# G. EKAMBARAPPA & ORS v. EXCESS PROFITS TAX OFFICER, BELLARY

- **Citation:** [1967] 3 S.C.R. 864
- **Court:** Supreme Court of India
- **Decided:** 1967-05-02
- **Case number:** Civil Appeal No. 185 of 1966
- **Bench:** J. C. Shah, S. M. S!Kri, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/g-ekambarappa-ors-v-excess-profits-tax-officer-bellary-4032
- **Pages:** 7

## Headnote

Aclap1<1tio11 of Laws, Order (No. 3) dated December 31, 1956Excess Profits Tax Act, 1940 made i11app/lcable to all areas forming
part of a Part B State immediately before November I, 1956-IVhetlier
tunounts to 'repeal' of Act in respect of such
area-General Clauses
Acl. s. 6 1vhether attracted.
General Clauses Act, S• 6(e)-Liabillty 'acer :ed
or
incurred'-
Bellary district i11cluded i11 Part B State Immediately before NO\·ember
I, 1956-Notice under E.tcess Profits Tax Act, s. IS Issued in 1960 ln
respect of business carried on in sahl district in 1943-44-Terms of s.
6(e) General Clauses Acl whether satisfied-Liability 10 tax ll'hetlier
.arises at eud of chargeable accounting period or lvhen assessntent pro·
ceedings completed.
The District of Bellary originally belonged to the Part 'A' State of
Madras in British India. On October l. 1953 it merged in the Part 'B'
State of Mysore. The Excess Profits Act, 1940 applied only to British
India. · When Bellary District went to the Part 'B' State of Mysore the
Act ceased to apply to it. After the States Reorganisation Act, 1956,
.\lysore also became a Part 'A' State.
But according to s. 1(2) of the
Adaptation of Laws
(No. 3)
Order dated December 31. 1956. the
aforesaid Excess Profits Tax Act was to extend "to the whole of India
except the t~rritories which immediately before November 1, 1956 were
comprised in a Part 'B' State." In 196Q the Excess Profits Tax Officer,
Bellary gave a notice to the appellants under s. 15 of the Act in respect of the period October 30, 1943 to October 30, 1944. The appellnnts objecied that the Act did not apply to Bellary district as immec;liately
·before November 1, 1956 it was in a Part 'B' State. The plea was re1ected by the departmental authorities as well as by the High Court
m a wnt petition under Art. 226 of the Constirution. In appeal. by
special leave, to this Court it was contended that so far as Bella11· Dis-·
trict was concerned it was not a case of repeal but only of non-application of the Act, and thus s. 6 of the Gen~ral Clauses Act was not
attracted.
It was further urged that even if s. 6 applied no liability
had accrued or been incurred in terms of cl. ( e) of the section
as
there was no assessment of escaped profits before November l, 1956
when the adaptation was made.
HELD : (i) The result of the Adaptation of Laws Order 1956 so
far as the Act was concerned, was that the provisions of the Act were
no longer opplicable or in force in Bellary district. To put it differently the Act was repealed so far as the area of Bellltry dIStrict was con-
,c~rned. Repeal of the Act means revocation or abrogation of the Act
and s. 6 of the General Clauses Acr applies even in the case of a partial repeal, or repeal of part of an Act.
[866H; 867A]
(ii) The case was covered by s. 6(e) of the General Clauses Act.
The liability of an assessee to tax arises immediately at. the end
~f t~e
chargeable accounting period and not
merely at the ttme when 1t
tS
quantified. bv assessment
proceedings. It followed t~refore that the
A
B
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E
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G
H
B
c
n
E
F
G
H
EKAMBARAPPA v. P..P.T.O, (Rama.swami, J,)
865
notice issued under s. 1 S of the Act was legally va)id and tho "f;P~llants
representing the original partners of the firm continued t!> be ta e to
be proceeded against under that section for the profits which had escap·
ed taxation. [867 E-Fl
Wallace Brothers & Co. v. Commissioner of Income-tax, 16 I.T.R.
