# KARIMTHARUVI TEA ESTATE LTD v. STATE OF KERALA

- **Citation:** [1966] 3 S.C.R. 93
- **Court:** Supreme Court of India
- **Decided:** 1965-12-15
- **Case number:** Civil Appeal No. 980 of 1964
- **Bench:** P. B. Gajendragadkar, K. N. Wanchoo, M. Hidayatullah, V. Ramaswami, P. Satyanarayana Raju
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/karimtharuvi-tea-estate-ltd-v-state-of-kerala-3782
- **Pages:** 6

## Headnote

The Kera/a Surcharge on Taxes Act ( 11 of 1957), s. 2-Wliether
applicable to' the assessment year 1957-58,
For the assessment year 1957-58, the appellant-company was assessed'
to agricultural income-tax under the Kerala Agricultural Income-tu Act;
1950 and a •urcharge was also levied and collected from the appellant
under the provisions of the Kerala Surcharge on Taxes Act, 1957. The·
appellant appealed to the Deputy Commissioner, objecting to the imposition of surcharge on the ground that the Jaw applicable to the assessment for 1957-58, under the provisions of the Agricultural Income-tax
Act, was the law in force on 1st Ap,il 1957, and as the Surcharge Act
came into force only from ht September 1957 and did not have retrospective effect, the surcharge could not be levied
for
that year.
TheDeputy Commissioner rejected the objections but the Appellate Tribunal
on further appeal upheld the contentic>n. The High Court, on a reference,.
held against the appellant.
In appeal to this Court,
HELD : The Surcharge Act having come into force on !st September·
1957, and not being retrospective in operation. it could not be regarded'
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as law in force at the commencement of the Herir of assessment 1957-58 ..
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Since it was not the law in force on 1st .April 1957, no surcharge could
be levied under it against the appellant in the assessment year 1957-58 ..
[98 A-BJ
Commissioner of Income-tax, Bo1nbay v. Scindia Steam Navigation'
Co. Ltd. [1962] 1 S.C.R. 788 and The Commissioner of Sales Tax U.P. v ..
The Modi Sugar Mills, [1961] 2 S.C.R. followed.
l.T. Commissioner v. l.S. Lines, A.I.R. 1953 S.C. 439, explained.

