# RAJPUTANA MINING AGENCIES LTD v. UNION OF INDIA AND ANOTHER

- **Citation:** [1961] 1 S.C.R. 453
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** CIVIL APPELLATE JURISDICTIO~: No. 26 of 1956
- **Bench:** S. K. Das, M. Hidayatullah, K. c. DAS GUPTA, J. c. SHAH, N. Rajagopala Ayyangar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rajputana-mining-agencies-ltd-v-union-of-india-and-another-2176
- **Pages:** 5

## Headnote

Income Tax-Applicability of enactment to Part B StatesIndian Income-tax Act, z922 (.Z:I of z922), as amended by Indian
Income-tax (Amendff!ent) Act (25 of z953), s. z4(2)(c).
The appellant, a private limited company, was incorporated
in 1954 in the former Kotah State which had integrated_ with
the United States of Rajasthan in 1949· The United ·states of
Rajasthan became State of Rajasthan, a Part B State. The
Indian Finance Act, 1950, made
the Indian Income-tax
Act, 1922, applicable to Part B States with effect from April ·1,
1950, whereupon Rajasthan became a taxable territory. The
Income-tax (Amendment) Act, 1953, amended' s. 14(2)(c) of the
Indian Income-tax Act, 1922. Thereupon the Income-tax authorities sought to tax the profits and income of the appellant for
the assessment year 1950-51 who claimed exemption under
s. 14(2)(c) of the Indian Income-tax Act, 1922, as it stood before
the amendment in 1953· The question for decision was whether
in view of t~e decision of this Court in Madan Gopal's case it was
still ot\en to the appellant to contend that. the amendment
operated from April l, 1950, and that income accrued prior to
April. 1, 1950, was still exempt although the exemption was
withdrawn only from April l, 1950.
Held, that the withdrawal of the exemption in the assessment year 1950-51 conversely affected the income of the previous year 1949-50. The application of the Indian Income-tax
Act made Rajasthan a taxable territory subject to the Indian
Income-tax law and Parliament was competent to enact a new
law for the area, just as it did for the whole of the rest of
India.
The fiction in the amendment made in s. l4(2)(c) made the
exemption in respect of liability to tax the income for the year
1949-50 to disappear as if it ha<l never been granted and obliterated the exemption. The whole purpose and intent of the
amendment was to reach this result from the assessment year
lcj50-51 onwards, and there could be no saving. The argument
assumes the premise that the Income-tax Act was incorporated
in the Indian Finance Act, 1950, but there is neither precedent
nor warrant for the assumption that when one Act applioo
another Act to some territory, the latter Act must be taken to
be incorporated in the former Act. It may be otherwise, if there
were words to show that the earlier Act is to be deemed to be
re-enacted by the new Act.
1960
. August-31.
454
SUPREME COURT REPORTS
[ 1961]
1960
Union of India v. Madan Gopal Kabra, [1954] S.C.R 541,
referred.
!t.'ajprllana 1l!iuing
Agencies Ltd.
v.
Union of India
6- Another
• Hidoyatullah ].
CIVIL APPELLATE
JURISDICTIO~:
No. 26 of 1956.
Ci vii Appeal
Appeal by Special Leave from the Judgment and
Order dated the 22nd April, 1954, of the Rajas than
High Court in Writ Petition X o. 76 of 1951.
N. C. Chatterjee, J.B. Dadachanji and M. S. K.
Aiyangar, for the appellants.
K. N. Rajagopal Sa8tri and D. Gupta, for the respondents.
1960. August 31. The Judgment of the Court was
delivered by
HIDAYATULLAH ,T.-This is an appeal with the
special leave of this Court against tho judgment of the
High Court of Rajasthan dated April 22, 1954. The
appellant is a private limited Company, which was
incorporated in 1945 in the former Kotah State. The
income-tax authorities sought to tax its profits and
income for the assessment year 1950-51 corresponding
to the previous year, 1949-50. The appellant claimed
exemption under s. 14(2)(c) of tho Indian Income-tax
Act, 1922, as it stood before the amendment in 1953,
contonding that the exemption stood good even after
the amendment. This claim was rejected by tho High
Court, which was moved under Art. 226 of the Constitution. Hence this appeal.
Prior to the integration of Kotah State into the
United State of Rajasthan in 1949, there was no
income-tax law in force in Kotah State. Till the
formation of the State of Ra.jasthan, there was no such
law in force in any part of Raja.sthan,' except Bundi
State. The Indian Finance Act of 1950 ma.do the
Indian Income-tax A

