The Ahmedabad MFG. &
Calicoprinting Co., Ltd. Vs. S. C. Mehta, Income-Tax Officer & ANR [1962]
Insc 312 (14 November 1962)
DAS, S.K.
KAPUR, J.L.
SARKAR, A.K.
HIDAYATULLAH, M.
DAYAL, RAGHUBAR
CITATION: 1963 AIR 1436 1963 SCR Supl. (2) 92
CITATOR INFO :
RF 1965 SC 171 (10) F 1966 SC1481 (4) RF 1968
SC 623 (21)
ACT:
Income Tax-Rectification-Retrospective
operation of statuteRebate granted on undistributed profits-Subsequent
declaration of dividends on such profits--Recall of rebate and re-computation
of assessment-Finance Act, 1956 (18 of 1956), ss. 19, 28-Indian Income-tax Act,
1922 (11 of 1922), S.35 (10).
HEADNOTE:
Sub-section (10) of s. 35 of the Indian
Income-tax Act, 1922, which was brought into force on April 1, 1956, provided
that where in any of the assessment years 1948-49 to 1955-56, a rebate of
income-tax was allowed to a company "and subsequently the amount on which
the rebate of income-tax was allowed.......... is availed of by the company,
wholly or partly for declaring dividends in any year", the amount shall be
deemed to have been made the subject of incorrect relief, and the Income-tax
Officer shall re-compute the tax payable by the company by reducing the rebate
originally allowed.
For the assessment year 1952-53, the account
year being the calendar year 195 1, the appellant company was assessed to
income-tax and super-tax on a total income of Rs. 1,02,07,808/and was allowed a
rebate of one anna per rupee on the undistributed profits of Rs. 36,62,776/under
the provisions of the Finance Act, 1952. For the assessment year 1953-54 the
appellant was assessed to a loss of Rs.
5,98,363/on April 17, 1954. On April 20,
1954, the appellant declared a dividend of Rs. 19,32,000/out of the
undistributed profits of the calendar year 1951 on which a rebate had been
allowed. On March 18, 1958, the Income-tax Officer issued a notice calling upon
the appellant company to show cause why action under s.35 (10) of the Indian
Income-tax Act, 1922 should not be taken against it by withdrawing the rebate
allowed on the sum of Rs. 19,32,000/-. The appellant claimed that subsection
(10) of s. 35 was not applicable as the amount on which the rebate was granted
was availed of for declaring dividends before the sub-section had come into
force.
Held (per Sarkar, Hidayatullah and Raghubar
Dayal, JJ., Das and Kapur, JJ., dissenting), that sub-section (10) of s. 35 of
the Indian Income-tax Act, 1922, was intended to have a retrospective operation
and was applicable to the present case.
Per Das and Kapur, JJ. (1) Sub-section (10)
of s. 35 which created a legal fiction was clearly prospective and showed that
what was correct at the, time when the rebate was granted was rendered
incorrect on the happening of the crucial event after the coming into force of
the subsection.
(2) The principle in Income-tax Officer v. S.
K. Habibu. llah, [1962] Supp. 2 S. C. R. 716, that 'a statute which is not
declaratory of a pre-existing law nor a matter relating to procedure but
affects vested rights, cannot be given a greater retrospective effect than its
language renders necessary, and even in construing a section which is to a
certain extent retrospective, the line is reached at which the words of the
section cease to be plain, is applicable to the present case.
94 Per Sarkar,j.-The language used in sub-ss.
(5) and (10)is wholly different and Income-tax Officer v. S. K.Habibullah,
[1962] Supp. 2 S. C. R. 716, is distinguishable.
Per, Hidayatullah and Raghubar Dayal,JJ.(1)
Under s. 35 (10) the only condition was that the declaration of the dividends
must be after the grant of the rebate. Though the section came into force from
April 1 1956, it was to be used retrospectively to recall rebate on amounts
which the law deemed to have been subject of an incorrect relief; and though
the recalling of the rebate was after the enactment of the section, the
conditions for. the exercise of the power may be before or after the
commencement of the section.
(2) Income-tax Officer v. S. K. Habibullah,
[1962] Supp. 2 S. C. R. 716 and Second Additional Income-tax officer v. Atmala
Nagaraj, [1962] 46, T. T. R. 609, may have to be reconsidered on some future
occasion.
CIVIL APPELLATE JURISDICTION : Civil appeal
No. 139 of 1962.
Appeal from the judgment and decree dated
November 6, 1958, of the Bombay High Court in Special Civil Application No.1806
of 1958.
R. J. Kolah, J. B. Dadachanji, O. C. Mathur
and Ravinder Narain, for the appellant.
Gopal Singh and R. N. Sachthey, for the
respondents.
1962. November 14. The following judgments
were delivered.
The judgment of S. K. Das and J. L. Kapur,
JJ., was delivered by S. K. Das,J. The judgment of M. Hidayatullah and Raghubar
Daval, JJ. was delivered by M. Hidayatullah, J.
A. K. Sarkar. J., delivered a separate judgment.
S. K. DAS,J.-This appeal on a certificate of
fitness granted by the High Court of Bombay raises a question of interpretation
of sub-s. (10) of s 35 of the Indian Incometax Act, 1922. This sub-section 95
is one of a group of sub-sections substituted or inserted in the said section
by s. 19 of the Finance Act, 1956 (Act 18 of 1956). By s. 28 of the said
Finance, Act, sub-s. (10) of s. 35 of the Income-tax Act, 1922, came into force
on April 1, 1956. The short question before us is, whether on its true
construction, sub-s. (10) of s. 35 applies in a case where a company declares
dividends by availing itself wholly or partly of the amount on which a rebate
of income-tax was earlier allowed to it under clause (1) of the proviso lo
Paragraph B of Part I of the relevant Schedules to the Finance Acts, when such
dividends were declared prior to the coming into force of the subsection, that
is, prior to April 1, 1956.
The facts which have given rise to the appeal
are these.
The Ahmadabad Manufacturing And Calico
Printing Co., Ltd., is the appellant before us. The appellant company was
incorporated under the Indian Companies Act, 1866, and has its office at
Ahmedabad. It carries on the business of manufacturing, and selling cotton
piece goods and chemicals.
For the assessment year 1952-53, the
corresponding account year being the calendar year 1951, the appellant was
assessed to income-tax and super-tax on a total income of Rs. 1,02,79,808/and
was allowed a rebate of one anna per rupee on the undistributed fits of Rs.