240 (P.C.), Chatturam Hori/ram Ltd. v. C.l.T., 27 J.T.R. 709. Kalwa
Dcvadattwn v. Union of India, 49 J.T,R. !65 and State of Kera/a v, N.
Sami Iyer, A.l.R. 1966 S.C. 1415, rehed on.

## Text

G. EKAMBARAPPA & ORS.
v.
EXCESS PROFITS TAX OFFICER, BELLARY
May 2, 1967
[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.]
Aclap1<1tio11 of Laws, Order (No. 3) dated December 31, 1956Excess Profits Tax Act, 1940 made i11app/lcable to all areas forming
part of a Part B State immediately before November I, 1956-IVhetlier
tunounts to 'repeal' of Act in respect of such
area-General Clauses
Acl. s. 6 1vhether attracted.
General Clauses Act, S• 6(e)-Liabillty 'acer :ed
or
incurred'-
Bellary district i11cluded i11 Part B State Immediately before NO\·ember
I, 1956-Notice under E.tcess Profits Tax Act, s. IS Issued in 1960 ln
respect of business carried on in sahl district in 1943-44-Terms of s.
6(e) General Clauses Acl whether satisfied-Liability 10 tax ll'hetlier
.arises at eud of chargeable accounting period or lvhen assessntent pro·
ceedings completed.
The District of Bellary originally belonged to the Part 'A' State of
Madras in British India. On October l. 1953 it merged in the Part 'B'
State of Mysore. The Excess Profits Act, 1940 applied only to British
India. · When Bellary District went to the Part 'B' State of Mysore the
Act ceased to apply to it. After the States Reorganisation Act, 1956,
.\lysore also became a Part 'A' State.
But according to s. 1(2) of the
Adaptation of Laws
(No. 3)
Order dated December 31. 1956. the
aforesaid Excess Profits Tax Act was to extend "to the whole of India
except the t~rritories which immediately before November 1, 1956 were
comprised in a Part 'B' State." In 196Q the Excess Profits Tax Officer,
Bellary gave a notice to the appellants under s. 15 of the Act in respect of the period October 30, 1943 to October 30, 1944. The appellnnts objecied that the Act did not apply to Bellary district as immec;liately
·before November 1, 1956 it was in a Part 'B' State. The plea was re1ected by the departmental authorities as well as by the High Court
m a wnt petition under Art. 226 of the Constirution. In appeal. by
special leave, to this Court it was contended that so far as Bella11· Dis-·
trict was concerned it was not a case of repeal but only of non-application of the Act, and thus s. 6 of the Gen~ral Clauses Act was not
attracted.
It was further urged that even if s. 6 applied no liability
had accrued or been incurred in terms of cl. ( e) of the section
as
there was no assessment of escaped profits before November l, 1956
when the adaptation was made.
HELD : (i) The result of the Adaptation of Laws Order 1956 so
far as the Act was concerned, was that the provisions of the Act were
no longer opplicable or in force in Bellary district. To put it differently the Act was repealed so far as the area of Bellltry dIStrict was con-
,c~rned. Repeal of the Act means revocation or abrogation of the Act
and s. 6 of the General Clauses Acr applies even in the case of a partial repeal, or repeal of part of an Act.
[866H; 867A]
(ii) The case was covered by s. 6(e) of the General Clauses Act.
The liability of an assessee to tax arises immediately at. the end
~f t~e
chargeable accounting period and not
merely at the ttme when 1t
tS
quantified. bv assessment
proceedings. It followed t~refore that the
A
B
c
D
E
F
G
H
B
c
n
E
F
G
H
EKAMBARAPPA v. P..P.T.O, (Rama.swami, J,)
865
notice issued under s. 1 S of the Act was legally va)id and tho "f;P~llants
representing the original partners of the firm continued t!> be ta e to
be proceeded against under that section for the profits which had escap·
ed taxation. [867 E-Fl
Wallace Brothers & Co. v. Commissioner of Income-tax, 16 I.T.R.
