A.K. Somnath Iyer, J.
1. The principal question Involved in these twowrit petitions is the constitutional validity of an Act passed by the Legislative Council of the Chief Commissioner of Coorg, intituled the Coorg Agricultural Income-tax Act, 1951 (Coorg Act No. 1 of 1951). This is how the question arises.
2. On 15-1-1951, the Legislative Council of the Chief Commissioner of Coorg which was then a part 'C' State in the Union of India, passed an Act called the Coorg Agricultural Income-tax Act to which the President of India accorded his assent on 13-5-1951. On the issue of a Notification dated 4-8-1951 under Sub-section (3) of Section 1 of the Act, the Act came into force in that State on 10-3-1951. It is stated in the preamble to the Act that the previous sanction of the Governor General had been obtained under section 97 of the Government of India Act 1935 as adapted by the India Provisional Constitution) Order, 1047, to the passing of that Act.
3. By an order made by respondent 2, the Agricultural Income-Tax Officer, Coorg, on 13-12-1952, the agricultural income of the petitioner for the previous year ending on March 31, 1951 was assessed to agricultural Income-tax under the provisions of the impugned Act for the assessment year 1951-52. By another order made by him on the same day, he similarly assessed, for the assessment year 1952-53, the petitioner's agricultural income for the previous year ending on March 31, 1952. The tax determined to be payable for the assessment year 51-52 was Rs. 346-4-0 and for the assessment year 52-53 it was Rs. 8,090-2-0. The petitioner unsuccessfully appealed under section 29 of the Act. against those orders of assessment to the Deputy Commissioner, Coorg, and his attempt to get those orders revised by the Commissioner under section 32 of the Act, also failed.
4. In these two writ petitions the Petitioner; has applied for writs of certiorari or other appropriate writs quashing those orders of assessment.
5. Mr. Govind Bhat, learned Advocate for the petitioner has urged that the orders of assessment made by respondent 2 were made without jurisdiction or authority. His main contention is that the Coorg Agricultural Income-tax Act, under the precisions of which the Income-tax officer made the assessment, was an unconstitutional piece of legislation for two reasons. According to him, the Legislative Council of the Chief Commissioner of Coorg, which will hereafter be referred to also as the Coorg Legislative Council, had, when it made that Jaw, no powers of legislation and that even if it had such powers of legislation, it had no competence to impose a tax on agricultural income.
6. To understand these contentions, ft would be necessary to trace briefly the history of the Coorg Legislative Council. Before its emergence as a Part 'C' State under the provisions of the Constitution of India, the State of Coorg was a province administered by a Chief Commissioner, under the provisions of the Government of India Act. That Act also provided for the constitution of Lieutenant-Governorships and by Sub-section (1) of section 77 of the Act the Governor-General in Council was empowered to constitute the Lieutenant-Governor in Legislative Council of a province governed by a Lieutenant-Governor, a local legislature for that province. Sub-section (2) of that section further empowered the Governor-General in Council to extend the provisions of the Act relating to Legi-slative Councils of Lieutenant-Governors, to any province administered by a Chief Commissioner.
7. By a Notification issued by the Governor-General-in-Council on 30-10-1923, in exercise of the power conferred on him by Sub-section (2) of Section 77 of the Act, the provisions of the Act relating to Legislative Councils of the Lieutenant-Governors were extended to the province of Coorg. That Notification directed that the provisions of Sub-section (1) of Section 77 of the Act shall apply to the province of Coorg in like manner as they applied to a new Lieutenant-Governorship.
8. For the purpose of giving effect to the said Notification and also in order that a Legislative Council may be constituted for the province of Coorg and to make provision for the matters referred to in Section 76 of the Act in respect of the said Legislative Council, rules known as the Coorg Electoral Rules were made under sub-Section (5) of Section 47 of the Government of India Act, 1919, which came into force on October 30, 1923, by a Notification issued by the Governor General in Council- Those rules provided for the composition of that Legislative Council and for elections to it.