36,62,776/under the first proviso to paragraph B of. Part I of the first
Schedule to the Finance Act, 1952. The amount of rebate allowed was Rs.
2,28,924/-. For the assessment year 195354, the corresponding account year
being the calendar year 1952, the appellant showed a book profit of Rs. 45,67,96,66,/-,
but was assessed to a loss of Rs. 5,98,353/on April 17, 1954. For the said
calendar year 1952, the appellant declared a dividend of Rs. 19,32,0000/on
April 20, 1954. This dividend came out of the undistributed profits of the
calendar year 1951 on which the appellant had been allowed rebate,.
96 On March 18, 1958, the Income-tax Officer,
Special Circle, Ahmadabad, respondent No. 1 before us, issued a notice to the
appellant calling upon the latter to show cause why action under sub-s. (10) of
s. 35 should not be taken against the appellant by withdrawing the rebate
allowed on the sum of Rs. 19,32,000/-. The appellant raised some objections,
one of which was that sub-s. (10) of s. 35 did, not apply to his case. The
Income-tax Officer, however, held that sub-s. (10) of s. 35 applied and
accordingly directed that the rebate allowed on the sum of Rs. 19,32,000/should
be withdrawn, by recomputing the tax payable by the appellant. He ordered the
issue of a demand notice for a sum of Rs. 1,20,750/which was the rebate allowed
on Rs. 19,32,000/-. The Income-tax Officer passed this order on March 27, 1958.
Being aggrieved by that order, the appellant
moved the High Court of Bombay by a writ petition filed on June 26, 1958.
The main ground taken by the appellant was
that sub-s. (10) of s. 35 did not apply to a case where dividend was declared,
as in this case, before the coming into force of sub-s. (10) of s. 35. The High
Court rejected this contention and dismissed the writ petition. The appellant
then obtained certificate of fitness and has preferred the present appeal in
pursuance of,, that. certificate.
We may now read some of the provisions of s.
35 in so far as they are relevant for our purpose"S. 35(1) The
Commissioner or Appellate Assistant Commissioner may, at any time within four
years from the date of any order passed by him in appeal or, in the case of the
Commissioner, in revision under s. 33A and the Income-tax Officer may, at any
time within four years from the date of any assessment order or refund order
passed by him on his own motion rectify 97 any mistake. apparent from the
record of the appeal, revision, assessment or refund as the case may be, and
shall within the like period rectify any such mistake which has been brought to
his notice by an, assessee :
xx xx xx (2) xx xx (3) xx xx (4) xx xx (5)
Where in respect of any completed assessment of a partner in a firm it is found
on the assessment or reassessment of the firm or on any reduction or
enhancement made in the income of the firm under section 31, section 33,
section 33A, section 33B, section 66 0 section 66A that the share of the
partner in the profit or loss of the firm has not been included in the
assessment of the partner, or if included, is not correct, the inclusion of the
share in the assessment or the correction thereof, as the case may be, shall be
deemed to be a rectification of a mistake apparent from the record within the
meaning of this section, and the provisions of sub-section (1) shall apply
thereto accordingly, the period of four years referred to in that sub-section
being computed from the date of the final order passed in the case of the firm.
(6) Where the excess profits tax or the
business profits tax payable by an assessee has been modified in appeal,
revision or any other proceeding, or where any excess profits tax or business
profits tax has been assessed after the completion of the corresponding
assessment for income-tax (whether before or after the commencement of the
Indian Income-tax (Amendment) Act, 1953), and in consequence thereof it is
necessary to recomputed the total income of the assessee chargeable to
income-tax, such re-computation shall be deemed to be a rectification of a mistake
apparent from the record within the meaning of this section and the provisions
of sub-section (1) shall apply accordingly, the period of four years referred
to in that subsection being computed from the date of the order making or
modifying the assessment of such excess profits tax or business profits tax.
(7) xx xx (8) xx xx (9) xx xx (10) Where, in
any of the assessments for the years beginning on the 1st day of April of the
years 1948 to 1955 inclusive, a rebate of income-tax was allowed to a company
on a part of its total income under clause (1) of the proviso to Paragraph B of
Part I of the relevant Schedules to the Finance Acts specifying the rates of
tax for the relevant year, and subsequently the amount on which the rebate of
income-tax was allowed as aforesaid , is availed of by the company, wholly or
partly, for declaring dividends in any year, the amount or that part of the
amount availed of as aforesaid, as the case may be, shall, by reason of the
rebate of income-tax allowed to the company and to the extent to which it has
not actually been subjected to an additional income-tax in accordance with the
provisions of clause (ii) of the proviso to Paragraph B of Part I of the
Schedule to the Finance Acts above referred to, be deemed to have been made 99
the subject of incorrect relief under this Act, and the Income-tax Officer
shall re-compute the tax payable by the company by reducing the rebate
originally allowed, as if the computation is a rectification of a mistake
apparent from the record within the meaning of this section and the provisions
of sub-section (1) shall apply accordingly, the period of four years specified
therein being reckoned from the end of the financial year in which the amount
on which the rebate of income-tax was allowed as aforesaid was availed of by
the company wholly or partly for declaring dividends." Speaking generally,
s. 35 deals with rectification of mistakes in circumstances detailed in the
various subsections thereof and provides for orders consequent on such rectification.
Sub-section (1) empowers the Income-tax authorities to rectify mistakes
apparent from the record in respect of certain orders passed by them. It
provides that the Income-tax Officer concerned may at any time within four
years from the date of any assessment order passed by him on his own motion
rectify any mistake apparent from the record of the assessment: The power of
rectification may be exercised subject to two conditions : (1) that there is a
mistake apparent from the record of the assessment, and (2) that the order of
rectification is made within four years from the date of the assessment sought
to be rectified.
Sub-section (5) deals with inclusion or
correction of the income of a partner in a firm consequent upon assessment or
reassessment of the firm of which he was a partner. Subsection (6) deals with
re-computation of total income of an assessee in consequence of modifications
made in the excess profits tax or the business profits tax payable by an
assessee subsequent to an assessment made under the Income-tax Act. These two
subsections were considered by this court in two decisions 100 to which we
shall presently refer. They have been relied on by the appellant and have some
bearing on the interpretation of sub-s. (10). Sub-sections (2), (3), (4), (7),
(8) and (9) are not relevant for our purpose and need not be referred to.
