advocate ( G. L. Agarwal,
with him) for the respondent.
1953. December 16. The Judgment of the Court
was delivered by
PATANJALI
SAsTRI C. J.-This is
an appeal from
an order of the High Court of Rajasthan directing by
writ issued under article 226 of the Constitution that
the Union of India, appellant herein, should not levy
income-tax on the income of the respondent accruing,
arising or received in Rajasthan (excluding the area
of the former covenanting State of Bundi) prior to
April 1, 1950.
The respondent
resides and carries on business in
the District of Jodhpur in Rajasthan which is one of
the States specified in Part B of the First Schedule to
the Constitution
(hereinafter referred to
as
Part B
States). In May, 1950, the respondent was required
to file a return of his income for the previous year,
that is the year ending March 31, 1950, for assessment
to income-tax, and subsequently was also asked to
produce
the
relevant
account
books before the
Income-tax
Officer,
Jodhpur,
on
August
11,
1950.
Thereupon the respondent
presented
the petition, out
of which this appeal arises, on August 23, 1950, invoking the jurisdiction of the High Court under article
226 of the Constitution for the issue of "a writ of
,
mandamus or
certiorari or other appropriate writ''
directing the appellant not to take any action under
the
Indian
Income-tax
Act,
1922,
(hereinafter
referred to as the Indian Act) as amended by the
Indian Finance Act,
1950, for the assessment or levy
1953
The Union of
India
v.
Madan Gopal
K«bra.
1953
Tir.t Union oj
India
v.
Madan Gopal
Kabra.
Po!a11Jali Sastri
C.].
544
SUPREME COURT REPORTS
[1954]
of income-tax on the income which accrued or arose
to the respondent or was received by him prior to
April 1,
1950, on the ground that such income was
not liable to be charged "under the provisions of any
law validly in force in Rajasthan."
The petition was heard by a Division Bench of the
High Court (Nawal Kishore and Kanwarlal Bapna JJ.)
who
accepted the
petition and issued
a writ as
already stated,
overruling
sundry
preliminary
objections to which no reference need be made as they have
not been raised by·the appellant before us.
As is
well-known, after the Indian Independence
Act, 1947, came into force, various Indian States (as
they were then known) which had been recognised,
subject
to
certain
restrictions
and limitations
not
material
here,
as
independent
principalities
were
brought into the Dominion of India from time to time
under arrangements with their Rulers, and this process
of
accession
and integration resulted in the
expansion of
the territory of India in
successive
stages. So far
as
Rajasthan is concerned, the Rajaputana States, as they were then called, integrated their
territories into the United State of Rajasthan, and
the new State acceded to the Dominion of India by
an Instrument of Accession executed by the head of
the
State
(Rajpramukh)
on
April
15, 1949, and
accepted by the Governor-General of India on May 12,
1949.
By
clause
(3)
of
the
Instrument the
Rajpramukh accepted "all matters enumerated in Lists I
and III of
the Seventh Schedule
to the- · Act
(the
Government of India Act, 1935)
as matters in respect
of which the Dominion Legislature may make laws
for the United State, provided that nothing contained
in the said Lists or in any . other provisions of the Act
shall be deemed to empower the Dominion Legislature
to impose any tax or duty in the territories of the
United State or prohibit the imposition of any duty
or tax
by
the Legislature of the United State in the
said territories." This limitation on the power of the
Domin;on
Legislature
thus
imposed
by
agreement
between
the
two
States was
given
effect
to as a
,
S.C.R.
SUPREME COURT REPORTS
545
constitutional
limitation
by
section
101
of
the
·Government of India Act,
1935, as
adapted by
the
Governor-General in August, 1949, in exercise of the
powers confererd on him by the Indian Independence
Act,
1947.
That
section
provided that "nothing
in this Act shall be
construed
as
empowering
the
Dominion Legislature to make laws for an acceding
.State otherwise than in accordance with the Instrument of Accession of that State and any limitations
·contained
therein."
The position
thus was that the
Dominion Legislature had no powff to make any bw
imposing any tax or duty
in the
territories
or the
United State of Rajasthan. In July,
1949, however
the
Indian
States
Finances
Enquiry
Committee
appointed
by
the
Government
of India
submitted
their report recommending, among other things, the
financial integration of the
acceding
States and the
imposition of the
Indian income-tax
in
their
territories as from the first day of April, 1950.
