1. This is an appeal from a judgment of Mr. Hathi, Judge of the City Civil Court, Bombay, by which he dismissed the plaintiff's suit. The suit came to be filed under the following circumstances.
2. One Rowji Sojpal entered into a contract with defendant No. 1, the Municipal Corporation of Bombay, for construction of certain sewers and admittedly under that contract a sum of Rs. 14,517-10-0 was due by the Muncipality to Rowji Sojpal on March 31, 1950. On March 20, 1950, Rowji Sojpal on March 31, 1950. On March 20, 1950, Rowji Sojpal assigned the benefit under this contract to the plaintiff and the plaintiff has sued the Muncipality to recover this sum of Rs. 14,517-10-0. The Municipality does not dispute its liability under the contract. Its defence is that it made this payment to the Union of India under a notice served by the Excess Profits Tax Officer on April 29, 1950, and the payment was made on May 5, 1950. The contention of the Municipality is that this payment discharges the Municipality's debt to Rowji Sojpal and therefore the plaintiff is not entitled to use on the assignment. The trial Judge upheld the contention of the Municipality and dismissed the suit. A third party notice was also taken out against the Union of India claiming this sum of Rs. 14,517-10-0 in the event of the court holding that the payment made by the Municipality to the Union of India was unjustified. No question arose with regard to the decision on the third party notice in view of the decision of the trial court that the plaintiff was not entitled to sue the Municipality, but the learned Judge held that in the event of the appellate court taking a different view the third party notice was bad inasmuch as no notice was given to the Union of India by the Municipality under Section 80 of the Code of Civil Procedure.
3. It seems that a sum was due by Rowji Sojpal for excess profits tax and the Municipality being the debtor of Rowji Sojpal, th e Excess Profits Tax Officer called upon the Municipality to pay the sum of Rs. 14,517-10-0 towards the liability of Rowji Sojpal for excess profits tax. This demand was made under Section 21 of the Excess Profits Tax Act, and the question is whether this demand was justified in law. Section 21 of the Excess Profits Tax Act makes certain sections of the Indian Income-tax Act, 1922, applicable with such modifications, if any, as may be prescribed and the mode of bringing about these modifications is by making rules under the rule-making power conferred under Section 27 upon the Central Board of Revenue. In making these provisions of the Indian Income-tax Act applicable Section 21 specifically states that these sections shall apply as if the provisions of those sections were provisions of the Excess Profits Tax Act, and one of the sections which is made applicable is Section 46 with which we are concerned in this case. Section 46 deals with the mode of recovery of income-tax and the first four sub-section of that section deal with the mode of recovery through the Collector. Sub-section (5) provides for a different mode of recovery and that mode is where an assessee is in receipt of any income chargeable under the head 'Salaries', the Income-tax Officer is given power to require any person who has to pay the salary to deduct from the payment of the salary any amount which is due for arrears of income-tax. Now, under the rules framed under Section 21 which authorised the Central Board of Revenue to make modifications in the sections of the Indian Income-tax Act made applicable to the Excess Profits Tax Act sub-section (5) of Section 46 was deleted. Therefore, as far as the Excess Profits Tax Act was concerned, the only mode of recovery was the mode prescribed in the first four sub-sections and not the mode prescribed in sub-section (5). The Income-tax Act was amended by Act No. XLVIII of 1948 and by that amendment a new sub-section was enacted to of Section 46 was deleted. Therefore, as far as the Excess Profits Tax Act was concerned, the only mode of recovery was the mode prescribed in the first four sun-sections and not the mode prescribed in sub-section (5). The Income-tax Act was amended by Act No. XLVIII of 1948 and by that amendment a new sub-section was enacted to Section 46 and that sub-section was sub-section (5A). This sub-section gave a very wide power to the Income-tax Officer to require any person from whom money was due or may become due to the assessee to pay the amount so due to the Income-tax Officer in respect of arrears of income-tax and the sub-section further provided that.
'Any person making any payment in compliance with a notice under this sub-section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt.'
4. Now, the Excess Profits Tax Officer purporting to act under sub-section (5A) of Section 46 read with Section 21 of the Excess Profits Tax Act served upon the Municipality the notice to which reference has already been made and the Municipality made the payment under sub-section (5A) of Section 46, and it is under that sub-section that it now claims that the payment made to the Excess Profits Tax Officer constitutes a valid discharge of its liability to Rowji Sojpal and, therefore, is binding upon him.