Now, we come to sub-s.(10). It deals with a
case where a rebate was allowed to a company on a part of its income (viz.,
undistributed profits) by virtue of the concessions given by the Finance Acts
of 1948 to 1955. This is clear from the first part of the sub-section. The
second part states the condition in which, or rather the crucial event on the
happening of which, the rebate granted. to a company is deemed to have been
given by a mistake apparent from the record, this condition or crucial event is
the declaration of dividends by 'the company out of the amount in whole or
part, on which abate was earlier granted to it. The third and operative part
states that on the happening of the crucial event, the amount on which rebate
was granted and which has been subsequently utilised for declaring dividends
shall be deemed to have been made the subject of incorrect relief under the Act
and the Income-tax Officer shall re-compute the tax payable by the company by
reducing the rebate originally allowed as if the re-computation is a
rectification of a mistake apparent from the record within the meaning of the
section. The fourth and last part introduces a period of limitation of four
years, the four years being reckoned not from the date of the order passed as
in sub-s.(1), but from the end of the financial year in which the amount on
which rebate of income-tax was allowed was availed of by the company wholly or
partly for declaring dividends. This, in brief, appears to be the scheme of subs.
(10) of s. 35.
Now, the argument on behalf of the appellant
is this. Like sub-s. (5) of s. 35, sub-s. (10) affects a 101 vested right,
namely, the right to a rebate of income-tax on a part of the total income of
the company under clause (1) of the proviso to Paragraph B of Part I of the
relevant Schedules to the Finance Acts of 1948 to 1955, and the further right
to declare dividends out of the undistributed profits of the previous year.
Under the well settled rules of statutory construction, no statute which
impairs an existing right or obligation except as regards a matter of
procedure, shall have retrospective operation unless such a construction
appears very clearly in the terms of the Act or arises by necessary and
distinct implication. Put differently, a statute is not to be construed to have
a greater retrospective operation than its language renders
necessary;............ and it is submitted that "the general rule is that
all statutes other than those which are merely declaratory, or which relate
only to matters of procedure or of evidence are prima facie prospective; and
retrospective effect is not to be given to them unless by express words or
necessary implication, it appears that this was the intention of the
legislature" and "'it is a corollary of this general presumption
against retrospection that, even when a statute is intended to be to some
extent retrospective,' it is not to be construed as having a retrospective
effect than its language renders necessary".
(Halsbury's Laws of England, Vol. 36. Third
edition, p. 423 and p. 426). 'The argument on behalf of the appellant is that
by s. 28 of the Finance Act. 1956, sub-s. (10) has undoubtedly retrospective
effect from April 1, 1956; but the language of the sub-section does not
expressly, nor by necessary implication, show that it has any greater
retrospective effect. It is pointed out that, on the contrary, where the
legislature wanted a particular subsection to have greater retrospective
effect, it had said so, e. g. in sub-s. (6). It is also pointed out that sub-s.
(5) of s. 35 was inserted by the Indian Income-tax (Amendment) Act, 1953, and
by s. 1 (2) 102 of the said Act it came into force on April 1, 19.52. Where the
legislature wanted to give greater retrospective effect to particular
provisions, it said so in ss. 3 (2), 7 (2) and 30 (2) of the said Act. That
being the position, the argument on behalf of the appellant is that we should
not give any greater retrospective effect to sub-s. (10) of s. 35 than what has
been done by s. 28 of the Finance Act, 1956. Learned Counsel for the appellant
has strongly relied on the decision of this Court in Income-tax Officer v. S.
K. Habibullah (1) wherein with regard to sub-s. (5) of s. 35 it was held that
the subsection was not declaratory of the preexisting law nor a matter relating
to procedure but effected vested rights and must be deemed to have come into
force only from April 1, 1952; therefore, the Income-tax Officer had no
jurisdiction under the said sub-section to rectify the assessment of a partner
consequent on the assessment of the firm in cases where the firm's assessment
was completed before April 1, 1952. The argument of the learned counsel for the
appellant is that the same principle must apply in the present case and sub-s.
(10) of s. 35 does not apply to a case where dividend was declared by the
company before the date of the coming into force of the sub-section, namely,
April, 1, 1956.
The second part of the argument of the
learned counsel for the appellant is that there is no real difference in
language between the two sub-sections, sub-s. (5) and sub.s. (10) of s. 35. In
both cases 1 rectification or correction is made by reason of a subsequent
event; in sub-s. (5) the subsequent event is the assessment of the firm which
discloses the inaccuracy in the earlier assessment of a partner; in sub-s. (10)
the subsequent event is the declaration of dividend out of the amount on which
a rebate was earlier granted. It is pointed out that in their true scope and
effect, the two sub-sections stand on the (1) [1962] Supp. 2 S. C.. R, 716, 103
same footing. Sub-section (10) further makes it clear that by a 'legal fiction
that which was correct at the time when it was made is rendered incorrect after
the coming into force of the sub-section. The sub-section states clearly
"shall, by reason of the rebate of Income-tax allowed to the
company.............................. be deemed to have been made the subject
of incorrect relief under this Act, and the Income-tax Officer shall re-compute
the tax payable by the company by reducing the rebate originally
allowed................." This language, it is argued, is clearly
prospective and does not justify the carrying of the legal fiction to a period
earlier than April 1, 1956.
As against these arguments, learned counsel
for the respondent has contended that the language of sub-s. (10) is different
from that of sub-s. (5) and the principle laid down by this court in S. K.
Habibullah's (1) cannot be applied to the present case. Alternatively, he has
argued that the decision is incorrect and should be reconsidered by us. The
argument of learned counsel for the respondent is that sub-s. (10) by necessary
implication has a greater retrospective effect than what is laid down by S. 28
of the Finance Act, 1956. He points out that the first part of the subsection
talks of the assessments made for any of the years beginning on April 1, 1948,
to April 1, 1955, when a rebate of income-tax was allowed; then the second part
refers to the subsequent declaration of dividend by the company in any year.
Learned counsel for the respondent has emphasised the expression "in any
year" and has submitted that this shows that the intention was to take in
a declaration of dividend made even earlier than April 1, 1956, According (1)
[1962] Supp, 2 S.C.R. 716, 104 to him, the only effect of s. 28 of the Finance
Act, 1956, is that the income-tax Officer can take action only after April 1,
1956, but the language of the sub-section does not justify the conclusion that
the legal fiction created by it must be restricted to the declaration of
dividends on or after April 1, 1956.
We have carefully considered these arguments.