Meanwhile
the framing
of the
Constitution
of India
by
the
Constituent
Assembly,
which
also
included
duly
appointed representatives of the acceding States, was
nearing completion, and in
November, 1949, the Rajpramukh,
in
exercise
of
his
powers
as the
duly
constituted
head of the State, issued a Proclamation
whereby he
declared and
directed that the "Constitution
of
India
shortly
to
be
adopted
by
the
Constituent Assembly of India shall be the Constitution
for the
Rajasthan
State
as for
the other parts of
India, and
shall
be
enforced
as such
in accordance
with the tenor of its provisions and that the provisions
·of the said Constitution shall, as from the date of its
commencement,
supersede
and
abrogate
all
other
constitutional
provisions inconsistent
therewith which
are at present in force in this State."
The Constitution of India then came into force on
January
26,
1950.
It repealed the
Government of
India Act, 1935, including section 101 thereof, and
brought
all the Part B States, including Rajasthan,
within the Union of India,
incorporating
the
territories of all those
States in the
"territory
of India"
as defined in
article 1(2).
It created a new Central
1953
Thi Union 9f
Jntlia
••
,\fadan Gi)pal
Kpq,..,
Patanjali .Sastri
C.J.
1953
Tl~ Union of
India
v;
Jladan GoJJal
.Ki1Wo.
Patafljali Sastri
C.J.
SUPREME COURT REPORTS
[1954]:
Legislature
for the
Union called
Parliament and
empowered that Legislature by article 245 "to make
laws for the whole or
any part of
the
territory
of
India" subject
to the
provisions of the
Constitution
and,
by article 246(1)
read with entry
No. 82
of
List
I, it conferred "exclusive power" to make laws
with respect to "taxes on income other than agricultural
income".
In exercise of that
power
and
pursuant to the recommendation of the Indian States
Finances
Enquiry
Committee
referred
to
above,
Parliament enacted the Finance Act, 1950 (Act XXV of
1950) providing by section 2( l) that income-tax and
super-tax shall be charged "for the year beginning on
the first day of April, 1950," (i.e., 1950..51) at lli: rates
specified in Parts I and II respectively
of
the
First
Schedule to that Act. Section 3 made certain amendments in the
Indian
Act "with effect from the first
day of
April,
1950."
Among these was
the
substitution of the
present
clause
(14-A) in section 2 in
the place of clause (14-A) as it stood before. The new
clause
defines
"taxable
territories"
as
respects
different periods so as to correspond to the successive
stages of expansion of the territory of India after the
Indian Independence Act, 1947.
The material part of
that clause as amended runs thus :-
( 14-A) 'taxable territories' means-
(a) ..... .
(b) ..... .
( c) ..... .
(cl) as respects any period
after the 31st
day
of
March, 1950, and before the 13th day of April, 1950,
the territory of India excluding the State of Jammu
and Kashmir and the Patiala and East Punjab States
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) ..... .
S.C.R.
SUPREME COURT REPORTS
547
(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 4-A and 4-B,
(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."
The definition, it may be observed in passing, is by
no means a model of perspicuity. Parts of it seem
redundant
and
even mutually
contradictory.
For
instance,
(leaving out
tbe
State of
Jammu and
Kashmir altogether in this discussion) whereas clause
(<l) excludes the Patiala and the East Punjab States
Union
from
the
taxable
territories
as
respects the
period from April
1, 1950, to April
12, 1950, subclause (ii) of .clause (b) of the proviso would seem to
include that State
also
within such territories
as
respects the same period, and while clauses (d) and (e)
of the substantive part of the definition when read
tog~ther seem . apt by themselves to bring the territorv
of India within the taxable territories as respects the
period after March 31, 1950, sub-clause (ii) of clause
(b) of the proviso apparently seeks to bring about the
same result by means of a fiction.
Now. the scheme of the Indian Act is to tax a person
resident in the taxable. territories during the previous
vear on all his income of the previous year whether
accruing within or 1vithout the taxable territories, and
to tax a person not resident in the
taxable territories
upon his income accruing within the taxable territories
during the previous year. Residence in the taxable
territories has to be determined in accordance with the
provisions of section 4-A which, in the case of an
individual, takes into account his having been in such
territories .within the five years preceding the year of
assessment. If Rajasthan was a taxable territory in the
year 1949-50,
the respondent would
be chargeable in
1953
The Union -0f
lndia
...
.\fadw1 Gopal
/(a6ra.
