# State of Madra1 v. C. 1. Coelho Sikri 1

- **Citation:** [1964] 8 S.C.R. 72
- **Court:** Supreme Court of India
- **Decided:** 1964-04-30
- **Case number:** Civil Appeal No. 322 of 1963
- **Bench:** K. SUBBA RAo, J. c. SHAH, s. M. S!KRr
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-madra1-v-c-1-coelho-sikri-1-3280
- **Pages:** 14

## Headnote

Jnconu Tax-Assessment as agent of non-resident party-Time limit
for issuing notice-Scope of amending
statute
extending
time
'\
8 S.C.R.
SUPREME COURT REPORTS
73
limit-Validity of notice-Indian Income-tax A.ct 1922 (11
of
1922). 1. 34(1)(b)(iii) proviso.
The appellant company was carrying on business in
Bombay
as
commission agents.
In the course of assessment proceedings for the
year 1954-551 the Income-tax Officer noticed from the assessee"s
books
of account tnat the assessee had business connections with certain nonresident parties and found that the transactions disclosed that through
the assessee those non-resident parties were receiving income, profits
and gains. He considered that s. 43 of the Indian Income-tax Act, 1922,
was applicable to the assessee and issued on March 27, 1957, a notice
under s. 34 of the Act for assessment of the assessee as an agent of
the said non-resident parties. The assessee pleaded, inter alia, that the
proceedings intiated by the Income-tax Officer under s. 34 were barred
since the notice issued by him was after the expiry of one year from
the end of the assessment year 1954·55, but the Income.tax
Officer
rejected the contention relyin'g on the amendment made to the proviso
to s. 34(1)(b)(iii) by the Finance Act, 1956, under which the period
of one year was changed to two years.
The amendment
was given
retrospective operation upto April 1, 1956, but since the power to issue
a notice under the unamended Act had come to an end on Marcil 31,
1956, the question was whether the Income·tax Officer could issue a
notice of assessment to a person as an agent of a non.resident party
under the amended provision when the period prescribed for such a
notice had before the amended Act came into force expired.
HELD:
The proceedings initiated by the Income·tax Officer by the
notice dated March 27, 1957, were barred; the authority of the Incometax Ofticer under the Indian Income·tax Act before it was amended by
the Finance Act of 1956 having come to an end, the amending provision
would not entitle him to commence a proceeding even though at the
date when he issued the notJce it was within the period provided by the
amendment.
Notwithstanding the fa('t that there was no determinable point of
time between the expiry of the time provided under the old Act and
the commencement of the An1tndn1ent Act, in the absence of an express
provision or clear implication, the legislature could not be said to have
intended to attribute
to
the Amending provision
a greater
retros·
pectivity than was expressly n1entioned.

## Text

1964
State of Madra1
v.
C. 1. Coelho
Sikri
1.
1964
April, 30.
72
SUPREME COURT REPORTS
[1964]
amount borrowed for the purchase of the plantation when
the whole transaction of purchase and the working of the
plantation is viewed as an integrated whole, is so closely
related to the plantation that the expenditure can be said
to be laid out or expended wholly and exclusively for the
purpose of the plantation. In this connection, it is pertinent to note that what the Act purports to .tax is agricultural income and not agricultural receipts.
from the agricultural receipts must be deducted all expenses which in
ordinary conunercial accounting must. be debited against
the receipts.
There is nothing in the Act which prohibits
such expenses from being deducted.
No farmer would
treat interest paid on capital borrowed for the purchase
of the plantation as anything but expenses, and as long as
the deductions he claims, apart from any statutory prohibition, can be fairly said to lead to the determination of
the true net agricultural income, these must be allowed
under the Act.
In principle, we do not. see any distinction
between interest paid on. capital borrowed for the acquisition of a plantation and that between interest paid on capital borrowed for the purpose of running an existing plantation; both are for the purposes of the plantation.
In the result, we agree with the High Court that the
deduction claimed by the assessee fell within the scope of
s. 5 ( e) of the Act, and that the whole of Rs. 22,628-9-8
and not merely Rs 1,570-10-7 sho_uld have been deducted
from his assessable income. The appeal fails and is dismissed with costs.
Appeal dismissed.
S. S. GADGIL, INCOME-TAX OFFICER, BOMBAY
v.
LAL AND COMPANY
(K. SUBBA RAo, J. c. SHAH AND s. M. S!KRr, JJ.)