5. The question that falls for determination is whether sub-section (5A) which was incorporated into the Indian Income-tax Act, 1922, applies to the Excess Profits Tax Act, or in other words whether the provision of law which empowers the Income-tax Officer to recover arrears of income-tax according to the mode prescribed in sub-section (5A) of Section 46 also empowers the Excess Profits Tax Officer to recover arrears of excess profits tax by a similar mode. The main and the most important fact to bear in mind is that when the Excess Profits Tax Act was passed in 1940, and when certain provisions of the Indian Income-tax Act were made applicable to the Excess Profits Tax Act, the Excess Profits Tax Officer was given no such power to recover excess profits tax as provided subsequently in sub-section (5A) of Section 46. The question for our determination is whether the subsequent amendment of the Indian Income-tax Act without the Excess Profits Tax Act being amended automatically applied the amendment not only to the Indian Income-tax Act but also to the Excess Profits Tax Act. Apart from authorities which we will presently refer, it is clear that when the Legislature enacted Section 21 and when it applied certain provisions of the Indian Income-tax Act, 1922, what it had before itself was the Indian Income-tax Act as it stood in 1940 and amended up to that date. The Legislature could only apply its mind to the legislative provisions of the Indian Income-tax Act in 1940. It could not possibly contemplate what form or shape the Indian Income-tax Act might take in 1948. The Legislature was dealing with a special branch of taxation, viz., the Excess Profits Tax Act, and it desired that certain provisions of the Indian Income-tax Act should also apply to the Excess Profits Tax Act and, therefore, in Section 21 it specifically referred to those sections of the Indian Income-tax Act which it intended should apply to the Excess Profits Tax Act. It is also significant that the only modifications of these sections which the Legislature contemplated were the modifications of these sections which the Legislature contemplated were the modifications which may be prescribed, and it is clear looking to the definition of 'prescribed' that 'prescribed' meant prescribed not by a legislative amendment but by rules made under the Excess Profits Tax Act. Therefore, if the language has any meaning at all, it is clear that in enacting Section 21 the Legislature did not contemplate any modifications of the provisions set out in that section by a legislative amendment of the Indian Income-tax Act. If that had been the intention of the Indian Legislature, nothing would have been easier than for the Legislature so to have provided in Section 21. It could have stated that the provisions of the various sections set out in Section 21 shall apply to the Excess Profits Tax Act as amended from time to time, or as may be made by a competent Legislature. But, to repeat, the Legislature confined itself to contemplating only one type of modification and that was a modification by rules and not by a legislative amendment.
6. Now, the principle has been fairly well established that if you have a prior Act and the Legislature passes a subsequent Act and the Legislature wishes to incorporate into the subsequent Act certain provisions of the prior Act, the Legislature instead of bodily incorporating all those provisions may incorporate them merely by reference. This the Legislature does for convenience. But the incorporation in the sub-sequent Act makes the incorporation such a part of the subsequent Act as if it had been expressly put in that subsequent Act. Once the provisions of the prior Act have been incorporated into the subsequent Act, those provisions have, as it were, an independent existence and that existence is in no way affected by the fate of those provisions in the prior Act, whether the prior Act is repealed or the prior Act is modified. Therefore, applying that principle to Section 21. Once the Legislature incorporated certain sections of the Indian Income-tax Act by reference in the Excess Profits Tax Act, then the fact that those sections were subsequently modified or those sections were repealed would not in any way affect these sections to the extent that they were incorporated in the Excess Profits Tax Act and become part of the Excess Profits Tax Act itself. There is a decision of the Privy Council in Secretary of State for India v. Hindusthan Co-opearative Insurance Society where their Lordships were considering the Calcutta Improvement Act, 1911. It was a local Act and the earlier act was the Land Acquisition Act, 1894, and certain sections of the Land Acquisition Act, 1894, were incorporated in the Calcutta Improvement Act, 1911, and these provisions of the Land Acquisition Act, 1894, were subsequently modified by Act XIX of 1921, and at pate 266 Sir George Lowndes delivering the judgment of the Board says :-
'......their Lordships regard the local Act as doing nothing more than incorporating certain provisions from an existing Act, and for convenience of drafting doing so by reference to that Act, instead of setting out for itself at length the provisions which it was desired to adopt.'
7. Again at page 267 :-
'It seems to be no less logical to hold that where certain provisions from an existing Act have been incorporated into a subsequent Act,no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed incorporated in it, at all events if it is possible for the subsequent Act to function effectually without the addition.'