The language of sub-s. (10) of s. 35 is perhaps not as clear as one might wish
it to be. There is no doubt, however, that the subsection affects vested rights
and should not be given a greater retrospective operation than its language
renders necessary. Even through the sub-section is to a certain extent
retrospective, and s. 28 of the Finance Act, 1956, in express terms makes it
retrospective from April 1, 1956, it is clear to us that there is nothing in
the language of the sub-section which would justify the inference that the
legislature intended to carry the legal fiction created by the sub-section to a
period earlier than the date on which the sub-section came into force. The
maxim applicable in such cases is that even in construing a section which is to
a certain extent retrospective, the line is reached at which the-words of the
section cease to be plain. We are further of the opinion that when the first
part of the sub-section refers to the assessments in the years 1948 to 1955, it
merely. refers to the period during which the rebate provisions were in force.
It is not disputed before us that the rebate provisions came into force from
the Finance Act of 1948 and ended with the Finance Act of 1955. The first Part
therefore is merely a reference to the period during which the rebate
provisions were in force. It is indeed true that in the second part of the
sub-section the expression used is "declaring dividends in any year and
this has to be read in conjunction with the word "subsequently" which
can only mean subsequent to the allowance or the rebate. But in the very 105
same part, it is further stated that the declaration of dividend in any year
shall, by reason of the rebate be deemed to have made the amount on which the
rebate was granted, the subject of incorrect relief etc.. This language which
creates the legal fiction is clearly prospective and shows that what was
correct at the time when the rebate was granted is rendered incorrect on the
happening of the crucial event after the coming into force of the subsection,
and by the express terms of s. 28 of the Finance Act, 1956, the sub--section
comes into force on April 1, 1956. We are unable, therefore, to agree with the
learned counsel for the respondent that the language of sub-s. (10) by
necessary implication takes the legal fiction back to a period earlier than
April 1, 1956. In coming to this conclusion, we have kept in mind the principle
that a statute does not necessarily become retrospective because a part of the
requisites for its action is drawn from a time antecedent to its passing.
Furthermore we see no reason why the
principle laid down in S. K. Habibullah's case (1) will not apply in the
present case nor are we satisfied that decision with regard to subs. (5) of s.
35 was incorrect. We may point out, however, that in Second Additional
Income-tax Officer v. Atmala Nagaraj (2) this court went a step further and
held that sub-s. (5) of s. 35 was not applicable to cases where the assessment
of the partner was completed before April 1, 1952, even though the assessment
the firm was completed after April 1, 1962 of Learned counsel for the appellant
frankly conceded before us that he did not wish to go as far as that and
contend that even in a case where a declaration of dividend was made after
April 1, 1956, sub-s. (10) would not apply; because that would make sub-s. (10)
unworkable. The (1) [1962] Supp. 2 S.C.R. 716.
(2) [1962] 46 I.T.R. 609.
106 decision in Second Additional Income-tax
Officer v. Atmala Nagaraj (1) may perhaps require reconsideration as to which
we need not express any final opinion now; but so far as this case is concerned
we see no reason why the principle in S. K. Habibullah's case (2) will not
apply. The principle is simply this. A statute which is not declaratory of a
preexisting law nor a matter relating to procedure but affects vested rights
cannot be given a greater retrospective effect than its language renders
necessary, and even in construing a section which is to a certain extent
retrospective, the line is reached at which the words of the section cease to
be plain. These are well settled principles and there is no reason to doubt
their accuracy.
For the reasons given above, we would allow
the appeal, set aside the order and judgment of the High Court and quash the
order of the Income-tax Officer dated March 27, 1958, and the notice of demand
dated March 28, 1958. The appellant will be entitled to its costs throughout.
SARKAR, J.-In its assessment to income-tax
for the year 1952-53, the appellant, a company, had been granted under the
provisions of the Finance Act, 1952, a rebate on a portion of its profits of
the previous year, that is, 1951 which it had not distributed as dividends to
its shareholders.' In the next assessment year 1953-54, the appellant used a
part of the aforesaid undistributed profits for declaring dividends. As the law
then stood, nothing could be done by the revenue authorities to withdraw the
rebate earlier granted on the ground of the profits being utilised in declaring
dividends in a latter year. From April 1, 1956, however, there was a change in
the law as sub. s. (10) of s. 35 of the Income-tax Act, 1922, was brought into
force then. By an order made on March 27, 1958, under that sub-section, the
terms of (1) [1962] 46 I.T.R. 609 (2) [1962] Supp. 2 S.C R. 716.
107 which I will set out presently, the
aforesaid rebate was withdrawn and the appellant was called upon to refund it.
The appellant then applied to the High Court
at Bombay for a writ to quash the order of March 27, 1958, on the ground that
sub-s. (10) was not applicable to the facts of this case for reasons which I
will later state. That application was dismissed. This appeal is against this
decision of the High Court at Bombay dismissing the application.
Now sub-s. (10) of s. 35 of the Income-tax
Act was enacted by the Finance Act of 1956 and it was given effect from April
1, 1956. That sub-section, in so far as it is necessary to state for the
purpose of this case, provides that where in any of the assessment 1948-49 to
1955-56, a rebate of income-tax was allowed to a company under the Finance Act
prevailing in that year on a part of its total income "and subsequently
the amount on which the rebate of income-tax was allowed as aforesaid is
availed of by the company, wholly or partly, for declaring dividends in any year.................................
the Income-tax Officer shall re-compute the tax payable by the company by
reducing the rebate originally allowed." The sub-section in substance
permits a rebate duly allowed in any year before. it came into force to be withdrawn
if "subsequently',' the amount on which the rebate was allowed "is
availed of" "for declaring dividends in any year." The appellant
contends that the sub-section does not apply unless the amount on which the
rebate was granted is availed of for declaring dividends after the sub section
had come into force, that is after April 1, 1956, and therefore it does not
apply to the present case. It is said that if it were not so the sub-section
would be given a retrospective operation and the rule is that it is to be
presumed that a statute dealing with substantive rights is not to have such 108
operation. The case of Income-tax Officer, Madras v. S. K. Habibullah was cited
in support of this contention.
I will assume that if the sub-section were
applied to a case like the present, it would affect a vested right. The rule no
doubt is that a statute is presumed not to do so. Bat this rule does pot apply
if the language of the statute indicates an intention to give it a
retrospective operation.
It seems to me that subs. (10) uses language
which indicates sufficiently clearly that it was intended to be applied where
the amount on which rebate had been obtained was availed of for declaring
dividends before the subsection came into force, that is' to say, to have a retrospective
operation. It says, "subsequently the amount an which the rebate of
income-tax was allowed as aforesaid is availed of.................. for
declaring dividends in any year".