240 (P.C.), Chatturam Hori/ram Ltd. v. C.l.T., 27 J.T.R. 709. Kalwa
Dcvadattwn v. Union of India, 49 J.T,R. !65 and State of Kera/a v, N.
Sami Iyer, A.l.R. 1966 S.C. 1415, rehed on.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 185 of
1966.
Appeal by special leave from the judgment and order dated
March 20, 1962 of the Mysore High Court in Writ Petition No.
109 of 1960.
A. K. Sen, R. Ganapathy Iyer and R. Gopa/akrishnan, for the
appellants.
D. Narsaraju, T. A. Ramachandran and R. N. Sachthey, for
the respondent.
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal is brought, by special leave, from
the judgment of the Mysore High Court dated March 20, 1962
dismissing writ petition No. 109 of 1960. The appellants had
prayed therein for the grant of writ for quashing a notice dated
January 16, 1960 issued by the respondent under s. 15 of the
Excess Profits Tax Act, 1940 (Act XV of 1940), hereinafter
called the 'Act', calling upon the appellants to submit a return of
the standard profits and the profits actually made during the
chargeable accounting period from October 30, 1943 to October
30, 1944 on the ground that the profits had been under-assessed.
The appellants carried on a business constituting themselves
into a partnership called 'Guduthur Thimmappa & Brothers in
1934. On the date of commencement of the business the partners were G. Thimmappa, G. Ekambarappa, and G. Padmanabhan, each of the partners representing their respective joint
families. The business of the firm was in Bellary town and· the
par~ners of the firm were _residents ~f Bellary town during the
penod the firm was carrymg on busmess. The firm was dissolved
on <?ctober 16, 1944.
Thimmappa, one of the partners, died on
ApnL13, 1955. For the chargeable accounting period from
October 30, 1943 to April 30, 1944, the Excess Profits Tax
Officer had taken steps to assess the "escaped'' profits of the firm.
He issued the necessary notices to G. Padmanabhan and G. Ekambarappa as the partners of the dissolved firm. He also issued notice
to G. M. Prabhu and G. Lakshmidevamma as the representatives of
G. Thimmappa.
The contention of the appellants before
the
High Court was that as from November 1, 1956 the Act must be
866
SUPREME COURT REPORTS
( 196 7) 3 S.C.R.
deemed to have been repealed so far as Bellary district is conA
cerned and therefore the respondent was not competent to take
any proceedings for determining the escaped income under s. 15
of that Act. The High Court rejected the contention on the
ground that, though the Act stood repealed by reason of the
inclusion of Bellary district in Mysore State, the liability to pay
tax on the escaped profits continued by virtue of s. 6 of the
B
General Clauses Act.
The question to be considered in this appeal is whether l'ie
appellants continued to be liable to be proceeded against under
s. 15 of t.he Act on the profits which had escaped taxation.
The present Bellary district was a part of the old Madras State
which was a Part "A" State under the Constitution of India till its
merger with the Mysore State on October l, 1953 which was a
Part "B" State. The Mysore State continued to be a Part "ff'
State till November 1, 1956. The Act extended, when first promulgated, to the territory of fonner British India.
After the
Constitution came into force, s. 1 (2) of the Act was adapted so
as to extend the operation of the Act "to the who!~ of India except
Part 'B' States" by the Adaptation of Laws Order, 1950. After
the formation of new States in pursuance of the States Reorganisation Act, 1956 (Act 37 of 1956), sub-s. (2) of s. I of the Act
was adapted by the President by Adaptation of Laws (No. 3)
Order, 1956 dated December 31, 1956.
Section 1(2) of the
Act as adapted read as follows :
"It extends to the whole of India except the territories which immediately before the 1st November, 1956
were comprised in part 'B' state."
The result of the adaptation was that all the provisions of the Act
stood repealed so far as the district of Bellary was concernea with
effect from December 31, 1956. It was contended on behal1 of
the appellants that it is not a case of repeal of the Act and so the
provisions of s. 6 of the General Clauses Act could not be invoked
to sustain the validity of the notices issl!ed by the respondent under
s. 15 of the Act. It was argued that so far as the Act was con·
cerned, the Adaptation of the Laws Order, 1956 only modified
the provisions of s. I (2) of the Act and did not repeal the. Act
as such and the effect of the modification was that the provisions
of the Act were no longer applicable to the Bellary district _which
was comprised in the territory of Part 'B' State of Mysore immediately before November 1, 1956.