8. Now, it is hardly necessary to state that Act No. XLVIII of 1948 did not expressly apply the amendment of Section 46 to the Excess Profits Tax Act; nor is it necessary to state that the Excess Profits Tax Act could function and did function effectually without the addition introduced by sub-section (5A). Sub-sectio n (5A) merely added a new mode of recovery of tax. The excess profits tax was being recovered and the mode of recovery was as laid down in the several provisions of the Indian Income-tax Act. Therefore, it could not be said that without the application of sub-section (5A) the taxing authorities could not recover the excess profits tax from the assessees. There is also a leading English decision to which reference may be made and that is In re Wood's Estate : Ex parte Her Majesty's Commissioners of Works and Buildings, and Lord Esher says this :-
'... If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually written in it with the pen, or printed in it, and, the moment you have those clauses in the later Act, you have no occasion to refer to the former Act at all.'
9. Both Mr. Thakkar who appears on behalf of the Municipality and Mr. Joshi who appears on behalf of the Union of India fairly concede, as indeed they must, that in face of these authorities it is not possible for them to contend that if the provisions of the Indian Income-tax Act were incorporated in the Excess Profits Act by reference, then the subsequent amendment of the Indian Income-tax Act could not possibly affect the Excess Profits Tax Act. But the argument put forward before us by both the counsel is that when you look at the language of Section 21, there has been no incorporation of the provisions of the Indian Income-tax Act. What is emphasized is that Section 21 provides that the sections of the Indian Income-tax Act mentioned in Section 21 shall apply and not that they shall be incorporated in the Excess Profits Tax Act, and the contention is that because the Excess Profits Tax Act makes the sections of the Indian Income-tax Act to apply, what is made applicable is not the sections of the Indian Income-tax Act as they stood in 1940 but the sections of the Indian Income-tax Act as may be amended from time to time. We do not propose to express any opinion as to what would be the true legal position if Section 21 had merely made the provisions of the Indian Income-tax Act applicable and had said nothing more, although it seems to us difficult to the understand how in principle the position would be different if the Legislature had applied certain sections of a prior Act to what the position would be if the Legislature had incorporated the provisions would be if the Legislature had incorporated the provisions of those sections in the subsequent Act and made it part of the Act, because, as pointed out by Chief Justice Cockburn in The Queen v. Smith :-
'....Upon the whole, however, I think the principle is sound, that when an Act, or part of an Act, is incorporated by any form of words in a subsequent Act, the repeal of the first Act does not repeal the part incorporated in the second Act, without express words to the effect.'
10. Therefore, according to the learned Chief Justice, incorporation may be by any form of words and no particular form of word in necessary. But in this particular case Section 21 does not merely apply the sections of the Indian Income-tax Act but goes on to provide 'as if the said provisions were provisions of this Act.' No clearer language could have been used to suggest that the Legislature was incorporating the sections mentioned in Section 21 in the Excess Profits Tax Act itself; in other words instead of taking pen and paper and writing out these sections in a schedule to the Excess Profits Tax Act, the Legislature thought it more convenient and less laborious to merely make a reference to the sections which could be found by turning up the Indian Income-tax Act.
11. Mr. Joshi has drawn our attention to a large number of statutes where provisions of some earlier Acts are made applicable. We express no opinion as to what would be the effect of any subsequent amendment of the prior statute; nor is it necessary for us to express any opinion because, as already pointed out, the language used in Section 21 is different from the language used in the other statutes and the expression 'as if the said provisions were provisions of this Act' do not occur in any other statute, nor does the clear intention of the Legislature become apparent in the earlier statute as to what modifications the Legislature was contemplating to the section which has been incorporated from the earlier statute. Therefore, in our opinion, when the Indian Income-tax Act, 1922, was amended by Act No. XLVIII of 1948, by adding sub-section (5A) to section 46, that new sub-section did not apply to the Excess Profits Tax Act and the Excess Profits Tax Officer had no authority to call upon the Municipality to pay the amount due to Rowji Sojpal and the payment by the Municipality to the Union of India of the debt due to Rowji Sojpal towards the liability of Rowji Sojpal to the Union of India for excess profits tax did not discharge the Municipality from its debt due to Rowji Sojpal under the contract.