Jnconu Tax-Assessment as agent of non-resident party-Time limit
for issuing notice-Scope of amending
statute
extending
time
'\
8 S.C.R.
SUPREME COURT REPORTS
73
limit-Validity of notice-Indian Income-tax A.ct 1922 (11
of
1922). 1. 34(1)(b)(iii) proviso.
The appellant company was carrying on business in
Bombay
as
commission agents.
In the course of assessment proceedings for the
year 1954-551 the Income-tax Officer noticed from the assessee"s
books
of account tnat the assessee had business connections with certain nonresident parties and found that the transactions disclosed that through
the assessee those non-resident parties were receiving income, profits
and gains. He considered that s. 43 of the Indian Income-tax Act, 1922,
was applicable to the assessee and issued on March 27, 1957, a notice
under s. 34 of the Act for assessment of the assessee as an agent of
the said non-resident parties. The assessee pleaded, inter alia, that the
proceedings intiated by the Income-tax Officer under s. 34 were barred
since the notice issued by him was after the expiry of one year from
the end of the assessment year 1954·55, but the Income.tax
Officer
rejected the contention relyin'g on the amendment made to the proviso
to s. 34(1)(b)(iii) by the Finance Act, 1956, under which the period
of one year was changed to two years.
The amendment
was given
retrospective operation upto April 1, 1956, but since the power to issue
a notice under the unamended Act had come to an end on Marcil 31,
1956, the question was whether the Income·tax Officer could issue a
notice of assessment to a person as an agent of a non.resident party
under the amended provision when the period prescribed for such a
notice had before the amended Act came into force expired.
HELD:
The proceedings initiated by the Income·tax Officer by the
notice dated March 27, 1957, were barred; the authority of the Incometax Ofticer under the Indian Income·tax Act before it was amended by
the Finance Act of 1956 having come to an end, the amending provision
would not entitle him to commence a proceeding even though at the
date when he issued the notJce it was within the period provided by the
amendment.
Notwithstanding the fa('t that there was no determinable point of
time between the expiry of the time provided under the old Act and
the commencement of the An1tndn1ent Act, in the absence of an express
provision or clear implication, the legislature could not be said to have
intended to attribute
to
the Amending provision
a greater
retros·
pectivity than was expressly n1entioned.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 322
of 1963.
Appeal from the Judgment and order dated April l,
1958 of the fonner Bombay High Court in Miscellaneous
Application No. 327 of 1957.
K. N. Rajagopala Sastry and R. N. Sachthey, for the
appellant.
1964
S. S. Gadgil
v.
Lal and Co.
74
SUPREME COURT REPORTS
1964
Bishan Narain, S. P. Mehta, J. B. Dadachanji, 0. C.
s. s. Gadgil
Mathur and Ravi11der Narain, for the• respondent.
V.
Lal and Co.
Shah J.
April 30, 1964.
The Judgment of the Court was
delivered by
SHAH, J .-Ml s Lal and Company hereinafter called the
assessee carry on business in Bombay as commission agents.
In the course of assessment proceedings for the year 1954-55
the assessee's books of account were examined by the
Income-tax Officer and it was noticed that the assessee had
business connections with certain non-resident parties.
On
M1rch, 12, 1957, the Income-tax Officer issued a notice
calli:Jg upon the assessee to show caus0 why in respect of
the assessment year 1954-55 the asscssee should not be treated under s. 43 of the Indian Income-tax Act, 1922, as an
agent in respect of twenty-five non-resident parties
named
in the notice. The assessee denied that he had "direct dealings" with any non-resident party and that in any event the
proposed action was barred because the period prescribed for initiation of proceeding had expired, and ' requested
the Income-tax Officer to
drop the proceeding.
The
Income-tax Officer B-III Ward, Bombay issued on March 27,
1957, a notice under s. 34 of the Indian Income-tax Act
for assessment of the assessee as .an agent of the twentyfive named non-resident parties.
The assessee submitted a
return showing his- income as "nil''.
The Income-tax
Officer held that the transactions disclosed from the books
of account -of the assessee clearly showed that the assessee
"had regular business connection with'' non-resident parties,
that through the assessee those non-resident parties were
receiving income, profits and gains, and s. 43 was
clearly
applicable to the assessee there
being
definite
business
connection between the assessee and the named non-residents.