Pata.11}ali Sastri
C.J.
!953
Till Uni"" qf
lndia
...
Madan Gopal
· abrn1
Patanjali Saslti
C.].
548
SUPREME COURT REPORTS
[1954]
respect of his income whether derived within or without
Rajasthan. It is,
however, argued on his behalf by
Mr. Chatterjee that section 3 of the Finance Act, 1950,
having substituted the
amended clause
(14-A)
"with
effect from the first day of April, 1950,'' Rajasthan
was not a taxable territory during the accounting year
1949-50,
and
that no income-tax
being admittedly
leviable in that State on the income accruing there in
that year, the new clause (14-A) should not be construed so as to impose liability to pay Indian incometax on such income.
According to
learned counsel
the word "assessment" in sub-clause (iii) of clause (b)
of the proviso must be taken to mean only computation of income and not the imposition of liability. In
support
of the construction he
relied on
the decision
of the Privy Council in Commissioner of Income-tax,
Bombay v. Khemchand Ramdas( 1 ) where it was said
that the word "assessment" was used in the Indian
Income-tax Act as meaning "sometimes the computation of income, sometimes the determination of tax
payable and sometimes the whole procedure laid down
in the Act for
imposing liability on the taxpayer."
Mr. Chatterjee reinforced the argument by referring
to the repealing and saving provisions of section 13
which he read as keeping alive a State law of incometax in force in any Part B State "for the purposes of
levy,
assessment
and collection of
tax"
not
only in
respect of the income of the year 1948-49 but also on
the income of 1949-50 which is the previous year for
assessment for the year ending March 31, 1951,
(i.e.,
1950-51). The result, therefore, according to him, was
that where any State law of income-tax was in force
in any Part B State before April 1, 1950, so as to make
the income of 1949-50 chargeable to tax, the amended
dause (14-A)
authorised the computation of such income for the purpose of taxation as, for example, in
the State of Bundi. But where, as
in the rest of
the territory of Rajasthan, no income-tax was leviable
on the income of the year 1949-50, the amendment by
the Finance Act, 1950, which took effect only from
April 1,
1950, did not, on its true construction, bring
(t) l.L.R. 1938 !lorn. 487.
S.C.R.
SUPREME COURT REPORTS
549
the income of the year
1949-50 into charge under the
Indian Act.
This argument found favour with the learned Judges
in the High Court but we are unable to accept it. A
short answer to it is provided by sub-clause ( i) of clause
(b) oi the proviso under which the whole of the territory
of India including Rajasthan is to be deemed taxable
territory for the purpose of section 4-A of the Indian
Act "as respects any period."
The words "any period"
cannot be taken to mean "any period after March 31,
1950," for the period referred to in the next clause is
expressly limited in that sense. Those limiting words
cannot be read into sub-clause (i) which must, therefore, be understood as referring to any period before or
after March 31, 1950. As already indicated, residence
in the taxable territories within the meaning of section
4-A can, in some cases, relate back to as many as
five
years before the year of assessment,
and that
is obviously the reason why the period mentioned
in sub-clause (i) is not limited as in sub-clause (iii)
of clause (b) of the proviso. Indeed, if the words
"any period" in sub-clause (i) were intended to mean
any period after March 31, 1950, that sub-clause of the
proviso. which enacts a fiction, would be wholly unnecessary, for clauses (d) and (e) of the substantive
part of the definition taken together clearly have the
effect, as already stated, of making the territory of
India a taxable
territory
during that
period. If
Rajasthan
was
thus a part of the taxable territories
during such period
preceding
the
assessment
year
1950-51, as would be necessary to make the respondent
"resident" in 'Such territories within the meaning of
section 4-A,
then the income
accruing or arising to
him in Rajasthan during the year
1949-50 would be
taxable though Rajasthan was not part of the taxable
territories in that year, for,
in the case of a person
resident in the taxable territories, income accruing or
arising to him without the taxable territories is also
chargeable to tax under section 4, sub-section ( 1) clause
(b) sub-clause (ii) of the Indian Act. This aspect of
the matter does not appear to have been sufficiently
1953
Thi Uni .. of
India
v.
MaianGopal
Kabra.
Patanjali Sastri
C.J.
195:1
Tht Union of
India
v.
~\ladan Gopal
Ka bra.
Palanjali Sastri
C.J.