There is no doubt that the words
"subsequently " and "in any year" mean in any year
subsequently to the year in which the rebate was granted. They would,
therefore, clearly include a year before the sub-section came into force. But
it is said that these words should in view of the rule be read as not including
a year before the sub-section came into force as they also include years
subsequent to the coming into force of the sub-section and are therefore
ambiguous.
I am unable to accept this contention. I find
no ambiguity.
If the intention was that the subsection
would apply only when the amount was availed of for declaration of dividends
after it was enacted then the words ""subsequently" and "in
any year" were wholly unnecessary. Without these words the sub-section
would have read, "and the amount is availed of for declaring
dividends." There would then be no doubt that it was intended to operate
only prospectively. But the legislature used some more words. It must have done
so with (1) [1962] Supp. 2 S.C.R.716.
109 some purpose. What that purpose was if it
was not to give the sub-section retrospective operation, I failed to see. I am
unable to read the words "subsequently" and "in any year"
as otiose and as indicating no different intention.
Therefore, it seems to me that the language
of the subsection plainly requires it to have a retrospective operation. The
subsection is properly applicable to this case.
There is another consideration leading me to
the view that the presumption against retrospective operation does not arise
here. It was said in Pardo v. Bingham(1) that it was not an invariable rule
that a s could not have a retrospective operation unless so expressed in its
very terms, and that it was necessary to look to the 'general scope and purview
of the statute and at the remedy sought to be applied and consider what was the
former state of the law and what it was that the legislature contemplated. It
is quite plain that in providing for the grant of rebate on undistributed
profits by the ,Finance Acts of 1948 to 1955 the legislature wanted to
encourage the employment of the profit made in a business in the business
itself. The object presumably was to expand the industries of the country. This
involved a long term employment of the, profits in the business. It could not
have been the intention of the legislature to grant rebate when a company only
kept the profits for a short time with itself and having earned the rebate
distributed the profits without the industry having had any real benefit of
them. I think should state here that the provisions for the grant of rebate did
not require that dividend was not to be declared at all. The object was to
encourage a reasonable division of the profits between the shareholders and the
industry.
Allowance of rebate was provided for on that
part of the profits which was left for employment in the industry after
reasonable dividends had been (1) (1869) L. R. 4 Ch. 735.
110 distributed to the shareholders. The
rebate was allowed on a graded scale depending on the amount of profits which
was not distributed as dividends.
Now the system of granting rebates started in
1948-49. It was stopped in 1955-56. The subsection was brought into force on
April 1, 1956, that is, seven years after the system had first been started.
The sub-section provided for withdrawal of the rebate when the amount on which
it had been granted was availed of in declaring dividends. It is fairly clear
from this that the legislature did not approve of these amounts being utilised
in declaration of dividends.
It is also not too much to suppose that there
had been many previous cases of such utilisation of profits for if it had not
happened earlier, there is no reason to think that the legislature anticipated
the evil happening in future and passed the law to stop it. In view of the
large number of years that had passed between the time when the allowance of
rebate commenced and the time when the sub-section was brought into force, it
can be imagined that a very large number of cases of distribution of profits on
which rebate had been allowed, had already taken place. I find it difficult to
think that many cases remained after April 1, 1956, where a company which
intended to utilise the amounts on which rebate had been granted in the
declaration of dividends, had not already done so.
There is no dispute that by sub-s. (10) the
legislature intended to penalise a case where subsequent to its enactment, the
amount on which rebate had been granted was utilised in declaration of
dividends. Now is there any reason to think that the legislature did not want
to impose the penalty also on those who had earlier utilised the amount in
declaration of dividends ? There was no special merit in these latter 111
cases, And I also think that they formed the majority of the cases. The grant
of rebate having been stopped after March 31, 1956, there was no occasion to
provide for cases of such grant thereafter. All these circumstances lead me to
the.
view that the intention of the legislature
was to penalise the cases of utilisation of amounts on which rebate had been
granted in payment of dividends which had happened before the sub-section came
into force. The remedy which the subsection provided would largely fail in any
other view. The general scope and purview of the subsection and a consideration
of the evil which it was intended to remedy lead me to the opinion that the
intention of the legislature clearly was that the subsection should apply to
the facts that we have in this case.
As to S. K. Habibullah's case (1) I do not
think that much assistance can be had from it. It applied the rule of
presumption against a statute having a retrospective operation-as to which
rule, of course, there is no dispute to sub-s. (5) of s. 35. Now cases on the
construction of one statute are rarely of value in construing another statute,
for each case turns on the language with which it is concerned and statutes are
not often expressed in the same language. The language used in sub-ss. (5) and
(10) seems to me to be wholly different. There is nothing in S. K. Habibullah's
case (1) to indicate that in the opinion of the learned judges deciding it
there were any words which would indicate that sub-s. (5) was to have a
retrospective operation. In my view, sub-s. (10) contains such words.
Furthermore, I do not find that the other
considerations to which I have referred, arose for discussion in that case.
In my view, the two cases are entirely
different.
I therefore, think that sub-s. (10) of s. 35
properly applies to this case. In my view, the appeal should be dismissed with
costs.
(1) [1962] Supp. 2 S. C. R. 716.
112 HIDAYATULLAH, J.-This is an appeal by an
assessee with' certificate under Art. 133 (i)(c) of the Constitution from the
judgment and order of the High Court of Bombay dismissing the assessee
company's petition under Art. 226 of the Constitution which challenged an order
under s. 35(10) of the Income-tax Act rectifying the earlier assessment and
sought a writ or writs to prohibit the Income-tax Authorities from giving
effect to that order.
The assessee (The Ahmedabad Manufacturing
& Calico Printing Co. Ltd.) is a public limited company carrying on
business of manufacture of cotton price-goods and chemicals. The year of
account of the assessee company is the calendar year. In the assessment year
1952-53, corresponding to the calendar year 1951, the appellants were assessed
on January 31, 1953, on a total income of Rs. 1,02,79,808. The assessee company
was allowed a rebate of one anna per rupee amounting to Rs. 2,28,924 on the
undistributed profits of Rs. 26,62,776 tinder the first proviso to Paragraph B
of Part I of the first Schedule to the Finance Act, 1952. For the assessment
year 1953-54 (account year calendar year 1952) the books of the assessee
company showed a profit of Rs. 45,67,966. That profit became a loss of Rs.