He therefore treated the assessee as agent of the non-resident
parties, under s. 43 of the Act.
The Income-tax Officer also rejected the contention of
the assessee that action under s. 34 was barred at the date
of the notice issued to the assessee.
Relying upon the first
proviso to s. 34(l)(b)(iii) inserted by the Finance Act,
1956, the Income-tax Officer held that the Legislature had
8 S.C.R.
SUPREME COURT REPORTS
75
by amendment extended the "time-limit in clear and express
terms so as to cover" action under s. 34 against a person on
whom the assessment or reassessment is to be made as an
agent of a non-resident person under s. 43 of the Act for the
assessment year 1954-55, and accordingly
assessed
the
income of the assessee at Rs. 60,684, estimating the income
of the parties residing outside the tax.1ble territories, in the
absence of accounts to be Rs. 50,000.
The assessee then filed a petition under Art. 226 of the
Constitution in the High Court of Judicature at Bombay
praying that a writ in the nature of mandamus or prohibition
do issue restraining and prohibiting the Income-tax Officer
from giving effect to or taking any steps or proceedings by
way
of
recovery
or
otherwise
in
pursuance of the orders of assessment.
The assessee pleaded, inter alia, that the proceedings for assessment nnder s. 34
of the Act commenced by the Income-tax Officer after the
expiry of one year from the end of the
assessment year
1954-55 were without the authority of law.
The High Court
of Bombay, following its earlier judgment in S. C. Prashar v.
Vosantsen Dwarkadas(') held that at the date
when the
notice was issued, by reason of the proviso which was in
operation under s. 34 (1) in respect of the assessment year
1954-55 the notice was out of time and that the period provided thereby could not be extended by the Finance Act of
1956 so as to authorise the Income-tax Officer to issue a
notice for assessment or reassessment of the assessce
as
statutory agent of a party,
residing outside \he taxable
territory.
In the view of the High Court the notice dated
March 27, 1957, was invalid, and a valid notice being a
condition precedent to the exercise of jurisdiction under
s. 34, the proceeding under s. 34 was not maintainable.
Against the order of the High Court issuing writs prayed for
by the assessee, with certificate of fitness this appeal
is
preferred by the Income-tax Officer, Bombay.
In order to appreciate the contention
raised
by the
assessee and which has found favour with the High Court,
it is necessary to refer to the relevant provisions of s. 34.
(1) 29 I.T.R. 857
1964
S. S. Gadgil
v.
Lal and Cc'
Shah J.
1964
S. S. Gadgil
v.
Lal and Co.
Shah/.
SUPREME COURT REPORTS
[rg64]
as they stood before the section was amended by the Finance
Act, 1956. The clauses relevant prescribing the period
within which notice may be issued n:ad as follows:
"(l) (a) If -
x
x
x
(b)
x
x
x
he may in cases falling under clause (a) at any
time within eight years and in cases falling under
clause (b) at any time within four years of the
end of that year, serve on the assessee, x x x
a notice containing all or any of the requirements which may be included in a notice under
sub-section (2) of section 22 and may proceed
to assess or re-assess such income, profits or
gains or recompute the loss or depreciation
allowance;
x
x
x
Provided that-
( i)
x
x
x
(ii)
x
x
x
(iii) Where the assessment made or to be made is
an .assessment made
or to be made on a
person deemed to be the agent of non-resident
person under section 43, this sub-section
shall have effect as if for the periods of
eight years and four years a period of one
year was substituted."
By s. 18 of the Finance Act, 1956, s. 34 was extensively
amended and cl. (iii) of the proviso was substituted by
the following proviso:
"Provided further that the Income-tax Officer shall
not issue a notice under this sub-section for
.any year after the expiry of two years from
that year if the person on whom an assessment
or re-assessment is to b1i made in pursuance
of the notice is a person deemed to be an
agent of non-resident person under section 43."
Initially a notice of assessment or re-assessment
under
s. 34 ( 1) against a person deemed to be an agent of a non-
8 S.C.R.
SUPREME COU:RT REPORTS
77
resident person under s. 43 could not be issued after the
expiry of one year f!'.Om the end of the year of assessment:
under the amended section this period was extended to two
years from. the end of the relevant assessment year.
In
the course of assessment to income-tax for the year 1954-55
the relevant law applicable
prescribed that a notice of
assessment or re-assessment .against a person deemed to be
an agent under s. 43 could not be issued after the expiry
of one year from the .end of the assessment year.