9. By a Notification dated January 3, 1924 the Governor General in Council, in exercise of the powers conferred by Sub-section (1) of Section 77 which had been by then extended to the province of Coorg, constituted the Chief Commissioner in Legislative Council of the Province of Coorg as from January 28, 1924, to be a local Legislature for the said province. He further made in exercise of the powers conferred by Section 45A and Section 129A of the Government of India Act, rules known as the Coorg Devolution Rules providing for the classification of subjects as central and provincial subjects, for the purpose of distinguishing the functions of local Governments and the local Legislature from the functions of the Governor General in Council and the Indian Legislature. As provided by Section 45A of the Act, the expressions 'central subjects' and 'provincial subjects' as used in the Act were the subjects so classified under the rules. Rule 2 of these rules provided that -
(1) 'For the purpose of distinguishing the functions of the local Government and the local Legislature of the province of Coorg from the functions of the Governor General in Council and the Indian Legislature, subjects shall in that province be classified in relation to the functions of Government as central and provincial subjects in accordance with the lists set out in the Schedule to these rules:
Provided that every subject so classified as provincial shall be subject to legislation by the Indian legislature.
(2) Any matter which is included in the list of provincial subjects set out in Part II of the Schedule shall to the extent of such inclusion be excluded from any central subject of which but for such inclusion, it would form part.' Part I of the Schedule set put the Central Subjects and Part II the Provincial Subjects referred to in that Rule.
10. It is therefore clear that by the extension to the province of Coorg, the provisions of the Act relating to Legislative Councils of Lieutenant-Governors and by the constitution of a Legislative Council for that province by the Coorg Electoral Rules, the Chief Commissioner in Legislative Council of the province of Coorg became the local Legislature for that province. And as a result of the classification made by the Coorg Devolution Rules, the subjects enumerated in Schedule II to those Rules became the pro-vincial subjects as distinguished from the Central subjects enumerated in Schedule I to those Rules.
11. Section 80-A of the Government of India Act empowered the local Legislature of a Province, to make, subject to the provisions of the Act, laws for the peace and good Government of the territories for the time being constituting that province although by Sub-section (3) of that section legislation on certain matters without the previous sanction of the Governor-General was forbidded. It is not contended that the impugned Act related to a matter the legislation on which was so forbidden and it is not disputed that even if it did, the previous sanction of the Governor General which the Coorg Legislative Council did obtain for making that law, empowered it to do so. It is therefore plain that the Coorg Legislative Council had the power, subject to the provisions of the Government of India Act, to legislate on the provincial subjects enumerated in Schdule II to the Coorg Devolution Rules.
12. Before the commencement of the Constitution of India, this Legislative Council of the Chief Commissioner Coorg was referred to in the Government of India Act as the Chief Commissioner in Legislative Council of that province and also as the Chief Commissioner's Legislative Council. In the Government of India Act. 1935, it was referred to as the Coorg Legislative Council and by Section 97 of that Act, it was provided that-
'Until other provision is made by His Majesty in council, the constitution, powers and functions of the Coorg Legislative Council, and the arrangements with respect to revenues collected in Coorg and expenses in respect of Coorg, shall continue unchanged.'
The Constitution of India also called it the Coorg Legislative Council and by Article 242 Of the Constitution it was provided that-
(1) 'Until Parliament by law otherwise provides, the constitution, powers and functions at the Coorg Legislative Council shall be the same as they were immediately before the commencement of this Constitution.'
When the impugned legislation was enacted by this Legislature. Parliament had not by law provided otherwise. It is therefore clear that the Legislative Council of the Chief Commissioner or Coorg which made the impugned legislation, was, when it made it competent to legislate on the subjects classified as provincial subjects by the Coorg Devolution Rules.