## Text

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KARIMTHARUVI TEA ESTATE LTD.
v.
STATE OF KERALA
December 15, 1965
[P. B. GAJENDRAGADKAR, C.J., K. N. WANCHOO,
M. HIDAYATULLAH, V. RAMASWAMI AND
P. SATYANARAYANA RAJU, JJ.j
The Kera/a Surcharge on Taxes Act ( 11 of 1957), s. 2-Wliether
applicable to' the assessment year 1957-58,
For the assessment year 1957-58, the appellant-company was assessed'
to agricultural income-tax under the Kerala Agricultural Income-tu Act;
1950 and a •urcharge was also levied and collected from the appellant
under the provisions of the Kerala Surcharge on Taxes Act, 1957. The·
appellant appealed to the Deputy Commissioner, objecting to the imposition of surcharge on the ground that the Jaw applicable to the assessment for 1957-58, under the provisions of the Agricultural Income-tax
Act, was the law in force on 1st Ap,il 1957, and as the Surcharge Act
came into force only from ht September 1957 and did not have retrospective effect, the surcharge could not be levied
for
that year.
TheDeputy Commissioner rejected the objections but the Appellate Tribunal
on further appeal upheld the contentic>n. The High Court, on a reference,.
held against the appellant.
In appeal to this Court,
HELD : The Surcharge Act having come into force on !st September·
1957, and not being retrospective in operation. it could not be regarded'
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as law in force at the commencement of the Herir of assessment 1957-58 ..
F
G
Since it was not the law in force on 1st .April 1957, no surcharge could
be levied under it against the appellant in the assessment year 1957-58 ..
[98 A-BJ
Commissioner of Income-tax, Bo1nbay v. Scindia Steam Navigation'
Co. Ltd. [1962] 1 S.C.R. 788 and The Commissioner of Sales Tax U.P. v ..
The Modi Sugar Mills, [1961] 2 S.C.R. followed.
l.T. Commissioner v. l.S. Lines, A.I.R. 1953 S.C. 439, explained.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 980 of
1964.
Appeal by special leave from the judgment and order, dated
July 25, 1963 of the Kerala High ·court in Income-tax Referred'
Case No. 10 of 1962 (Agrl.).
·
M. C. Setalvad, 0. P. Malhotra, V. 0. Abraham, .T. B. Dada-
'
chanji, 0. C. Mathur and Ravinder Narain, for the appellant.
;
P. Govinda Menon, A. Sreedharan Nambiar and M. R. K ..
Pillai, for the respondent.
U
The Judgment of the Court was delivered by
Satyanarayana Raju, J. This appeal, by special leave, against
the judgment and order of the Kerala High Court, dated July 25.
94
SUPREME
COURT
REPORlS
( 1966 J 3 S.C.R.
1963 in Income-tax Referred Case No. 10 of 1962 (Agricultural),
raises the question as to the true scope and operation of s. 2 of the
Kerala Surcharge on Taxes Act, 1957 (Ker. Act XI of 1957),
hereinafter called the Surcharge Act.
The facts which have given rise to this appeal may be brietly
stated.
For the assessment year 1957-58, the appellant company
was asscs~ed to agricultural income-tax under the Kcrala Agricultural lncemc-tax Act, 1950.
In the assessment, a surch:1rgc at
the rate of 5 % on the agricultural income-tax and '11pcr tax was
also levied and collected from the appellant under th: provisions
-0f the Surcharge Act.
The appellant appealed to the
Deputy
Con11nissioner
of
Agricultural Income-tax and Sales Tax, South
:Zon~. Quilon,
· objecting tc the imposition of surcharge on the gwund that the
law applicable to assessment for 1957-58 under the provii!ions of
the Agricultural Income-taic Act was 1he law in force on April I,
1957 and as the Surcharge Act which came into force only from
September l. 1957 did not have any retrospective effect. the surcharge could not be levied for that year.
By his order, dated
November 14, 1959, the Deputy Commissiona re.iectecl these
-Objections.
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Thereupon. the appellant preferred a further appeal to the
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Kerala Agricultural Income-tax Appellate Tribunal, Trivandrum.
By its order, dated August 2, 1961, the appellate Tribunal upheld
the contention of the appellant holding that the Surcharge Act
could not have retrospective operation unless there was a specific
provisi0n therein to that effect.
On the application of the respondent, the Tribunal stated a
case to the Kcrala High Court and referred the following question
·Of law:
"Whether any surcharge can be
levied
en
the
agricultural income-tax payable for the assessment year
1957-58 ?"
By judgment. dated July 25, 1963, lhe Division Bench of the
High Comt answered the question in the affirmative, against the
appellant. The appellant then applied to this Court and obtained
special leave to appeal against the judgment and order of the
High Court.
It is contended for the appellant, by Mr. Setalvad, learned
counsel, that the Surcharie Act having come into
force
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KARIMTHARUVI LTD. v. KERALA (Raju, J.)
95
September 1, 1957 and the said Act not being retrospective in
operation, it could not be regarded as law in force at the commencement of the year of assessment viz. 1957-58. It is also contended that in the absence of express enactment or necessary
intendment, the provisions of a statute which affect a right in
existence at the time of the passing of that enactment are not to
be applied retrospectively and that the interpretation placed by
the.High Court on the scope of sub-s. ( 3) of s. 1 of the Surcharge
Act is erroneous.
Before dealing with these contentions, it would be convenient
to read tbe material provision of the Surcharge Act. Sub-section
( 3) of s. 1 reads :
"It shall come into force on such date as the
Government may, by
notification in
the
Gazette,
appoint."
By a notification, dated August 27, 1957, the Government of
Kerala appointed the first day of September 1957 as the date on
which the said Act shall come into force. By a further notification
dated November 28, 1957, the Government of Kerala, in exercise
of the powers conferred on it by s. 6 of that Act notified that
surcharge shall not be levied on assessments on the turnover or
income of the year 1956-57 onwards but that it shall be confined
E only to assessments made on or after September 1, 1957 and that
where the turnover or income for periods prior to 1956-57 is