That
period expired on March 31, 1956, and after that date no
notice could be issued, relying upon the law as it stood
before amendment for assessment or re-assessment treating the assessee as an agent of a non-resident under s. 43.
But. the Income-tax Officer sought recourse to the amended
provision which gave him a period of two years from the
end of the assessment year, for initiating assessment proceedings, and the authority of the Income-tax· Officer to
so act is challenged by the assessee.
Section 18 of the Finance Act, 1956, is, it is common
ground, not given retrospective operation before April 1.
1956. The question then is, whether the Income-tax Officer
may issue a notice of .assessment to a person as an agent
of a non-resident party under the amended provision when
the period prescn'bed for such a notice had before the
amended Act came into
force
expired?
Indisputably
the period for serving
a notice
of
re-assessment
under the unamendro section had expired, and there was
in the Act as it then stood, no provision for extending the
period beyond the end of one year from the year of assessment.
The Income-tax Officer -could therefore commence
a proceeding under s. 34 on March 27, 1957, only if the
amended section applied and not otherwise.
The amending Act came into force after the period provided for the
issue of a notice under s. 34 before it was amended had
expired.
It is true that there was no determinable point
of time between the expiry of the prescribed time within
which the n<?tice could have been
issued against
the
assessee under s. 34 proviso (iii) before it was amended.
But there was no overlapping period either. Prima facie,
on the expiry of the period prescribed by s. 34 as it originally stood, there was no scope for issuing a notice unless tho
19~ -
S. S. Gadgik
v.
Lal and Co.
Shah/.
196-1
S. S. Gadgil
v.
Lal and Co.
Shah J:
SUPREME COURT REPORTS
[1g64]
Legislature expressly gave power to the Income-tax Officer
to issue notice under the amended section notwithstanding
the expiry of the period under the unamended provision or
unless there was overlapping of the period within which
notice could be issued under the old and the amended provision.
But counsel for the Commissioner submitted that
at no time was the Income-tax Officer bereft of authority
to issu.J a notice under s. 34 of the Indian Income-tax Act,
1922.
He submitted that till the mid-night of March 31,
1956, notice could be issued in exe:rcise of the powers conferred by s. 34 proviso (iii) before it was amended and
notice of assessment or re-assessment could also be issued
under the amended provision immediately
thereafter
in
exercise of the powers conferred by s. 18 o! the Finance
Act, 1956.
Counsel relied upon the rule contained in
s. 5 ( 3) of the General Clauses Act that unless the contrary
is expressed, a Central Act or Regulation shall be construed
as coming into operation immediately on the expiration of
the day preceding its commencement. It was submitted
that this is merely a statutory recognition of the rule which
is well-settled that where a ·Statute names a date on which
it shall come into operation. it shall be deemed to come
into force immediately on the expi.ration of the previous
day and the law does not take into consideration fractions
of a day.
Reliance was placed by counsel
upon
Tomlinson v.
Bullock(') and English
v.
C/iff(2 ).
In
Tom/inson's
case ( 1) the question was whether an order of affiliation
could be made on an .1pplication made in respect of a child
born at any time of the day on August 10, 1872 under the
Bastardy Act, 35 & 36 Viet. c. 65.
In an application made
for an order of affiliation, it was hel'd that the order could
competently be made in respect of a child born at any time
of the day on the 10th of August. 1872, because the Act
in the contemplation of law for this purpose came into
effect from the
commencement of the day on which it
received the royal assent, and that normally an Act which
comes into operation becomes Jaw as soon as it commences.
Jn English v. Cliff(') it was held by the Court of Chancery
(t) (1879) 4 Q.B.D. 230
(2) (1914) 2 Ch. D. 37f.
•
S S.C.R.
SUPREME COURT REPORTS
79
that the trustees under a deed of settlement dated May 13,
l 964
1892, who stood possessed of ,an estate during the term of
s. s. Gadgil
twenty-one years from the date of settlement upon trust Lal an/co .
. to apply the rents and profits mentioned therein and who
-
were authorised at the expiration of the said period to sell
Shah /.
the estate could competently sell it and their action was
not liable to be challenged as infringing the rule of perpetuity. It was held in that case that the determination of
the term of twenty-one years and the commencement of the
trust for sale arising at one and the same tnoment, the trust
was not void for
remoteness on the gruund that it was
limited to take effect at the expiration of the term.