13. Mr. Bhatt's contention that the Legislative Council of the Chief Commissioner of Coorg which enacted the impugned legislation, had no powers of legislation and was not the local Legislature referred to in the Government of India Act, a contention raised for the first time during the argument, has thus no substance and must fail. As the learned Advocate-General has pointed out, it is clear from the provisions of Sub-section (2) of Section 78 and Sub-section (1) of Section 80 of the Act as contrasted with those of Sub-section (3) of that section, that legislation was the normal business of this Legislative Council.
14. The next submission of Mr. Bhatt is that a tax on income derived from agriculture was not one of the provincial subjects set out in Pan II of the Schedule to the Coorg Devolution Rules and so the impugned legislation made by the Coorg Legislative Council was outside its legislative competence. He further contended that the topic of that legislation fell within the 8th entry of Part I of that Schedule and so was a central subject.
The learned Advocate-General contended that the subject of the impugned Act fell within the 10th Entry of Part II and also within the 44th Entry read with the 10th entry of that Part and was not within the 8th entry of Part I. Now the 8th entry of Part I reads-
'8. Customs, cotton excise duties, income-tax, salt and other sources of all India revenues.' Entries 10 and 44 of Part II read-
'10. Agriculture, including research institutes, experimental and demonstration farms, introduction of improved methods, provision for agricultural education, protection against destructive insects and pests, and prevention of plant diseases.'
'44. Taxes imposed by or under Provincial legislation.'
15. It is now well established that when the validity of an Act is called in question, 'the first thing for the Court to do is to examine whether the Act is a law with respect to a topic assigned to the particular Legislature which enacted it.
16. If it is, then the court is nest to consider whether, in the case of an Act passed by the Legislature of a Province (now a state), its operation extends beyond the boundaries of the Province or the State, for, under the provisions conferring legislative powers on it such Legislature can only mate a law for its territories or any part thereof and its laws cannot, in the absence of a territorial nexus, have any extra-territorial operation.
17. If the impugned law satisfies both these tests, then finally the court has to ascertain if there is anything in any other part of the constitution which places any fetter on the legislative powers of such Legislature. The impugned law has to pass all these three tests. (State of Bombay v. R.M.D. Chamarbaugwala, (S) : 1SCR874 (A) ).
18. It is not disputed that the impugned law in this case satisfies the second test. Whether it satisfies the remaining two tests is therefore the question to be considered.
19. The impugned Act will pass the first test if it is a law with respect to a topic assigned to the Coorg Legislative Council by Part II of the Schedule to the Coorg Devolution Rules. On behalf of the Respondents it is claimed that it is a law made with respect to a topic covered by the 10th entry and also by the 44th entry read with the 10th entry of Part II.
20. An examination of the scope and purpose of the impugned legislation would now be necessary to decide under which particular entry of the legislative list of the Coorg Legislature, it was enacted. It is stated in the preamble to the Act that it was enacted to provide for the levy of tax on agricultural income in the State of Coorg. Section 2 of the impugned Act gives the meaning of Agricultural Income as-
(1) any rent or revenue derived from land which is used for agricultural purposes and is either assessed to land revenue in all the States of India or subject to a local rate assessed and collected by officers of the State Government as such;
(2) any income derived from such land by-
(i) agriculture, or
(ii) the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by a cultivator or receiver of rent in kind to render the produce raised or received by him fit to be taken to market, or
(iii) the sale by a cultivator or receiver of rent in kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii);
(3) Any income actually derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator, or the receiver of rent in kind, of any land with respect to which, or the produce of which, any operation mentioned in paragraphs (ii) and (iii) of Sub-clause (2) is carried on.'
Agricultural Income in this Act, it is seen, is defined almost exactly as it is defined in the Indian Income-tax Act, 1922. Section 3 is the charging section contained in Chapter II of the Act under which such agricultural income is chargeable to agricultural income-tax. The main features of the remaining parts of the Act follow the pattern of the Indian Income-tax Act, 1922.
