Report No. 12
Note on Repeal and transitional provisions
(At first, draft clauses on repeal and transitional provision were prepared in the Commission, but later it was felt that it need not be done in the Commission and might be left to the Ministry of Law.)
When the new Act comes into force, the existing Act i.e., 1922 Act will, of course, cease to apply. While drafting the repeal clause, it would be desirable to consider which, of the following courses should be adopted.-
(1) Absolute repeal of the existing Act-This may not be feasible, since it would necessitate innumerable saving provisions and may cause inconvenience also.
(2) Formal repeal of the existing Act with a provision that so far as the assessments etc. for assessment years prior to the commencement of the new Act are concerned, the existing Act will continue to apply. This seems to be the method adopted in section 13 of the Finance Act, 1950 (25 of 1950) and section 6 of the Taxation Laws (Extension to Jammu and Kashmir) Act, 1954 (41 of 1954) which, while repealing the old laws, preserve the old laws for the purpose of "levy, assessment and collection" of income-tax, etc. for past years.
Section 527 of the U.K. Act, 1952 follows the same method, sub-section (1), main para, repeals the previous laws as listed in the twenty-fifth Schedule, but the proviso enacts that the provisions of the new Act "shall not apply to income-tax for the year 1951-52 or any previous year of assessment and the provisions of the enactments mentioned in the twenty-fifth Schedule shall continue to apply for tax in any such year to the same extent that they would have applied thereto if this Act had not been passed".
Section 2 of the Australian Income-tax and Social Service Contribution Assessment Act, 1936-1953, while repealing the enactment concerned (aide the main paragraph), provides (vide first proviso) that the Act repealed by this section, shall continue in force for all purposes in connection with income-tax payable for any financial year prior to the financial year commencing on the 1st January, 1936.
[It may be noted that the saving embodied in the various Acts referred to above varies in each Act. Thus the Indian Acts i.e., Finance Act, 1950 and the Act relating to Jammu and Kashmir, save the old law for levy, assessment and collection of tax etc. The U.K. Act saves the old law for tax. The Australian Act saves the old law "for all purposes".]
(3) Another alternative would be, not to "repeal" the existing Act, but to provide that it "shall cease to apply". (A clause framed on these lines would not of course, attract the provisions relating to repeal in the General Clauses Act and they will have to be specifically incorporated in the repeal clause).
A precedent for this will be found in section 130 of the Canadian Income-tax Act which, instead of effecting a specific repeal, merely provides that provisions of the Income-tax War Act (i.e.' the earlier Income-tax Act of Canada) "are not applicable to taxation years after the 1948 Taxation Year"1.
1. Hence, assessment in Canada still continue to the made and disputes litigated under the old Act in respect of pre-1948 income. Vide Plaxton,. Income-tax Law, 1949, Second Supplement.
Title I, sub title A, section 1, U.S.A. Internal Revenue Code, (U.S.A. Statutes, 1934, Part I, p. 683) provides that the provisions of the new Act shall not apply to assessment years commencing prior to 1st January, 1934, and income-tax for assessment years prior to that date shall remain unaffected by the new Act and shall continue to be governed by the applicable provisions of the old Act.
If this third alternative is adopted, notifications and orders etc. can be issued under the old Act on all matters in respect of assessment years prior to the commencement of the new Act.
[It may be stated here that the repeal clauses in section 53 of the Indian Income-tax Act, 1918 (7 of 1918), section 8 of the Indian Income-tax Act, 1920 (19 of 1920) and section 68 of the Indian Income-tax Act, 1922 (11 of 1922) might not be very helpful in drafting the repeal clause. These Acts straight-away repeal the old Act and add that such repeal shall not affect the liability of any person to pay any sum due under the old Act.]