5,98,353.
after deductions like depreciation etc. were
allowed.
Inspite of there being a loss, the assessee
company declared on April 20, 1953, a dividend of Rs. 19,32,000 for the year of
account 1952.
The Income-tax Officer,' by an order dated
March 18, 1958, called upon the assessee company to show cause why action under
s. 35(10) of the Income-tax Act should not be taken to recall a proportionate
part of the rebate because in his opinion the entire dividend of Rs. 19,32,000
came out of' the undistributed profits of the calendar year 1951 on which the
appellant had received a rebate. The 113 "(5) Where in respect of any
completed assessment of a partner in a firm it is found on the assessment or
re-assessment of the firm or on any reduction or enhancement made, in the
income of the firm under section 31, section 33 section 33A, section 33B,
section 66 or section 66A that the share of the partner in the profit or loss
of the firm has not been included in the assessment of the partner or, if
included, is not correct, the inclusion of the share in the assessment or the
correction thereof, as the case may be, shall be deemed to be a rectification
of a mistake apparent from the record within the meaning of this section, and
the, provisions of sub-section (1) shall apply thereto accordingly, the period
of four years referred to in that subsection being computed from the date of
the final order passed in the case of the firm." It must be noticed that
under this amendment time limit started from the date of the final order passed
in the case of the firm though the rectification is to be made in the
assessment of the' partners of the firm.
By s. 19 of the Finance Act, 1956, sub-s.
(10) (among others) was added as from April 1, 1956. That subsection reads as
follows :"(10) Where in any of the assessments for the years beginning on
the 1st day of April of the 114 rectify any such mistake which has . been
brought to his notice by an assessee :" It must be noticed that the, time
limit started from the date of the order of assessment which was to be
rectified.
In 1953, by s. 19 of the Indian Income-tax
(Amendment) Act, 1952 (25 of 1953), sub-s. (5) (among others) was added as from
April 1, 1952. That sub-section reads as follows :"(5) Where in respect of
any completed assessment of a partner in a firm it is found on the assessment
or reassessment of the firm or on any reduction or enhancement made in the
income of the firm under section 31, section 33 section 33A, section 33B,
section 66 or section 66A that the share of the partner in the profit or loss
of the firm has not been included in the assessment of the partner or, if
included, is not correct, the inclusion of the share in the assessment or the
correction thereof, as the case may be, shall be 'deemed to be a rectification
of a mistake apparent from the record within the meaning of this section, and
the provisions of sub-section (1) shall apply thereto accordingly, the period
of four years referred to in that subsection being computed from the date of
the final order passed in the case of the firm." It must be noticed that
under this amendment time limit started from the date of the final order passed
in the case of the firm though the rectification is to be made in the
assessment of the partners of the firm.
By s. 19 of the Finance Act, 1956, sub-s.
(10) (among others) was added as from April 1, 1956. 'Mat sub-section reads as
follows :"(10) Where in any of the assessments for the years beginning on
the 1st day of April of the 115 years' 1948 to 1955 inclusive, a rebate of
income-tax was allowed to a company on a part of its total income under clause
(i) of the proviso to Paragraph B of Part I of the relevant Schedules to the
Finance Acts specifying the rates of tax for the relevant year, and
subsequently the amount on which the rebate of income-tax was allowed as
aforesaid is availed of by the company, wholly or partly, for declaring
dividends in any year, the amount or that part of the amount availed of as
aforesaid, as the case may be, shall, by reason of the rebate of income-tax
allowed to the company and to the extent to which it has not actually been
subjected to an additional income-tax in accordance with the provisions of
clause (ii) of the proviso to Paragaph B of Part I of the Schedules to the
Finance Acts above refer-red to, be deemed to have been made the subject of
incorrect relief under this Act, and the Income-tax Officer shall recompute the
tax payable by the company by reducing the rebate originally allowed, as if the
recompilation is a rectification of a mistake apparent from the record within
the meaning of this section and the provisions of sub-section (1) shall apply
accordingly, the period of four years specified therein being reckoned from the
end of the financial year in which the amount on which rebate of income-tax was
allowed as aforesaid was availed of by the company wholly or partly for
declaring dividends." It will be noticed that the time limit under this
subsection was to commence from the end of the financial year in which the
dividends were declared from profits on which the rebate was earned earlier.
The question in this case is whether sub-s.
(10) can apply Co an assessment which had been nude be116 fore sub-s. (10) came
into force. The contention of the assesse-company is that sub-s. (10) was given
retrospectivity only up to April 1, 1956, and the words of that at sub'-section
should be interpreted in such a way as to give the sub-section no greater
retrospectivity.
According to the assessce company the
assessment for the year 1953-54 had become final on April 17, 1954, that is to
say, before the 1st day of April, 1956, from which date subs. (10) was made to
operate. The provisions of s. 35(10), according to the assessee company, could
only be utilised if dividends were declared after April 1, 1956, but not if the
declaration took place earlier. Reliance was placed upon the decision of this
Court in Income-tax Officer v.
Habibullah(1), and reference was also made to
another decision following Habibullahs' case, (1), Second Additional Income-tax
Officer v. Atmala Nagaraj.(2) Our learned brother Das, J., following
Habibullah's case(') has held that the contention of the assessee company is
well-founded and has expressed the opinion that Atmala Nagaraj's Case (2) may
need re-consideration. He has, therefore, ordered the reversal of the judgement
and order of the High Court. In our judgement, and we say it with profound
respect, this appeal must be dismissed. We are also of the opinion that both
the above cases (which are of the same Divisional Bench) may have to be
reconsidered hereafter. Amala Nagaraj's case(") followed Habibullah's
case.(') The difference in the facts of the two cases was only in one respect
and that was not sufficient to take Atmala Naagaraj's case (2) out of the ratio
of the earlier decision. We shall deal with these two cases later.
The Income-tax Act imposes a charge of tax
for a year at a time and that year is the year of assessment. The charge is in
respect of a previous year which is commonly known as the year of account.
(1) [1962] Supp. 2 S.C.R. 716.
(2) [1962] 46 T. T. R 609.
117 The rate at which the tax is to be
charged is enacted by an annual Finance Act for each assessment year. The
assessment year is the Financial Year. From the nature of things an amendment
of the Income-tax. Act, made in the middle of the assessment, year, if made to
operate from the beginning of the, assessment year, operates on incomes which
had been earned before. Since an amendment cannot be. allowed to operate from
the mid-term, each such amendment is made to, comprise a whole assessment year
whether it be the assessment year then running. or an earlier or a later
assessment, year. Amendments are thus .give retrospective.
operation from the first day of April in the
same, or a preceding, or prospective operation for a future assessment year.