Chapter II also provides for the method of accounting and exemptions from assessment. Chanter III specifies the classes of Income-tax authorities. Chapter IV provides for the furnishing of returns setting forth the agricultural income, its assessment and the demand of the tax determined. That chapter also provides for an appeal against the assessment to the Deputy Commissioner and a revision petition to the Commissioner and also provides for the re-assessment of escaped income.
Chapter V provides for the recovery of tax and penalties. Chapter VI provides for refund of excess taxes paid and Chapter VII for punishment of offences. Chapter VIII contains what are called miscellaneous provisions including a provision for a reference to the High Court of questions of law for its decision. These, in brief, are the main features of the Act.
21. It is plain that the object or purpose of the impugned law being the levy, assessment and collection of taxes on agricultural income, it is a legislation with respect to tax on agricultural income. It is not disputed that it is so.
22. That being so, the next step will be to examine whether the subject of the legislation 's included in the provincial subjects enumerated in Schedule II to the Coorg Devolution Rules. It is urged by the learned Advocate-General that the Coorg Legislative Council being competent to legislate Under entry 44 of Part II of the schedule to those rules, with respect to 'taxes imposed by or under provincial legislation', it was competent to make a law levying taxes with respect to all the subjects enumerated in that Part.
He has argued and it is not seriously disputed by Mr. Bhatt that that is the meaning and content of entry 44 which compendiously describes in that way the taxes with respect to which the Coorg Legislature was competent to legislate. The learned Advocate-General is, I think, quite right in asking us to interpret Entry 44 in that way. It is in my view plain that, as entry 44 reads, the Coorg Legislature, had, under that Entry, subject to such limitations as might exist, the power to make laws imposing taxes in respect of all those subjects enumerated in Entries 1 to 43 of Part II.
That being so, it is clear that the 10th Entry of that part conferring upon it the power to make a law with respect to agriculture, the 44th entry empowers it to make a law levying a tax with respect to agriculture.
23. The next Question is whether the power to legislate upon a tax with respect to agriculture, includes a power to legislate with respect to taxes on agricultural income. It is argued, though faintly, by Mr. Bhatt that although the Coorg legislature was under Entry 44 read with Entry 10 of Part II competent to make legislation relating to a tax on agriculture, it was beyond its competence to pass legislation relating to a tax on income from agriculture.
His argument is that tax on agricultural income being a subject only remotely related to or very indirectly connected with 'agriculture', the topic of the 10th Entry, it was not a 'tax imposed by or under provincial legislation' within the meaning of the 44th Entry in respect of which the Coorg Legislative Council had the authority to make a law. It is not easy to follow this argument.
24. It is well settled that an exhaustive enumeration being unattainable and so numerous being the subjects of possible legislation, no subject enumerated in a legislative list, which is necessarily described in general terms, is to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it.
In interpreting an entry in a list conferring legislative powers, that construction most beneficial to its widest possible amplitude must be adopted. United Provinces v. Atiqa Begum ; Navinchandra Mafatlal v. Commr. of Income-tax, Bombay City, (S) : 26ITR758(SC) (C); Hans Muller Of Nurenburg v. Superintendent Presidency Jail, Calcutta, (S) : 1955CriLJ876 (D) and Commissioner of Income-tax, West Bengal, Calcutta v. Benoy Kumar Sahas Roy, AIR 1957 SC 763 . As observed by Gwyer C.J., in 1940 3 PLJ 97 : AIR 1341 FC 16.
'The subjects dealt with in the three Legislative Lists are not always set cut with scientific definition, it would be practically impossible for example to define each item in the Provincial List in such a way as to make it exclusive of every other item in that List, and Parliament seems to have been content to take a number of comprehensive categories and to describe each of them by a word of broad and general import.
In the case of some of these categories, such us 'Local Government', 'Education', 'Water', 'Agriculture' and 'Land', the general word is amplified and explained by a number of examples or illustrations, some of which would probably on any construction have been held to fall under the more general word, while the inclusion of ethers might not be so obvious. Thus 'Courts of Wards' and 'treasure trove' might not ordinarily have been regarded as included under 'Land', it they had not been specifically mentioned in item No. 21.