Neither
-0f these cases has, in our judgment, any application to the
principle applicable in the present case.
The power to
issue a notice under the unamended Act came to an end
on March 31, 1956. Under that Act no notice could
thereafter be issued.
It is true that by the amendment made
by s. 18 of the Finance Act, 1956, a notice could be issued
within two years from the end of the year of assessment.
But the application of the amended Act is subject to the
principle that unless otherwise provided if the right to act
under the earlier statute has come to an end, it co.uld no!
be revived by the subsequent amendment which extended
the period of limitation.
The right to issue a notice under
the earlier Act came to an end before the new Act came
into force.
There was undoubtedly no determinable point
-0f time between the expiry ot the earlier Act and the commencement of the new Act; but that would not, in our
judgment, affect the application of this rule.
Reliance was also" placed by counsel for the Commissioner upon the rule which has prevailed in the Supreme
Court of the United States of America that "a new statute
should be construed as a colliinuation of the old one with
the modifications contained in the new one, although it
formally repeals the old stat\lte, when it re-enacts its substantial provisions and the two statutes are almost identical." Bear Lake & River Water W arks & Irrigation Company and Jarvis-Conklin .Mortgage Trust Company
v.
Wil/~an:_ Garland and Corey Brothers & Co. (1). It appears
(I) 164 U.$. I
JH#
S. S. Gadgil
v.
Lal and Co.
Shah J.
So
SUPREME COURT REPORTS
to have been recognised in the Supreme Court of the United
states of America in Pacific Mail S. S. Co. v. Jolifee( 1)
that repeal in terms of a former statute does not necessarily
indicate .an intention of the legislature thereby to impair
right which had arisen under the act which was repealed.
As the provisions of the new act took effect simultaneously
with the repeal of the old one, the Supreme Court held that
the new one might more properly be said to be substituted
in the place of the old one, and to continue in force, with
modifications, the provisions of the old act, instead of
abrogating or annulling them and re-en.acting the same as
a new and original act.
Apart from the question whether
the rule so enunciated is applicable to the interpretation of
Indian statutes, in this case we are not concerned with
re-enactment of a statute.
The statute abrogates one rule
of limitation, and enacts another rule with a limited retrospective operation. · To such a case the rule enunciated by
the Supreme Court of America, assuming it applies, attributing to the Legislature an intention to continue in force the
provisions of the old Act, with a modification, so as to
give to the new statute in substance operation retrospectively from the date on which the old statute was enacted, can
have no application.
We do not
think that
any such
intention may be attributed to the Legislature in enacting
s. 18 of the Finance Act, 1956 so as to make it the basis
of a liability to taxation after the expiry of the period prescribed in that behalf by the Legislaturn.
Counsel also submitted that s. 34 lays down a rule of
limitation for commencing an
action for assessment or
re-assessment, and that in the absence of an express provision to the contrary, a statute of limitation in operation at
a given time governs all proceedings from the moment of
its enactment, even though the cause of action on which the
proceeding was based came into existence before the Act
was enacted. Equating a proceeding under s. 34 of the
Indian Income-tax Act with a suit or a proceeding in a
civil court, counsel said that the law of limitation being
a law of procedure, assessment proceedings including proceedings for re-assessment are governed hy the law in force
(1) 69 U.S. (2 Wall) 459
8S.C.R.
SUPREME COURT REPORTS
81
at the date on which they are instituted, and that the rule
that the repeal of a statute without express words or clear
implication in the repealing statute, cannot take away a
right vested in a party acquired under the repealed statute
when it was in force, is a rule of prescription and not of
procedure, and notwithstanding general observations to the
contrary in certain decisions, applies only to those actions
in which by . the determination of the period prescribed, a
right to institute an action for possession of property
is
extinguished.
Counsel relies in support of the plea on
Baleswar v. Latafat('). It is unneces'sary to dilate upon
this argument in any detail, or to enter upon an analysis
of the numerous cases which were mentioned at the Bar
to determine whether the rule that without an express provision, or a clear implication arising from the amending
statute rights acquired under the repealed statute by the
determination of the period of limitation prescribed thereby
cannot be deemed to be revived, applies to suits for possession only.
It
may be sufficient to !Dake two comments
on the .argument.