In our opinion there is no
justification for the argument put forward on behalf of the appel·
!ants. The result of the Adaptation of Laws Order, 1956 so far
as the Act was concerned, was that the provisions of that i\Ct were
no longer applicable or in force in Bellary district. To put it
differently, the Act was repealed so far as the area of Bellary
c
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A
B
EKAMBARAPPA v. E.P.T.O. (Ramaswami, J,)
867
district was concerned. Repeal of an Act means revocation or
abrogation of the Act and, in our opinion, s. 6 of the General
Clauses Act applies even in the case of a partial repeal or repeal
of part of an Act. Section 6 of the General Clauses Act slates :
"Effect of repeal.-Where this Act or any Central
Act or Regulation made after the commencement of this
Act, repeals any enactment hitherto made or hereafter
to be made, then, unless a different intention appears,
the repeal shall not-
( c) affect any right, privilege, obligation or liability
C
acquired, accrued or incurred under any enactment so repealed; or
D
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F
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"
Section 3 ( 19) of the General Clauses Act defines an "enactment''
as including "a Regulation and also as including any provision
contained in any Act <lr in any such Regulation as aforesaid".
The argument was also stressed on behalf of the appellants
that even if s. 6 ( c) of the General Clauses Act )Vas
applicable
there was no "liability incurred or accrued" as there was no assessment of escaped profits before November 1, 1956 when the adaptation was made. We do not think there is any substance in this
argument. The liability of the appellants to tax arose immediately
at the end of the chargeable accounting period and not merely at
the time when it is quantified by assessment proceedings. It
follows tb.erefore that the notice issued under s. 15 of the· Act was
legally . valid and the appellants representing the original partners
of the firm continued to be liable to be proceeded against under
that section for the profits which had escaped taxation. In Wallace Brothers and Co. Ltd. v. Commissioner of Income-tax('),
the Judicial Committee expounded in clear terms the scope of a
tax liability under the Income-tax Act. It was observed by the
Judicial Committee as follows :
" ...... the rate of tax for the year of assessment
may be fixed after the close of the previous year and
the assessment will necessarily be made after the close
of that ye.ar. Bu.t the liability to tax arises by virtu.e of
the charging sect10n alone, and it arises not later than
the close of the previous year, though quantification of
the amount payable is postponed."
The. same view has been expressed by this Court in Chatllram
Hori/ram Ltd. v. C.I.T. (2) in which the legal position was revie~ed
(I) 16 l.T.R. 240, 244, (P.C.)
(2) 27 l.T.R. 709.
868
SUPREME COURT REPORTS
[1967] 3 S,C.R.
with regard to the question of charge to income.-tax.
In that
case, the assessee-company carrying on business in Chota Nagpur
was assessed to tax for the year 1939·40, but the assessment was
set aside by the Income-tax Appellate Tribunal on March 28,
1942, on the ground that the Indian Finance Act, 1939, was not
in force during the assessment year 1939-40, in Chota Nagpur
which was a partially excluded area. On June 30, 1942, a Regulation was promulgated by which the Indian Finance Act of 1939
was brought into force in Chota Nagpur retrospectively as from
March 30, 1939. Thereupon the Income·tax Officer made an
order holding that the income of the assessee for the year 1939-40
had escaped assessment and issued to the assessee a notice under
s. 34 of the Income-tax Act. The validity of the notice was
questioned. It was held by this Court that though the Finance
Act was not in force in that area in 1939-40, th~ income of the
assessee was liable to tax in that year and, therefore, it had escap·
dently of the passinl( of the Finance Act but until the Finance Act
It was pointed out that the income was chargeable to tax indepen·
dently of the passing of the Finance Act but until the Finance Act
was passed no tax could be actually levied. The same principle
was reiterated by this Court in Ka/wa Devadattam v. Union of
lndla(').