Ordinarily, the law, as it stands on the 1st of April in any assessment year,
applies to, assessments in that year. but the law may expressly or by necessary
implication give itself a greater retrospective operation.
The date on which the amendment comes into
force is the date of the commencement of the amendment. It is read as amended
from that date. Under ordinary circumstances, an Act does not have
retrospective operation on substantial rights which have become fixed before
the date of the commencement of, the Act. But this rule is not unalterable. The
legislature may affect substantial rights by enacting laws which are expressly
retrospective or by, using language which has that necessary result. And this
language may give an enactment more retrospectivity than what the commencement
clause gives to any of its provisions. When this happens the provisions thus
made retrospective expressly or by necessary intendment, operate from a date
earlier than the date of commencement and affect rights which, but for such
operation, would have continued undisturbed.
It must be remembered,-that if the Income-tax
Act prescribes a period during which the, tax due in 118 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
reassessment, merely create a bar when that time passes against the machinery
set-up by the Income-tax 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 a in become eligible if the bar is removed
and the tax-payer 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.
The amendment, with which we are concerned,
was made by the Finance Act, 1956 (18 of 1956). By s. 2, it dealt with the year
beginning on the 1st day of April, 1956, and fixed the rates of taxes,for the
assessment year commencing on that date. It also amended the Income-tax Act by
ss. 3 to
35. Section 28 then prescribed the dates of
commencement of these sections. It read :"28. Commencements of amendments
to Act' 11 of 1922.-The amendments made in the Income-tax Act, by section 4 and
clause (b) of section 15 shall be deemed to have come into force on the 1st day
of April 1955, and the amendments made by section 3 to 27 inclusive shall come
into force on the 1st day of April, 1956." Sub-section (10) was introduced
into s. 35 of the Income-tax Act by s. 19 of this Act. If there was nothing
more in the language of the sub-section to give it operation from an earlier
date it would have operated only from 1st April, 1956, but the language of the
sub-section gives it additional retrospectively and says so in such clear and
unambiguous language as to leave no doubt. There is no room for the application
of Lord justice Bowmen's dictum in. Reid v. Reid (1) that even in construing a
section which is to a certain extent retrospective, the maxim that statutes are
prospective only, ought to be borne in mind as applicable whenever the line is
reached at which the words of the section cease to be plain.
The topic of s. 35 is rectification of
mistakes apparent from the record. Sub-section (10) introduced a new basis for
rectification in s. 35 which already prescribed a period of four years from-the
order of assessment and the new subsection enabled rectification to be made in
new circumstances and within a new time limit. Those circumstances when
analyzed, furnish the key to the retrospectively of the section. We shall begin
by quoting only the material portion of that sub-section, which has been quoted
in full earlier "Where, in any of the assessments for the years beginning
on the 1st day of April of the years 1948 to 1955 inclusive, a rebate of
income-tax was allowed......... and subsequently the amount on which the rebate
of income-tax was (1) (1886) 31 Ch. D. 409.
120 allowed... is availed of .......for
declaring dividends in any year...... the, amount .....shall be deemed to have
been, made the subject, of incorrect relief and the Income tax Officer shall recomputed
the tax as if the recompilation is a rectification of a mistake apparent from
the record within the, meaning of this section and. the provisions of
subsection (1) shall apply accordingly, the period of four years being reckoned
from the end of the financial year in Which. the amount on which rebate of
income-tax Was allowed was, availed of for declaring dividends." The
purport of this new sub-section was the recall of rebate which had. been
allowed in any of the assessments for the years 1-4-1948 to 31-3-1956 under
certain. circumstances.
At the very start, the sub-section takes one
to assessment years to which S. 28 which prescribed the commencement as 14-1956
did not take one to. We do not accept the argument of the learned counsel for
the assessee company that the mention of the years is merely a repetition of a
historical fact for ready reference. The words "in any of the assessments
for the years etc. II show in respect of which, assessments rectification,
would be possible. The years are mentioned individually by using the word
"any". The law. speaking in 1956 was thus speaking of all the
assessment years individually going. back to 1st April, 1948.
;The language was clearly one of retrospectively
and the suggestion, that there is no intent behind these words and that they
merely refer to a historical fact is -not acceptable to us. This conclusion is
further fortified by the words :"and subsequently the amount.... .... is
availed of for declaring.. dividends in any year.." 121 Having mentioned
the years individually in the opening part, an event is mentioned which is
subsequent, namely, declaration of dividend from an amount on' which rebate was
allowed. "Subsequently" here obviously means subsequent to "any.
of the assessments for the years beginning on the 1st day of April of the years
1948 to 1955 inclusive", not necessarily subsequent to the Amending Act.
The declaration of the dividends must be after' the grant of the rebate.
That is the only condition and it does not
import the date of commencement of the subsection in any way . Then comes the
operative part and it is this. If in the earlier assessment in any of the years
mentioned a rebate' was allowed and subsequently in any year there was a
declaration of dividend utilising the amount on which the rebate Was given, the
amount so utilised should be deemed to be the subject of incorrect relief. This
fiction comes into force from 1-4-1956 but it is not stated that the
circumstances in which it comes into being should also be after 1-4-1956.
The sub-section no doubt is to be used from
1-4-1956 but it is to be used retrospectively to recall rebate on amounts which
the law deems to have been the subject of an incorrect relief in the past. The
recalling of the rebate is after the enactment of sub-s. (10) but the
-conditions for the exercise of the power may be before or after' the
commencement of the sub-section. The only curb on the exercise of the power is
that the Income-tax Officer may go back a period of four years reckoned from
the end of the financial year in which the declaration of dividend was made to
the date when the action is taken.
In the present case, this is so. The assessee
company declared dividends in the calendar year 1952. The assessment year was
1-4-1953 to 31-3-1954. The letter written on March 18, 1958, asking the
assessee company to show cause was 122 within the four years reckoned from the
end of the financial year (31-3'1954) in which the amount on Which rebate of
Income-tax was availed of for declaring dividends. It complied with the letter
of the sub-section. Since the power commenced. on 1-4-1956, the utmost reach of
the Income-tax Officer would be the end of the assessment year A 1952. Any
declaration of dividend after 1st day of April, 1952, out of accumulated
profits of any of the years in which rebate was earned would be within time for
the recall of the rebate. But a declaration prior to 1-4-1952 would be beyond
the power of the Income-tax Officer to recall. This meaning is the only meaning
which the plain words of the section can bear. Any other' meaning might make
sub.s. (10) unworkable because no company.,, with the knowledge that rebate
would be recalled, would like to declare dividends after April 1, 1956, out of
amountson which rebate was earned. If the other meaning was attributed, sub-s.