The rule has in fact been applied to
suits other than suits for possession: e.g. Mahomcd Mehdi
Faya v. Sakinabai( 2 ) (a suit for restitution of conjugal
rights); M. Krishnaswami Nalcker .v.
A. Thiruven1wda
Muddaliar(') (a suit for recovery of a debt); Shambhoonath
Saha v. Guruchurn Lahiri(') (an application for execution); and Nepal Chandra Roy Chowdhury • v. Niroda
Sundari Ghose(') (an application for setting aside an ex
parte decree). Again soon after it was
delivered
the
the authority of Baleswar's case(') was weakened by the
judgment in Jagdish v. Saligram (6 ) where the Court doubted the correctness of the earlier view.
A proceeding for assessment is not a suit for adjudication
of a civil dispute.
That an income-tax proceeding is in
the nature of a judicial proceeding
between
contesting
parties, is a matter which is not cap;tble of even a plausible
argument.
The Income-tax authorities who have power to
assess and recover tax are not acting as judges decidi!!g a
(1) I.LR. 24 Pat. 249
(2) l.L.R. 37 Born. 383
(3) A.I.R. (1935) Mad. 245
(4) J.L.R. s Cal. 894
(S) I.L.R. 39 Cal. 506
(6) I.L.R. 24 Pat. 391
51 S.C.-6.
1964
S. S. Gadgil
...
Lal ond Co.
Shall J.
1964
S. S Gadgil
v.
Lal and Co.
Sltllh /.
82
SUPREME COURT REPORTS
litigation between the citizen and the States:
they
are
administrative authorities whose proceedings are regulated
by statute, but whose function is to estimate the income of
the taxpayer and to assess him to tax on the basis of that
estimate.
Tax legislation necessitates the setting up
of
machinery to ascertain the taxable income, and to assess
tax on the income, but that does not impress the proceeding
with the character of an action between the citizen and the
State: The Commissioner of Inland Revenue v. Sneath(');
and Shell Company of Australia Ltd. v. Federal Commissioner of Taxation( 2 ).
Again the period prescribed by s. 34 for assessment or
re-assessment is not a period of limitation. The section in
terms imposes a fetter upon the power of the Income-tax
Officer to bring to
tax escaped income.
It prescribes
different periods in different classes of cases for enforcement of the right of the State to recover tax.
It was observed by this Court in Ahmedabad Manufacturing and Calico
Printing Co. Ltd. v. S. C. Mehta. Income-tax Officer and
another('):
·
·~···-·---
"It must be remembered that if the Income-tax Act
prescribes a period during which tax due in
any particular assessment year may be assessed, then on the expiry of that period the department cannot make an assessment.
Where no
period is prescribed the assessment can be
completed at any time but once completed it
is final.
Once a final assessment has been
made, it can only be reopened to rectify a
mistake apparent from the record (s. 35) or
to reassess where there has been an escapement
of assessment of income for one reason or
another. (s. 34). Both these sections which
enable reopening of back assessments provide
their own periods of time for action but all
these periods of time, whether for the first
assessment or for rectification, or for reasaea!-
ment, merely create a bar when that time passed
(1) 17 T.C. 149, 164
(2) (1931] A.C. 275
(3) (1963] Supp. 2 S.C.R. 92,u7-n8
8 S.C.R.
SUPREME COURT REPORTS
against the machinery set up by the Incometax Act for the assessment and levy of the tax.
They do not create an exemption in favour of
the assessee or grant an absolution on the expiry
of the period.
The liability is not enforceable
but the tax may again become exigible if the
bar is removed and the taxpayer is brought
within the jurisdiction of the said machinery
by reason of a new power.
This is, of course,
subject to the condition that the law must say
that such is the jurisdiction, either expressly
or by clear implication. If the language of
the law has that clear meaning, it must be
given that effect
and
where
the language
expressly so declares or clearly implies it, the
retrospective operation is not controlled by the
commencement clause."
.Counsel for the Commissioner sought to derive some
support from Income-tax Officer, Companies District I, Calcutta and another v. Calcutta Discount Company Ltd.( 1)
in which Chakravartti C.J., dealing with the effect of the
Income-tax and Business Profits Tax (Amendment) Act,
1948, observed:
"The plain effect of the substitution. of the new s: 34
with effect from 30th March, 1948 is ihat from
that dat$1 the Income-tax Act is to be re.ad as
including the new section as a part thereof and
if it is to be so read, the further effect of the
express language of the section is that so far as
cases coming within cl. (a) of sub-s. ( 1) are
concerned all assessment years ending within
eight years ftom 3Qth March, 1948 and from
subsequent dates, are within its purview and it
will apply to them, provided the notice contemplated is given
within
such eight years.