550
SUPREME COURT REPORTS
[1954]
appreciated in the court below. The learned Judges
say : "The first clause in proviso (b) means to say that
the earlier residence in Part B States will be taken to
be residence in taxable territories while taking account
of the residence
for a certain prior period."
Having
thus correctly construed
the clause,
they failed
to
realise its effect on the operation of section 4 ( 1) (b)
(ii), for they proceeded to consider the construction of
proviso
(b)
(iii)
observing : "The
next important
question calling for determination is whether Rajasthan became
taxable
territory
during the
financial
year in this case, i.e., 1949-50, for, if the answere is in
the
negative,
the
petitioner
must be held
to be
immune from liability to assessment on the income
of that year." This, as
pointed out above,
is a misconception. It may well be that proviso (b) (iii) was
designed to bring the income, profits and gains of the
year 1949-50 into charge under section 4 ( 1) (a) and
section 4( 1) ( c ), in which cases receipt or accrual, as
tbe case may be, in the taxable territories is the test
of chargeability.
It may be mentioned
here that
the
exemption from tax under section 14 (2) (c) of the
Indian Act of income accruing within Part B States
was abrogated, except as
reganls the State of
Jammu
and Kashmir, by the
amendment
of that pmvision
with effect from the first <lay of April, 1950.
Even assuming it were necessary for the Revenue
to bring the case within proviso (b) (iii) in order to
sustain the charge on the respondent's income accruing
in Rajasthan during the year 1949-50, we are of opinion
that the construction placed by the learned Judges on
that clause cannot be supported. They assume that
proviso (b) (iii) is a provision authorising assessment of
income-tax, and proceed to discuss what the word
·"assessment" in that context should be taken to mean.
Charge · of income to tax and its computation are
matters
governed
by other
provisions
of the Indian
Act. All that section 2 (14-A)
does
is to define what
~
the expression "taxable
territories"
means in
certain
cases and for certain purposes wherever that expression
1s used in the various
provisions
of the
Indian Act.
S.C.R.
SUPREME COURT REPORTS
551
And as the expression is used in the charging section
4 in connection with the conditions which are to determine liability to tax, sub-clause (iii)
of clause (b) of
the definition must, when read with section 4 of the
Indian Act, have reference to chargeability of income.
The result is that sections 3 and 4 of the Indian Act
read in the light of the definition in proviso (b) to the
amended section 2 (14-A)
and section 2 of the Indian
Finance Act,
1950,
authorise the
imposition of the
Indian income-tax and super-tax on the income derived
by the respondent in the year
1949-50 in the territory
of Raj asthan.
As already observed, the learned Judges below, in
order to reinforce their construction of sub-clause (iii)
of clause (b) of the proviso, read section 13 of the
Finance Act as keeping alive the law of income-tax in
force in any Part B State for purposes of levy, assessment, and collection of tax in respect of the income of
1949-50. This, in our opinion, is not the effect of section 13 on its true construction. After referring to the
decision of the Privy Council to which reference has
been made, the learned Judges say-
"There are three stages in connection
with the
imposition of a tax. The first is the declaration of
liability, the second is the assessment and the third is
the collection. This clause makes the territorv a taxable territory for the purpose of making any ass.essment
but not for the purpose of chargeability. The charge-
, ability is left to arise by some other law and that law
is the previous State law referred to in section 13,
,Financ~ Act, 1950. It arises in a twofold manner. In
the first place, under section 6 of the General Clauses
Act the repeal of the State law as from April
1, 1950,
· did not affect any liability incurred under the repealed
enactment and secondly, though the language used in
··section 13 is very complicated, a careful perusal makes
.it clear that. the State law is not only kept alive for the
. purpose of . levy, assessment and collection of inccime-
":tax on the income of.the year 1949-50, but.also for the
';ibove
purposes in the subsequent year. The previous
~,y,ear in relation Jo the subsequent .· y~ar J95t52 is
the
1953
The Uni•n o..f
L"Uli•
...
MaJan Gopal
K4br0.
Palanjali'' Sastri
C.J.
1953
The L'nio11 of
lndia
••
Madan Q,pal
Kabra.
Patllt!fali Saslri
C.J.
552
SUPREME COURT REPORTS
[1954}
year 1950-51 and the period not included therein would
be the year 1949-50 and the State law is directed to
apply if the income remains untaxed under the Indian
law ........ Therefore if somebody is liable to income-tax
in any territory where such law was in force prior to
April 1, 1950, but certain period has not been included
while assessing him to income-tax but the chargeability existed, the proviso
(b) (iii)
would become
applicable for such period as he was not charged but
the
liability had
accrued,
and the
territory
would
become taxable territory for the purpose of making
any assessment of the year 1950-51."