## Text

I S.C.R. SUPREME COURT REPORTS
453
RAJPUTANA MINING AGENCIES LTD.
v.
UNION OF INDIA AND ANOTHER.
(S. K. DAS, M. HIDAYATULLAH, K. c. DAS GUPTA,
J. c. SHAH AND N. RAJAGOPALA AYYANGAR, JJ.)
Income Tax-Applicability of enactment to Part B StatesIndian Income-tax Act, z922 (.Z:I of z922), as amended by Indian
Income-tax (Amendff!ent) Act (25 of z953), s. z4(2)(c).
The appellant, a private limited company, was incorporated
in 1954 in the former Kotah State which had integrated_ with
the United States of Rajasthan in 1949· The United ·states of
Rajasthan became State of Rajasthan, a Part B State. The
Indian Finance Act, 1950, made
the Indian Income-tax
Act, 1922, applicable to Part B States with effect from April ·1,
1950, whereupon Rajasthan became a taxable territory. The
Income-tax (Amendment) Act, 1953, amended' s. 14(2)(c) of the
Indian Income-tax Act, 1922. Thereupon the Income-tax authorities sought to tax the profits and income of the appellant for
the assessment year 1950-51 who claimed exemption under
s. 14(2)(c) of the Indian Income-tax Act, 1922, as it stood before
the amendment in 1953· The question for decision was whether
in view of t~e decision of this Court in Madan Gopal's case it was
still ot\en to the appellant to contend that. the amendment
operated from April l, 1950, and that income accrued prior to
April. 1, 1950, was still exempt although the exemption was
withdrawn only from April l, 1950.
Held, that the withdrawal of the exemption in the assessment year 1950-51 conversely affected the income of the previous year 1949-50. The application of the Indian Income-tax
Act made Rajasthan a taxable territory subject to the Indian
Income-tax law and Parliament was competent to enact a new
law for the area, just as it did for the whole of the rest of
India.
The fiction in the amendment made in s. l4(2)(c) made the
exemption in respect of liability to tax the income for the year
1949-50 to disappear as if it ha<l never been granted and obliterated the exemption. The whole purpose and intent of the
amendment was to reach this result from the assessment year
lcj50-51 onwards, and there could be no saving. The argument
assumes the premise that the Income-tax Act was incorporated
in the Indian Finance Act, 1950, but there is neither precedent
nor warrant for the assumption that when one Act applioo
another Act to some territory, the latter Act must be taken to
be incorporated in the former Act. It may be otherwise, if there
were words to show that the earlier Act is to be deemed to be
re-enacted by the new Act.
1960
. August-31.
454
SUPREME COURT REPORTS
[ 1961]
1960
Union of India v. Madan Gopal Kabra, [1954] S.C.R 541,
referred.
!t.'ajprllana 1l!iuing
Agencies Ltd.
v.
Union of India
6- Another
• Hidoyatullah ].
CIVIL APPELLATE
JURISDICTIO~:
No. 26 of 1956.
Ci vii Appeal
Appeal by Special Leave from the Judgment and
Order dated the 22nd April, 1954, of the Rajas than
High Court in Writ Petition X o. 76 of 1951.
N. C. Chatterjee, J.B. Dadachanji and M. S. K.
Aiyangar, for the appellants.
K. N. Rajagopal Sa8tri and D. Gupta, for the respondents.
1960. August 31. The Judgment of the Court was
delivered by
HIDAYATULLAH ,T.-This is an appeal with the
special leave of this Court against tho judgment of the
High Court of Rajasthan dated April 22, 1954. The
appellant is a private limited Company, which was
incorporated in 1945 in the former Kotah State. The
income-tax authorities sought to tax its profits and
income for the assessment year 1950-51 corresponding
to the previous year, 1949-50. The appellant claimed
exemption under s. 14(2)(c) of tho Indian Income-tax
Act, 1922, as it stood before the amendment in 1953,
contonding that the exemption stood good even after
the amendment. This claim was rejected by tho High
Court, which was moved under Art. 226 of the Constitution. Hence this appeal.
Prior to the integration of Kotah State into the
United State of Rajasthan in 1949, there was no
income-tax law in force in Kotah State. Till the
formation of the State of Ra.jasthan, there was no such
law in force in any part of Raja.sthan,' except Bundi
State. The Indian Finance Act of 1950 ma.do the
Indian Income-tax Act, 1922, applicable to the whole
of India, except the State of Jammu and Kashmir,
and suitably a.mended the Indian Income-tax Act.
Ra.ja.sthan then became, from April I, 1950, a taxable
territory.
For the asseBSment ye&r 1950-51, income-tax was
sought to be imposed in the State of Rajasthan. One
I
1 S.C.R. SUPREME COURT REPORTS
455
Madan Gopal Kabra move the High Court under Art.
z96o
226 of the Constitution to restrain the taxing autho- R .
-
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f
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f
h
· d
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t A
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a;p11tanaMining
r1t1es rom c a1mmg tax or t e per10 pr10r o pri ,
Agencies Ltd . .
1950, contending that inasmuch as Raiasthan was not
v.
a taxable territory before April 1, 1950, no tax for a Union of India
period prior to that date could be demanded. This
& Another
Court in an appeal by the Department against the
decision of .the High Court of Rajasthan, which had Hidayatullah f.
accepted the contention, held that the tax was leviable.
It is not necessary to give the details of the decision
on that occasion. The judgment of this Court is reported in The Union of India v. Madan Gopal Kabra (1).
The present appellant and fourteen others filed petitions under Art. 226 of the Constitution, urging fresh