12. There is one other point which was taken before the lower Court to which reference might be made and which has been urged before us by Mr. Thakkar, and that is with regard to the assignment made by Rowji Sojpal in favour of the plaintiff. Now, the contract which Rowji Sojpal entered into with the Municipality was as the sole proprietor of Rowji Sojpal & Sons. In the deed of assignment which was executed in favour of the plaintiff Rowji Sojpal describes himself as the karta of a joint and undivided Hindu family and describes the firm of Rowji Sojpal & Sons as a joint family firm and the deed of assignment is executed by Rowji Sojpal as the manager and karta, and the contention put forward is that there is no liability upon the Municipality to pay the assignee inasmuch as the assignment is by Rowji Sojpal as the karta of a joint and undivided Hindu family, whereas the contract was entered into by Rowji Sojpal as the sole proprietor of Rowji Sojpal & Sons. In our opinion, it is rather difficult to understand this contention. The only privity that was established under the contract was between the Municipality and Rowji Sojpal as an individual and as the sole proprietor of the firm. There was no privity between the Municipality and any coparcenary of which Rowji Sojpal was the karta. In order that the assignment should be effective all the interest of Rowji under the contract must be transferred and conveyed to the assignee, and the only question that the Court has to consider with regard to assignments is whether if the debtor paid the assignee, he would get a complete and proper discharge. Mr. Thakkar says that inasmuch as the assignment is made by the joint family and if the Municipality were to pay the assignee, some question may arise as to whether the assignment was made for the benefit or legal necessity of the joint family, and Mr. Thakkar apprehends that some sort of claim might be made against the Municipality by the coparceners other than Rowji of the joint family. For every apprehension there must be some reasonable basis and it is difficult to understand what possible reasonable basis there is for this apprehension on the part of the Municipality. It cannot be seriously disputed that the only person who could have sued on the contract is Rowji Sojpal. The joint Hindu family could not have sued on the contract because, as already pointed out, it had no privity with the Municipality. If in fact the contract was for the benefit of the joint family, the joint family might have had some claim against the karta. It might have been a matter of accounts in a partition between the karta and other members of the joint family, but as far as the Municipality was concerned, it had not entered into a contract with Rowji Sojpal as an individual and not as represting the family and it had not entered into any contract with the family itself. If Rowji Sojpal had filed a suit against the Municipality and the Municipality had paid Rowji Sojpal, it would have received a complete discharge. If Rowji Sojpal conveys his complete interest in the contract to the assignee and the Municipality pays the assignee, it would have received the same discharge as it would receive if it had paid to Rowji himself. It cannot possibly be suggested that Rowji could have made any claim against the Municipality, if the Municipality had paid the assignee under the deed of assignment. The fact that Rowji describes himself as the karta and not as the sole proprietor has nothing whatever to do with the Municipality. All that the Municipality has got to see is whether the assignee has been conveyed all the rights of its creditor and whether in paying the assignee it would get as good a discharge as if it had paid to its own creditor. It may be that for greater caution the assignee wanted in the deed of assignment the coparceners to join and the joint family to be represented. But that does not in any way affect the liability of the Municipality to pay the creditor and also in law to pay the assignee of the creditor. The only question is, is the plaintiff the assignee of the Municipality's debt, and there can be no doubt that whatever the interest Rowji has in the contract has been assigned to the plaintiff under the deed of assignment. Therefore, in our opinion, there is no substance in this contention put forward by the Municipality.
13. As far as appeal No. 481 of 1952 is concerned, these are the only two contentions that have been urged before us.
14. The result, therefore, is that the appeal must succeed. The order of dismissal by the trial Court will be set aside and there will be a decree in favour of the plaintiff and against defendant No. 1 for Rs. 14,517-10-0 with interest at the rate of 4 per cent. from October 3, 1950, till judgment, costs of the suit including the costs of the High Court suit and interest on judgment at 4 per cent. Respondent to pay costs of this appeal.
15. Appeal allowed.
F. A. No. 482 of 1952.
16. With regard to appeal No. 482 of 1952, that is the appeal by the Municipality against the Union of India, and as we have already stated, the view taken by the trial Court was that as no notice had been served upon the Union under Section 80 of the Code of Civil Procedure, the third party notice was bad. Mr. Thakkar wanted to contend before us that inasmuch as the third party notice was not a suit, Section 80 would not apply and it would not be necessary to serve a notice upon the Union. Mr. Joshi for the Union fairly concedes that on the merits the Union would have no answer to the claim of the Municipality. Inasmuch as we have now held that the payment by the Municipality to the Union was not justified and that the amount was paid obviously under a mistake of law, the Union would be liable to refund the amount to the Municipality. The only defence which the Union seems to have is a very technical defence under Section 80. We have persuaded Mr. Joshi to represent to the proper authorities that it would not be proper for the Union of India to refuse to pay the Municipality the amount which in law it is entitled to merely on the ground that no proper notice was given under Section 80. Mr. Joshi has promised to convey our views to the proper authorities, and pending the decision of the Union of India, this appeal will stand over.