It will be seen that the basis on which this reasoning.
proceeds is that section 13 of the Finance Act, 1950,
saves
the operation of the States
laws relating to
income-tax in Part B States in the year 1949-50 for
the purpose of levy, assessment and collection, and it
is those laws that imposed the liability to tax on the
income accruing in those States during that year. This
is a misapprehension of the true meaning and effect of
section 13. That section, so far as it is material here,
runs thus:
"Repeats and savings.-(!) If immediately before the
1st day of April, 1950, there is in force in any Part B
State other than J ammu and Kashmir or in Manipur,
Tripura or Vindhya Pradesh or in the merged territory
of Cooch-Behar any law relating to income-tax or supertax or tax on profits of business, that law shall cease
to have effect except for the purposes of the levy,
assessment and collection of income-tax and super-tax
in respect of any period not included in the previous
year for the purposes of assessment under the Indian
Income-tax Act, 1922, for the year ending on the 31st
day of March, 1951, or, for any subsequent year .......... "
A close reading of that provision will show that it
saves the operation of the State law only in respect of
1948-49 or any earlier period which is the period not
'
included in the previous year (1949-50) for the purpo!!Cs
of assessment for the year
1950-51. In other words,
there remained no State law of income-tax in operation,
in any Part B State in the year 1949-50. No doubt,
.,
S.C.R.
SUPREME COURT REPORTS
553
there
is
the phrase "or for any subsequent year"
immediately following the words "for the year ending
on the 31st day of March, 1951." Relying on that
phrase, the
learned Judges argue thus : Take the
"subsequent
year"
1951-52.
The previous year for
making an assessment for that year would be 1950-51.
The year 1949-50 "is a period not included" in that
previous year. Therefore, section 13 saves the operation of any law relating to income-tax in force in any
Part B State in 1949-50 "for the purposes of the levy,
assessment and collection of income-tax and super-tax
in respect of that period," that is to say, the income
accruing in 1949-50 in a Part B State continues to be
chargeable under the State law.
But the learned
Judges. failed to see that, on this reasoning, the same.
thing could be said of the income of 1950-51, 1951-52,
etc. if you take the "subsequent year" to be 1952-53,
1953-54, etc. and work backwards. On this construction of section 13, the State law of income-tax would
continue to operate for an indefinite period even after
the commencement of the Constitution during which
period the Indian income-tax and super-tax would be
leviable. In other words, the State law of income-tax
in Part B States for the levy, assessment and .collection
would be in operation side by side with the Indian Act
even after the financial integration of those States
with the Indian Union-a result manifestly repugnant
to the policy underlying the Finance Act, 1950. No
argument, therefore, could be logically based
OJ} the
words "or for any subsequent period", which evidently
were added with a view to catch the income
of any
broken period perior to April 1, 1950, which might
otherwise escape
assessment both under the repealed
State law and the newly introduced Indian Act.
"
Nor can section 6 of the General Clauses Act, 1897,
"'f
serve to keep alive the liability to pay tax on the
income of the year 1949-50 assuming it to have accrued
under the repealed State law, for a "different intention"
clearly appears in sections 2 and 13 of the Finance Act
read together as
indicated above.
In
any
case,
no
question of keeping any such liability alive could arise
in the present case as admittedly no State law of
i
8-94 S. C. Indiaf 59
it
)I
_{f
l
t
i
'
1953
The Union of
India
v.
Madan Gopal
Kahra.
Patanjali Sastri
C.J.
1953
TJ..e Wnion of
India
v.
Madan Gopal
Kabra.
Pati;njali SaJtri
C.J.
554
SUPREME COURT REPORTS
f 1954 J
income-tax was in operation in the territory of Rajasthan, except the former State of Bundi. On this
view the whole basis of the reasoning of the learned
Judges below falls to the ground.
Even so, it was contended, the Finance Act, 1950,
in so far as it purports to authorise such levy is ultra
vires and void as Parliament was not competent under
the Constitution to make such a law. The argument
was put in two ways. In the first place, it was said
broadly
that as
the Constitution could not operate
retrospectively
as
held by this
court
in Kesava
Mad!tava Menon's case( 1), the
power of legislation
conferred by the Constitution upon Parliament could
- not extend so as to charge retrospectively the income
accruing prior to the commencement of the Constitution.