I think however that none of the items in the Lists is to be read in a narrow or restricted sense, and that each general word should be held to extend to all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it, I deprecate any attempt to enumerate in advance all the matters which Ere to be included under any of the more general descriptions; it will be sufficient and much wiser to determine each case as and when it comes before this Court.
I am moved to make this observation be-cause of a passage in the judgment of Iqbal Ahmad, J., in which he says: 'By the authority given to it to make laws about the 'collection of rents' the Provincial Legislature is in my judgment authorized to provide about payment of rent in cash or in kind; to fix the instalments in which rent is to be collected, to make provision, about abatement or enhancement of rent, to prescribe the conditions under which the rent may be remitted, to regulate the method by which rent is to be collected and to legislate about kindred matters.
The impugned Act however is not with respect to any such matter. It is therefore outside the scope of entry 21 of the Provincial List, I do not know why the learned Judge should assume that the list of illustrations which he gives is necessarily exhaustive. I agree that, if it were his conclusion might follow logically from his premises; but such a priori assumptions are a dangerous guide for the construing of a statute.
The general descriptive words in item 21 include 'the collection of rents'; and if a Provincial Legislature can legislate with respect to the collection of rents, it must also have power to legislate with respect to any limitation on the power of a landlord to collect rents, that is to say, with respect to the remission of rents as well as to their collection.
Item No. 22 of the Provincial List is 'Forests'; could it reasonably be argued that the power to legislate with respect to forests did not include a power to legislate with respect not only to afforestation but also to disafforestation? Item No. 24 is 'Fisheries'; could it reasonably be argued that this only included the regulation of fishing itself and did not include the prohibition of fishing altogether in particular places or at particular times? I have no doubt that legislation with respect to the remission of rents is legislation with respect to a matter included in item No. 21'.
25. So construed, it is, I think, plain that Entry 44 which authorises legislation relating to a tax agriculture also bestows competence to enact a law relating to a tax on agricultural income.
26. But it is contended by Mr. Bhatt that tax on agricultural income was the topic of the 8th Entry of Part I and so was a central subject, outside the authorised field of the Provincial Legislature, He has argued that in the subject of 'income-tax' which was a topic assigned by Part I to the Indian Legislature, was included tax on agricultural income and that any legislation relating to it was beyond the competence of the Coorg Legislative Council.
To support his construction of that Entry he has relied on the provisions of the Indian Income-tax Act, under which, according to him, tax on agricultural income would have been exigible but for its being expressly excepted out of its operation. But, in my opinion, Sub-rule (2) of Rule 2 of the Coorg Devolution Rules contains the answer to that contention. That sub-rule provides that-
(2) 'Any matter which is included in the list of provincial subjects set out in Part II of the Schedule shall, to the extent of such inclusion, be excluded from any central subject of which, but for such inclusion, it would form part.'
27. If, as I consider, the 44th Entry readwith the 10th Entry of Part II the text of which is explicit, includes a tax on agricultural income, it is plain that that subject was as provided by this sub-rule excluded from the topic of the 8th Entry of Part I even if it could be held to form part of it, but for such inclusion.
Further, while the powers and functions of the Coorg Legislative Council and therefore its competence to legislate on the matters enumerated in Part II of the Schedule to the Coorg Devolution Rules, are preserved by Section 97 of the Government of India Act. 1935, and Article 242 of the Constitution of India, the powers of the Governor-General in Council and the Indian Legislature under those Rules including the overriding power of the Indian Legislature to legislate on a provincial subject bestowed by the proviso to R. 2 were not preserved in that way.