The question in that case was whether the liability of
a Hindu undivided family arose before or after partition of the
family.
In that case, this Court speaking through Shah, J. stated
in clear terms thus :
"Under the Indian Income"tax Act liability to pay
income-tax arises on the accrual of the income, and not
from the computation made by the taxing authorities in
the course of assessment proceedings; it arises at a point
of time not later than the close of the year of account."
The same view has been taken in a recent case by this Court in
State of .Kera/a v. N. Sami lyer( 2).
In view of the principle
expressed in these authorities we are of the opinion that the
liability to pay excess profits tax accrued immediately at the end
of th.~ chargeable accounting period and that liability was preserv·
ed under s. 6 ( c) of the General Clauses Act even though the Act
stood repealed so far as Bellary district was concerned with effect
from November 1, 1956.
Mr. Narsaraju contended in the alternative that on the combined operation of s. 53 of the Andhra Pradesh Act (Act 30 of
1953) ands. 119 of the State Reorganisation Act (Act 37 of
1956) all the provisions of the Excess Profits Tax Act,
1940
remained .in operation in Bellary district i11 spite of the Adaptation of Laws Order, 1956. Section 53 of the Andhra Pradesh
Act states as follows :
(I) 49 l.T.R. 165.
(2) A.T.R, 1966 S.C. 141 l.
A
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EKAMBARAPPA v. E.P.T.O. (Ramaswami, J.)
869
"Tho provisions of Part II shall not be deemed to
have effected any change in tho territories to which any
law in force immediately before tho appointed day eit·
tends or applies, and territorial references in any such
law to the State of Madras or of Mysore shall, until
otherwise provided by a competent Legislature or other
competen! authority, continue to have the same mean·
ing."
Section 119 of the State Reorganisation Act reads as follows :
"The provisions of Part II shall not be deemed to
have effected any change in the territories to which any
law in. force immediately before the appointed day ex·
tends or applies, and territorial references in any such
law to an existing State shall, until otherwise provided
by a competent Legislature or other competent autho·
rity, be construed as meaning the territories within that
State immCdiately before the appointed day."
Section 120 of this Act states :
"For the purpose of facili'ating the application of
any law in relation to any of the States formed or terri·
torially altered by .the provisions of Part II, the appropriate Government may, before the expiration of one
year from the appointed day, by order make such adaptations and modifications of the law, whether by way of
repeal or amendment, as may be necessary or expedi·
ent, and thereupon every such law shall have effect subject to the adaptations and modifications so made until
altered, repealed or amended oy a competent Legislature or other competent authority.
Explanation.-In this section, the expression "ap·
propriate Government" means-
(a) as respects any law relating to a matter enume·
rated in the Union List,. the Central Govern·
ment; and
( b) as respects any other law,-
( i) in its application to a Part A State, the
State Government, and
(ii) in its application to a Part C State, the
Central Government."
It was pointed out that the Act was in force in Bellary district
when the Comtitution came into force and the effect of s. 53 of
the Andhra Pradesh Act was to continue the operation of that
Act so far as Bellary district was concerned. The effect of s. 119
870
SUPll.BMB COUll.T 11.BPORTS
[1967) 3 S.C.R.
<>f the State Reorganisation Act was to preserve the territorial
<>peration of the Jaw which was jmmediately in force before the
date-of the promulgation of that Act until such l~w was repealed
by the competent legislature or a competent legislative authority.
There is great force in the argument advanced by Mr. Narsaraju
on this point. But it is not necessary for us to express any conduded opinion on this aspect of the case because we have
already given reasons for holding that the appeal must be dismissed on the ground that the Act stood repealed by reason of the
Adaptation of Laws Order, 1956 and the liability to pay tax on
.escaped profits continued under s. 6 of the General Clauses Act.
We accordingly affirm the judgment of the Mysore High Court
<lated March 20, 1962 and dismiss this appeal with costs.
G.C.
Appeal dismissed.
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