This is a fallacy. While it is true that the
Constitution has
no
retrospective operation, except
where a different intention clearly appears it is not
correct to
say
that in bringing into existence new
Legislatures and conferring on them certain powers
of legislation, the Constitution
operated
retrospectively. The legislative powers conferred upon Parliament
under article 245 and article 246 read with List I of the
Seventh Schedule could obviously be exercised only
after the Constitution came into force and no retrospective operation of the Constitution is involved in the
conferment of those powers. But it is a different thing
to say that Parliament in exercising the powers thus
acquired is precluded from making a retroactive law.
The question must depend upon the scope of the powers
conferred, and that must be determined with reference
to the "terms of the instrument by which, affirmatively,
the legislative powers were created and by which, negatively, they were restricted" : [Queen v. Burah ( ') ].
Article 245
of the Constitution enacts that subject to
its
prov1S1ons
Parliament may
make
laws for
the
whole or any part of the territory of India and
article 246 proceeds
to distribute legislative powers as
between Parliament and the State Legislatures in the
(r) [r,,51] S.C.R. 228.
(•) 5 LA. I)8.
•
S.C.R.
SUPREME COURT REPORTS
555
country. Thus, these articles read with entry No. 82'
of List. I of the Seventh Schedule empower Parliament
to make laws with respect to taxes on income for
the whole of the territory of India, and no limitation
-0r
restriction
is
imposed
in
regard
to
retroactive
legislation. It is, therefore, competent for Parliament
to make a law imposing a tax on the income of any
year .prior to the commencement of the Constitution.
It was said, however, that the line of decisions like
Queen v. Burah(' ), which defined the powers of legislatures created by the British Parliament, could have
no application to the Union Parliament which .came
into life as a new legislature on the commencement of
the Indian Constitution. It could not be assumed
that such a legislature had the power of making a law
having retrospective operation in relation to a period
prior to its birth unless the Constitution itself clearly
and explicitly conferred such power. In ·support of
this
argument
certain observations
of one of the
Judges
in an
Australian
case
[Ex parte Walsh and
Johnson;
In re Yates(')] were
relied
on. We are
unable to accept
the argument.
Our Constitution,
as appears from the Preamble, derives its authority
from the people of India, and learned counsel conceded that it was open to the people to confer on the
legislatures
established by
the Constitution, which
they framed
through their representatives, power to
make laws having operation in relation to periods
prior to the commencement of the Constitution. But,
it was insisted, such a power should be given in clearly
expressed terms. There is, however, no question here
of the Constitution operating retrospectively in bringing into existence the Union Parliament or the legislatures of
the States. The only question
is what
powers have been conferred upon these legislatures
by the representatives of the people who framed the
Constitution
and, in determining
that
issue,
the
principles laid down m cases like Queen v. Buralz(')
apply in full force. The observations in the Australian
case, to which :eference has been made, seem to us
(I) 5 I.A. 178.
(2) 37 C.L.R. 36, at pp. 80, 81.
1953
Thi Union of
India
v.
Madan Gopal
Kabra.
Patanjali Sastri
C.J.
1953
The Union of
India
v.
Madan Gopal
Kabra.
Pataniali Sastri
·c.J.
556
SUPREME COURT REPORTS
to go too far and cannot be accepted as sound constitutional doctrine.
Nor can it be saiJ, in strictness, that the Finance
Act,
1950,
is
retroactive
legislation. That
Act, as
already
noticed,
purports
by
section
2 to
charge
income-tax and super-tax at specified rates "for the
year beginning on the 1st day of April, 1950". The
case is thus one where the statute purports to operate
only prospectively, but such operation has, under the
scheme of the Indian income-tax law, to take into
account income earned before the statute came into
force.
Such an enactment cannot, strictly speaking,
be said to be retroactive legislation, though its operation may affect acts Jone in the past. Dealing with
a statute authorising the removal of destitute widows
from a parish, it was
observed
in an English case
[Queen v. St. Mary, Whitechapel(1)]: "It was said that
the operation of the statute
is
confined
to persons
who have become widows after the Act was passed and
that
the
presumption against a
retrospective
statute
being intended supported this construction. But we
have before shown that the statute is
in its
direct
operation prospective as it relates to future removals
only and that it is not properly called a retrospective
statute because a part of the requisites for its action
is drawn from time antecedent to its passing." It is,
however,
unnecessary to
pursue
this
aspect of
the
matter further as we have held that Parliament has
the power to make retroactive laws.