The result was that while the Coorg Legislative Council, had, when it enacted the impugn-ed law, the competence to make laws relating to the subjects classified as Provincial Subjects and enumerated, in Part II, the machinery provided by the Rules for legislation relating to the Cen-tra Subjects enumerated in Part I had become non-existent, its place having been taken by Article 246 of the Constitution which placed no fetteron the otherwise plenary competence of the CoorgLegislative Council to legislate on those provincial subjects.
28. That being so the argument advanced by the learned Advocate General that the 8th Entry of Part I authorised legislation relating to taxes only on income which was a source of all India revenue, which agricultural income in Coorg was not or that the previous sanction of the Governor-General obtained under section 97 of the Government of India Act and the subsequent assent of the President accorded to the impugned Act, amounted to a decision which wag final that the impugned law related to a provincial subject, does not arise.
In my opinion, the contention of Mr. Bhatt that the impugned legislation was ultra vires the Coorg Legislative Council has to fail.
29. The learned Advocate-General urged at one stage that the impugned law was within the 46th Entry of Part II. The view urged for our acceptance was that taken by the Deputy Commissioner that the impuged law related to a matter Which even if assumed to be one included in 8th Entry of the Central Subject, had been declared by the Governor-General in Council to be of a merely local or private nature within the province and so had moved into Part II, the provincial list.
It was not disputed by Mr. Bhatt that if the Governor-General had made such declaration, legislation by the Coorg Legislative Council would have been undoubtedly competent. But, it is, I think, clear that no such declaration was made by the Governor-General in Council and the learned Advocate-General who had to admit that the decision of their Lordships of the Privy Council in Jogendra Narayan v. Debendra Nara-yan on which the Deputy Commissioner relied, when properly understood, does not support the conclusion that the previous sanction of the Governor-General obtained under Section 97 of the Government of India Act, amounted to a declaration to that effect, did not press that contention.
30. It is next argued by Mr. Bhatt that the assessment of the petitioner's agricultural income for the assessment year 1951-52 was made without jurisdiction, as even under the impugned Act, the agricultural income for that year was not chargeable to tax. The assessment year 1051-52 was the year commencing on April 1, 1951 and ending on March 31, 1952.
It is Mr, Bhatt's argument that the income for that assessment year was taxable only if the impugned Act was in force on April 1, 1951. The impugned Act, it is not disputed, came into force on August 10, 1951, although it had been passed by the legislature on January 15, 1951 and had received the assent of the President on May 13, 1951.
31. Now, section 3 of the Act provides that agricultural income-tax shall be charged for each financial year on the total agricultural income of the assessee of the previous year. It is not disputed that the financial year referred to in this section as defined by the General Clauses Act, means the year commencing on the 1st day of April, Section 2(o) of the impugned Act defines the privious year as-
(i) the twelve months ending on the 31st day of March preceding the year for which the assessment is to be made, or if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending or any date other than the said 31st day of March, then at the option of the assessee, the year ending on the day to which his accounts have so been made up:
As is also the case under the Indian Income-tax Act. the subject of charge is not the income of the year of assessment but the income of the previous year, such previous year in this case being the twelve months ending on 31-3-1951. The argument of Mr. Bhatt is that the Act not having been in existence or in force on 1-4-1951, which is the date of the commencement of the year for which the assessment has been made, no tax was exigible on the income of the previous year ending on 31-3-1951.
In support of this argument Mr. Bhatt has referred to Section 17 of the Act which requires the assessee to furnish his return setting forth his income during the previous year before the 1st day of June of every year, and also to Section 18 of the Act which empowers the Income-tax Officer to make the assessment to the best of his judgment if the assessee fails to furnish such return.
He has also pointed out that the Rules under the Act were made only on 20-11-1951 It is argued by him that in respect of the income of the previous year ending on 31st March 1951, compliance with the provisions of Section 17 of the Act was an impossibility, the Act which came into force on 10-8-1951 not having been in existence on the first day of June 1951.