What is not within the purview of the section
is an assessment year which ended before eight
years from 30th March, 1948.
(1) a3 I.T.R. 471
1964
S. S. Gadgil
...
Lol and Co.
Shala J.
1964
8. S. Gu,;l
y,
Lol tmll Co.
Shah/.
SUPREME COURT REPORTS
(1g64]
But it may be recalled that the amending Act of 1948 with
which the Court was concerned in Calcutta Discount Company's case(') came into force on September 8, 1948, but
s. 1 (2) prescribed that the amendment in s. 34 of the
Income-tax Act, 1922, shall be deemed to have come into
force on March 30, 1948, and the period under the unamended section within which notice could be issued under
~. 34 ( 3) against the assessee company ended on March 31,
1951.
Before that date the
amending
Act came
into
operation, and at no time h.ad the right to re-assess become
barred.
In considering whether the amended statute applies, the
question is one of interpretation i.e., to ascertain whether it
was the intention of the Legislature to deprive a taxpayer of
the plea that action for assessment or re-assessment could not
be commenced, on the ground th.at before the amending Act
became effective, it was barred.
Therefore the view that
even when the right to assess or re-assess has lapsed on
account of the expiry of the pe'riod of limitation prescribed
under the earlier statute, the Income-tax Officer can exercise
his powers to assess or re-assess under the amending statute
which gives an extended period of limitation, was not accepted in Calcutta Discount Company's case(').
As we have already pointed out, the right to commence
a proceeding for assessment against the assessee as an agent
of a non-resident party under· the Income-tax Act before it
was amended, ended on March 31, 1956.
It is true that
under the amending Act by s. 18 of the Finance Act, 1956,
authority was conferred upon the
Income-tax Officer
to
assess a person as an agent of a foreign party under s. 43
within two years from the end of the year of assessment.
But authoriiy of the Income-tax Officer under the Act before
it was amended by, the Finance Act of 1956 having already
come to an end, the amending provision will not assist him
to commence a proceeding even though at the date when
he issued the notice it is within the period provided by that
amending Act.
This will be so, notwithstanding the fact
that there has been no determinable point of time between
the expiry of the time provided under the old ·Act .and the
(1) 23 I.T.R. 471,
8 S.C.R.
SUPREME COURT REPORTS
commencement of the amending Act. The Legislature has
given to s. 18 of the Finance Act,
1956, only a limited
retrospective operation i.e., upto April 1, 1956, only.
That
provision must be read subject to the rule that in the absence
of an express provision or clear implication, the Legislature
does not intend to attribute to the amending provision a
greater retrospectivity than is exrressiy mentioned, nor to
authorise the Income•tax Officer to commence proceedings
which before the new Act came into force had by the expiry
of the period provided, become barred.
The appeal fails and is dismissed with costs.
Appeal dismissed.
COMMISSIONER OF INCOME-TAX, U.P., LUCKNOW
v.
KANPUR COAL SYNDICATE
(K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.)
Income Tax-Assessment on Association of persons or on members indi·
vidually-Option to appropriate authority-Right of appeal, whether
such assessee has--Powers of Tribunal
and
Appellate Assistanl
Commissioner in Appeal-Income-tax Act, 1922 (11 of 1922), n.
3, 14(2) (b) 30, 31 and 33.
Income-tax was assessed upon the total income in the hands of tho
respondent-assessee, an association of several persons
combined
together for the purpose of purchase of coal and its supply to customers
for domestic purposes and other small scale industries. The assesseo
claimed that it should not be assessed to tax as an association of persons,
but the proportion of the income in the hands of each members of
the association might be assessed to tax instead. The Income-tax Officer
refused this request and an appeal to the Appellate Assistant Commissioner was dismissed. The Income-tax Appellate Tribunal, on a further
appeal. held that though the Income-tax Officer had power to assess
income of the association of persons as such or in the altematiye on
the individual members thereof in respect of their proportionate sharo
fn the income, the tribunal had no power under the Act to direct tho
Income-tax Officer to exercise his power in one way or other. On a
196'
Lal orul Co.
Y.
s. s. Gadill
Sltah J.
1964
April, 30.