Secondly,
it
was
said
that
section
101
of
the
Government of India Act, 1935,
which gave
effect
to the
stipulation in
the Instrument of Accession
against the imposition by the Dominion Legislature
of any tax or duty in the territory of the United
State of Rajasthan,
was
kept
alive,
notwithstanding
its repeal by article 395 of the Constitution, by section 6 of the General Clauses Act, 1897, [which is
made applicable to the interpretation of the Constitution by
article 367 ( 1) l as a "right" or "privilege"
acquired
under
the
repealed
enactment,
and so
(r) (r848) r2 Q.B. r20. !2); rr6 E.R. Brr, 8r4.
•
•
S.C.R.
SUPREME COURT REPORTS
557
continued to operate under article 372 ( 1) as a constitutional
limitation on the power of Parliament, with
the result that Parliament had no power to impose
tax contrary to section 101 of the Government of
India Act, 1935. The argument is somewhat ingenious
but there are obvious difficulties in the way of its
acceptance. For one thing, section
101 of the Government of India Act, 1935, created no right or privilege
in the subjects of the United State of Rajasthan which,
notwithstanding the repeal of that section, could be
regarded as stiII enuring for their benefit. Section 101
merely imposed a restriction upon the power of the
Dominion Legislature to make laws for an acceding
State inconsistent with the stipulations contained in
the Instrument of Accession.
When
that
section
along with the rest of the Government of India Act,
1935, was repealed by the new Constitution, which has
created new
legislatures with power
to make retroactive laws, it is idle to suggest that rights or privileges
acquired while the old Constitution Act was in force
are preserved for ever-for that must be the result
0£ the argument-by section 6 of the General Clauses
Act, which can have no application to such cases.
Furthermore, it will be recalled that the Proclamation
made by the Rajpramukh as Ruler of Rajasthan on
23rd November, 1949, declared and directed that the
Constitution of India when brought into force "shall
be the Constitution for the Rajasthan State" and it
expressly "superseded
and abrogated all other constitutional
provisions
inconsistent
therewith"
which
were
then
in force. The competency of the Raipramukh as the Ruler of the State to accept the
Constitution of India as
governing that State also
wa~ not challenged before us, and it is manifest that,
after such declaration
and direction, no restriction
imposed on the Dominion Legislature by the Instrument of Accession and enforced by section 101 of the
Government of India Act could prevail against the
legislative powers
conferred
on Parliament by the
Constitution of India. The difference in
the constitntional position which previously
existed
between
the
Provinces
and
the
acceding States has
thus
1953
The Union of
India
v.
Madan Gopal
Kabra.
Patanjali Sastri
C.J.
1953
The Union of
India
v.
Madan Gopal
Kabra.
Palaf!fali Sastri
C.J.
1953
55S
SUPREME COURT REPORTS
[1954}
disappeared except, of course, in regard to matters m
which such distinction has been preserved by the
Constitution itself,
e.g., by article 238
and article 371.
It follows that the amendment of section 2 clause
(14-A)
of the Indian Act, by the Finance Act, 1950,
so as to authorise the levy of tax on income accruing
in the territory of Rajasthan in the year 1949-50 is
within the competence of Parliament and therefore
valid.
We accordingly allow the appeal, and set aside
the judgment of the High Court. We make no order
as to costs.
Appeal allowed.
Agent for the appellant : G. H. Rajadhyaksha.
Agent for the. respondent : Rajinder Narain.
THE ST A TE OF 'WEST BENGAL
v.
MRS. BELA BANERJEE AND OTHERS.
rPATANJALI sAsTRI c.J., MEHR CHAND MAHAJAN,
S. R. DAs, GHULAM HASAN and
JAGANNADHAD.\S JJ.J
?'he rv est Ren gal Land Dcvelopn1ent and Planning Act, 194!!
(West
Bengal
Act XX/ of 1948)-Provisions of s. 8-(i) Declaration
under
s.
6-Conclusive
evidence-I~and-Subject
1natter
of decla1·ation needed for a public purposc-(ii) Con1pensation
of
land acquired under the Act not to exceed nzarket value of land as on
Dece1nber 31, 1946-ultra Yires the Constitution and void-Contti·
tution of India, ai·t.