The inference, according to him, is that the legislative intent was that no tax was chargeable 111 the income of that previous year. It is, I think, difficult to agree that such was the object of the legislation when it is remembered that the Act had been passed by the Legislature as early as on 15-1-1951 although the President's assent to it was accorded on 13-5-1951.
Further, it has to be borne in mind that the liability to tax arises from Section 3 of the Act which is the charging section and Sections 17 and 18 of the Act & the rules made under Section 62 merely create the machinery for the determination of the amount of the tax. So, if on a true construction of Section 3 of the Act, the income of the petitioner for the previous year ending on the 31st day of Marchis chargeable to tax under the Act. the incongruities in the machinery sections such as those referred to on his behalf, would be of no assist-lance to him.
In Chatturam v. Commissioner of Income-tax, Bihar, 1947 15 ITB 302: AIR 1947 PC 32, their Lordships of the Federal Court of India pointed out that under the Indian Income-tax Act, the liability to pay the tax being founded on Sections 3 and 4 of the Act. the liability to pay income-tax and the jurisdiction to make an assessment were not conditional on the validity of the notices issued under Section 22 of the Act. Kania J., (as he then was) in pointing out the distinction between the charging and machinery sections said this:
'It was next contended that in the present case notices under Section 22 (1) and (2) of the Income-tax Act were already issued before the Notification of 26-5-1940. The notices were the foundation of the Jurisdiction of the Income-tax Officer. At that time the Finance Act of 1940 was not operative in the area in question and the Governor, by his Notification, cannot give jurisdiction to the Income-tax Officer in respect of his ultra vires notices. This contention is founded on a misunderstanding of the jurisdiction of the Income-tax Officer and the operation of the Income-tax Act.
The Income-tax assessment proceedings commence with the issue of a notice. The issue or receipt of a notice is not, however, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessees to pay the tax. It may be urged that the issue and service of a notice under Section 22 (1) or (2) may affect the liability under the penal clauses which provide for failure to act as required by the notice. The jurisdiction to assess and the liability to pay the tax, however, are not conditional on the validity of the notice.
Suppose a parson, even before a notice is published in the papers under Section 22 (1), or before he receives a notice under Section 22 (2) of the Income-tax Act, gets a form of return from the Income-tax Office and submits his return, it will be futile to contend that the Income-tax Officer is not entitled to assess the party or that the party is not liable to pay any tax because a notice had not been issued to him.
The liability to pay the tax is founded on Sections 3 and. 4 of the Income-tax Act, which are the charging sections. Section 23 etc., are the machinery sections to determine the amount of tax. Lord Dunedin in Whitney v. Commissioners of Inland Revenue, 1926 AC 37 , stated as follows:
Now, there are three stages in the imposition of a tax. There is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex-hypothesi has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the per-son taxed does not voluntarily pay.' In W.H. Cockerline & Co. v. Commissioners of inland Revenue, 1930 16 Tax Cas 1 . Lord Hanworth M.R. observed as follows:
Lord Dunedin speaking, of course, with accuracy as to these taxes, was not unmindful or the fact that it is the duty of the subject to whom a notice is given to render a return inorder to enable the Crown to make an assessment upon him; but the charge is made in consequence of the Act, upon the subject; the assessment is only for the purpose of quantifying it. He quoted with approval the following passage from the judgment of Sargant L.J., in the case of Williams-
I cannot see that the non-assessment prevents the incidence of the liability, though the amount of the deduction is not ascertained until assessment. The liability is imposed by the charging section, namely, Section 38 (of the English Act) the words of which are clear.
The subsequent provisions as to assessment and so on are machinery only. They enable the liability to be quantified, and when quantified to be enforced against the subject, but the liability is definitely and finally created by the charging section and all the materials for ascertaining it are available immediately.
In Attorney-General v. Aramayo, 1925 9 Tax Cas 445 , it was held by the whole Court that there may be a waiver as to the machinery of taxation which inures against the subject. In India these well-considered pronouncements are accented without reservation as laying down the true principles of taxation under the Income-tax Act. This contention of the appellants therefore fails''.