(10) might well be a dead letter. The sub-section was obviously the result of
noting how rebates were earned and later were being utilized to fill the
pockets of the shareholders. The amendment met this situation and did it in
very clear terms.
It remains to consider, the decisions of this
court in Habibullah's case (1) and Atmala Nagaraj's case (2). In those two
cases this Court was called upon to interpret subs. (5) quoted above which was
introduced as from April 1 1952, by the Indian Income-tax (Amendment) Act,
1953., In both the cases there was a final assessment of the incomes of
partners in registered firms. Later the assessment of the registered firms took
place and it was found that the share of income of the partners was larger than
what had been assessed. Under s. 35 (1), as it stood before sub-s.
(5) was introduced, rectification could be
made in respect of a mistake apparent (1) [1962] Supp, 2 S.C.R. 716. (2) [1962]
46 I. T. R. 609.
123 from the record and the records of the
firms could not be read with those of the partners to find an error in the
latter. There was thus an impasse. It was ruled by the Privy Council in
Commissioner of Income-tax v. Khemchand Ramdas(1), at p. 248 :
"............... When once a final
assessment, is arrived at, it cannot, in their Lordships' opinion, be reopened
except in circumstances detailed in section 34 and 35 of the Act........... and
within the time limited by those acts." Therefore, unless the original s.
35 allowed such rectification there was no help. Often the firm's final
assessment dragged on for years and by the time that assessment was done the
time limited by (sub.s.1) had already run out. Parliament therefore stepped in
with an amendment which was to commence on April 1, 1952. Two matters were
provided by sub-s. (5). Firstly, the result of the assessment of the firm
showing that the partners' income was not properly included in their own
assessments, was to be deemed to disclose an error in the record of the
partners' assessment and secondly, the period of four years instead of being
computed from the order of assessment made against the partners as under sub-s.
(1) was to be computed from the date of the final order passed in the case of
the firm.
No doubt this. power could be exercised from
1-4-1952 but the question that had to be considered was whether it could be
exercised only to reopen the assessment of partners of a firm if, and only if,
the order in the assessment of the firm was passed after the amendment came
into force. In dealing with the matter in Habibullah's case(2) this Court
referred to the finality which attaches to a final (1) (1938) L. R. 65 I. A.
236, 248.
(2) [1962] Supp. 2 S.C.R. 716.
124 assessment as stated by the Privy
Council. This Court then referred to the date of the commencement of sub-s. (5)
which 'was fixed retrospectively as 1-4-1952 and held that the sub-section
could not be used to reopen assessments which had become final before the
commencement of the new subsection, contrasting its language with that of
sub-s. (6) which wits, simultaneously introduced. In Habibullah's case (1) the
dates were :Partners' assessment for 1946-47 on 22-2-1950 -do -do1947-48 on –do
Registered firms' assessment for 46-47 on 31-10-1950 -do-do1947-48 on 306-1951
Sub-s.(5) to s. 35 introduced from 1-4-1952 Order under s.
35 (5) on 27-3-1954 If sub-s. (5) could be
used in this case it is plain that the 'four years period had not passed
between31-10-1950 '(;which was the earlier assessment) and 27-3-1954 when the
rectification was made. No doubt, the two assessments of the firm were also
before 1-4'-1952 but the sub-section has nowhere said that the power was only
to be exercised if the' assessment of the firm was after that date. Such a
meaning is also difficult to imply. Under a fiction created after 1-4-1952 the
assessment of the partners disclosed a mistake and if the fiction and the rest
of the sub-section were to be given their full and logical effect the
assessment of the partners could, be reopened and rectified. But it was held
otherwise by this Court. The main reason was that the partners' assessments had
become final before' 1-4-1952, that under the law, as it then stood, there'
was' no error in their record, and Sub-s.(5) having been enacted retrospectivity
from (1) [1962] Supp. 2 S. C.R. 716.
125 1-4-1952 could not be given more
retrospectivity That the firm's assessment was also before 1-4-1952 was not
given as a reason and in any event it was not very relevant. It neither added
to nor detracted from the finality (such as it was on 22-2-1952) on the
Partners' assessment. The law obviously mentioned the final order in the firm's
assessement as the starting point in view of the length time the firm's
assessments take to reach their own finality. But there was nothing to 'show
that this new terminus a quo must be after 1-4-1952 before sub-s(5) could be
used. The words of the sub-section were entirely indifferent to this aspect In
Atmala Nagraj's Case (1) the assessment of the was also completed before partners
(22-1-1952) 1-4-1952 and had become final subject however to section 34 and 35.
No doubt the assessment of the firm was completed after 1-4-1952 but this
distinction made no difference to the finality such as had been gained on 22-11952.
We do not naturally express a final opinion
on sub-s. (5).
We must leave that to a future case. We must,
however, say that the two earlier cases may have to be reconsidered on some
future occasion. When the occasion comes the questions to ask would be
1. Did finality attach in Habibullah's case
(2) to the partners' assessment under the law as it then stood from 22.2-1950
(partners assessment) or from 31-10-1950 and 30-6-1951 (the firm's assessment)
?
2. Was there no finality in so far as the
partner's assessment was concerned in Atmala Nagaraj's case (1) between
22-1-1952 (partner's assessment) and 1-4-1952 (the commencement of sub-s. (5))
? (1) [1962] 46 I.T.R. 609. (2) (19621 Supp. 2 S.C.R. 716.
126
3. Was the finality of the partner's
assessment, if any, controlled in the one case by the fact that the assessment
of the firm was before 1-4-1952 and in the other by the fact that the
assessment of the firm was after 1-4-1952 We have detailed these questions
because they high-light the only point of difference between the two cases. We
express no opinion of these questions.
In view of what we have said on. the
interpretation of s. 35 (10) we are of opinion that the judgment of the High
Court was right. We would, therefore, dismiss this appeal with costs.
By COURT : In accordance with the opinion of
the majority, this appeal is dismissed with costs.
Appeal dismissed.
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