pending assessment, surcharge shall not be levied on such assessments when made. We are not now called upon to determine the
validity of these regulations.
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Now, it is well-settled that the Income-tax Act, as it stands
amended on the first day of April of any financial year must apply
to the assessments of that year.
Any amendments in the Act
which come into force after the first day of April of a financial
year, would not apply to the assessment for that year, even if
the assessment is actually made after the amendments come into
force.
In Scindia Steam Navigation Co. Ltd. v. Commr. of Inc .
Tax,(') a Divison Bench of the Bombay High Court, consisting
of Chagla C.J., and Tendolkar J., considered the question as to
the effect of an amendment which came into force after the commencement of a financial year. The facts in that case were these.
The assessee's ship was lost as a result of enemy action.
The
(I) 24 I.T.R. 686.
96
SUPREME COURT
REPORTS
[ 1966 J 3 s.c.R.
Government paid the assessee in I 944 a certain amount as compensation which exceeded the original cost of the ship.
The
Income-tax Officer included the difference between the original
cost and the written down value of the ship in the total income
of the assessee for the assessment year 1946-47.
The Tribunal
upheld that decision and referred the question, whether the sum
representing the difference between the original cost and the
written down value was properly included in the assessce's total
income computed for the assessment year
1946-47.
It
was
argued that the fourth proviso to s. 10(2)(vii) of the Income-tax
Act (inserted by the Amendment Act of 1946 with effect from
May 4, 1946) under which the inclusk,n of the amount
was
justifi~d by the department, had :10 application to the case.
The learned Judges held that ~s it was the Finance Act of 1946
that imposed the tax for the assessment year 1946-47, the total
income had !o be computed in accordance with the provisions
of the Income-tax Act as on April 1, 1946; that as the amendments made by the Amendment Act of 1946 with effect from
May 4. 1946 were not retrospective, they could not be taken into
consideration merely because the assessee was assessed after that
date; and that the assessee was not liable to pay tax on the sum
because the fourth proviso to s. 10(2)(vii) of the Income-tax Act
under which it was sought to be taxed was not in force in respect
of the assessment year 1946-4 7.
This Court affirmed this decision in Commissioner of lncometax, Bombay v. Scindia Steam Navigation Co. Ltd.(') where it
was staled at p. 816 as follows :
"On the merits, the appellant had very nttle to say.
He sought to contend that the proviso though it came
into force on May 5, 1946, was really intended
to
operate from April I, 1946, and he referred us to certain
other ~nactmenls as supporting that inference.
But
we are construing the proviso. In terms, it
is
not
re1rospcc1ivc, and we cannot import into its construction
matlers which arc ad extra /egis, and thereby alter its
true effect."
In The Commissioner of Sales Tax, Uttar Pradesh v. The Modi
Sugar Mills Ltd.(') this Court held by a majority as follows:
"A legal fiction must be limited 10 the purposes for
which it has been created and cannot be extended beyond
(I) (1962) I S.C.R. ;ss: 42 J.T.R. 589.
(2> 11961f2 s.c.R. 189, 199
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KAR!MTHARUVI LTD. v. KERALA (Raju, J.)
its legitimate field. The turnover of the previous year
is fictionally made the turnover of the year of assessment : it is not the actual or the real turnover of the year
of assessment. By the imposition of a different tariff in
the course of the year, the incidence of tax liability
may competently be altered by the Legislature, but for
effectuating that alteration, the Legislature must devise
machinery for enforcing it against the tax payer and if
_ the Legislature has failed to do so, the court cannot
resort to a fiction which is not prescribed by the Legislature and seek to effectuate that alteration hy devising
machinery not found in the statute."
9T
In the instant case, there is no escape from the conclusion·
that the Surcharge Act not being retrospective by express intend- -
ment, or necessary implication, it cannot be made applicable from
April 1, 1957, as the Act came into force from September 1, of
that year.
The High Court has, however, relied upon a decision of this
Court in I. T. Commissioner v. I. S. Lines(') where it was held'.
as follows :
"It will be observed that we are here concerned with
two datum lines : (l) the 1st of April, 1940, when the
Act came into force, and (2) the 1st of April, 1939,
which is the date mentioned in the amended proviso.
The first question to be answered is whether these dates
are to apply to the accounting year or the year of
assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be
applied is the law in force in the assessment year unless
otherwise stated or implied. The first
datum line·
therefore affected only the assessment year of 1940-4 l,
because the amendment did not come into force tiff
the 1st of April 1940. That means that the old law
applied to every assessment year up to and including
the assessment year 1939-40."
This decision is authority for the proposition that though the subject of the charge is the income of the previous year, the law to·
. be- applied i5 that in force in the assessment year, unless otherwise·
stated or implied.
The facts of the said decision are different
and distinguishable and the High Court was clearly in error in,
applying that decision to the facts of the present case._
(I) A.LR. 1953 S.C. 43~.
·98
SUPRF.ME COURT .REPORTS
[1966] 3 S.C.R.
The Surcharge Act having come into force on September l.
1957. ;ind the said Act not being retrospective in operation, it
could not be regarded as law in force at the commencement of
the )'ear of assessment 1957-58. Since the Surcharge Act was
not the law in force on April I, I 957, no surcharge could be
levied under the said Act against the appellant in the assessment
_year 1957-58.
In the remit, the appeal is allowed with costs.
Appeal allowed.
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