grounds by a later amendment. Their contention was
thats. 14(2)(c) of the Indian Income-tax Act, as it
stood on April 1, 1950, granted an exemption, and
that this exemption was not affected by the amendment of the said provision in 1953 even though the
amendment was retrospective from
April 1, 1950,
unless the Finance Act, 1950, which applied the
Income-tax Act to this area was also amended. This
contention was not accepted by the High Court which
dismissed the petition under Art. 226, holding inter
alia that this point was also decided by this Court
against Madan Gopal Kabra.
In this appeal, this point alone is argued, and it is
contended that the point is still open for decision. Section 14(2)(c), as it stood before the amendment in 1953,
read as follows :
" The tax shall not be payable by an assessee-
( c) in respect of any income, profits or gains
accruing or arising to him within Part B State unless
such income, profits or gains are received or deemed
to be received in or are brought into the taxable
territories in the previous year by or on behalf of the
assessee, or are assessable under section 12-B or section 42 ".
The amendment provided :-
"In section 14 of the principal.Act in clause (c) of
sub-section (2), for. the words and letter ' Part B State '
(1) [1954) S.C.R. 541,
456
SUPREME COURT REPORTS
[1961]
1960
the words' the State of Jammu and Kashmir' shall be
-M . substituted and she.II be deemed to ha vc been sub.
R~p;~:;:; ~;;.nc stituted with effect from the lst day of April, 1950 ".
g
v.
The result of this amendment was described by this
Union of Ind•• Court in Kabra's case(') to be as follows:
6- Another
"It may be mentioned here that the exemption
from tax under s. 14(2)(c) of the Indian Act of income
Hidayatwllah f. accruing within Part B States was abrogated, except
as regards the State of Jammu and Kashmir, by the
amendment of that provision with effect from the first
day of April, 1950."
Mr. N. C. Chatterjee appearing for the appellant
contends that the point cannot be considered to have
been finally decided, and that the remark is descrip.
tive only of what the Parliament had purported to do.
He claims that the point can and should be reconsider-
. ed. In support of his contention, he urges that the
effect of the passing of the Indian. Finance Act, 1950,
and the application of the Indian Income-tax Act to
Rajasthan o.nd other Part B States was to incorporate
the Indian Income-tax Act by reference in the Indian
Finance Act with such modifications and amendments
as were then made.
Any subsequent amendment' of
the Indian Income-tax Act had no effect on the original
Act as incorporated by reference in the Indian Finance
Act, unless the latter was suitably amended also. The
argument which did not find favour in Kabra's case(')
was again advanced, though in another form. It is
that the amendment operates from April 1, 1950, and
that the income accrued prior to April 1, 1950, and it
was still exempt, because the exemption was withdrawn only from April 1, 1950.
In our opinion, both the arguments have no substance, and the position indicatod by this Court in the
passage cited earlier, represents the true state of the
law. To begin with, the exemption is in respect of
liability to tax in any yoar of assessment, and the
exemption in the assessment year 1950.51 was in
regard to the income in the previous year.
For the
same reason, the withdrawal of the exemption in the
assessment year 1950-51 conversely affected the
(1) [1951J s.c.R. 511.
•
1 S.C.R. SUPREME COURT REPORTS
457
income of the previous year, 1949-50 which is the
1960
subject-matter of tax in this case. The next argument
-
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f th I d"
F'
A t RajputanaMining
m1sconce1ves
e na ure o
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Ltd
1950. By that Act, the Indian Income. tax Act was
gene~.'
·
applied, but the Income-tax Act was ·not incorporated Union of India
by reference in the Indian Finance Act to become a
& Another
part of it. The application of the Indian Income-tax
. -
Act made Rajasthan a taxable territory subject to the Hidayatullah f.
Indian Income-tax law, and Parliament was competent
to enact a new law for the area, just as it did for the
whole of the rest of India. The fiction in the amend-.
ment made the exemption to disappear as if it had
never been granted, and unless there was a saving, the
amendment must operate to obliterate the exemption.
In fact, the whole purpose and intent of the amendment was to reach this result from the assessment year
1950.51 onwards, and there could be no saving. The
argument assumes the premise that the Income. tax Act
was incorporated in the Indian Finance Act, 1950, but
there is neither precedent nor warrant for the assumption that when one Act applies another Act to some
territory, the latter Act must be taken to be incorporated in the former Act. It may be otherwise, if
there were words to show that the earlier Act is to be
deemed to be re.enacted by the new Act. The Indian
Finance Act, 1950, was concerned with the application
of the Indian Income-tax Act to this area, which it did
by amending the definition of ' taxable territory' in
the Indian Income.tax Act and by applying that Act
to the territory .. Thereafter, the Indian Parliament
could amend the Income-tax Act retrospectively, and
the amendment would apply also to the new taxable
territory. In our opinion, both the arguments are not
valid.
The appeal fails, and will be dismissed with costs.
Appeal dismissed.