32. The contention of Mr. Bhatt that the Act which came into force four months and more after the commencement of the assessment year cannot validly charge any tax on the income of its previous year rests not so much on the construction of Section 3 of the Coorg Agricultural Income-tax Act as it does on the interpretation placed on Section 3 of the Indian Income-tax Act.
He has relied on the decision in Scindia Steam Navigation Co., Ltd., Bombay v. Commr. of Income-tax, Bombay City, (S) : 26ITR686(Bom) (K), in which chagla C.J., pointed out that the liability to pay tax and the authority to make an assessment under the Indian Income-tax Act arising as they do from the provisions of the Finance Act of each year, the liability to pay the tax on the income of the previous year depended on the provisions of the Income-tax Act as it stood on the date when the Finance Act came into force and not on the amendments subsequently made to the Income-tax Act.
33. In that case, a sum of money which could not have been properly included in the total income of the assessee, under the provisions of the Income-tax Act as it stood on the date when the Finance Act came into force was so included under the provisions of a subsequent amendment made to the Income-tax Act. Such inclusion, was, it was held without authority, there being no liability upon the assessee to pay tax on that amount on the date on which the Finance Act came into force. In his judgment, Chagla C.J. said this:
'Now, turning to the merits of the case, it appears that this proviso which is relied upon by the Department was incorporated in the Indian Income-tax Act by Act 8 of 1946 which came into force On 4-5-1946. Therefore, this proviso was not in operation on 1-4-1946, when the assessment year of the assessee. viz.. 1946-17. commenced; and Mr. Palkhivala's contention on behalf of the assessee is that the liability of the assessee to pay tax depends upon the provisions of the Indian income-tax Act as they were in force on 1-4-1946, and inasmuch as on 1-4-1946 there wasno liability upon the assessee to pay tax on this amount of Rs. 9,26,532, it could not be made liable by reason of a subsequent amendment of the Income-tax Act which was brought about on 4-5-1946.
In order to appreciate this contention one must bear in mind two basic facts about the Indian income-tax Act. The first is that the Indian Income-tax Act subjects to tax not the income of the assessee in the year of assessment but in the previous year, and the other basic fact is that the liability to tax arises not by reason of the provisions or the Indian Income-tax Act but by reason of the fact that a Central Act fixes the rate at which the assessee is liable to pay tax and it is by reason of the Central Act that the income of the previous year of the assessee becomes liable to tax.
It these two basic facts are borne in mind, then the position in law becomes very clear and very simple. Now, the income of the previous year of the assessee is for the year 1945-43 which ended on 31-3-1946, and it was the Finance Act of 1946 that imposed a liability upon the assessee to pay tax on this income at the rate mentioned in that Act. When we turn to the Finance Act of 1946, Sub-section (9) of Section 11 makes this provision:
'For the purposes of this section and of the rates of tax imposed thereby, the expression 'total income' means total income as determined for the purposes of income-tax or super-lax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922, and the expression 'earned income' has the meaning assigned to it in Clause (6AA) of Section 2 of that Act.'
Therefore, the total income that has to be computed is in accordance with the provisions of the Indian Income-tax Act and it is clear that as this provision is being made on 1-4-1946, the provisions of the Indian Income-tax Act are the provisions as they obtained on that date.' The principle on which the above decision rested was that under Section 3 of the Income-tax Act as it is worded, no liability to tax arises until the enactment of the annual Finance Act. That is also what their Lordships of the Privy Council pointed out in Maharajah of Pithapuram v. Commissioner of Income-tax, Madras, . Lord Thankerton in that case said-
'In the first place, it is clear to their Lordships that under the express terms of Section 3 of the Indian Income-tax Act, 1922, the subject of charge is not the income of the year of assessment, but the income of the previous year. This is in direct contrast to the English Income-tax Acts, under which the subject of assessment is the income of the year of assessment, though the amount is measured by a yardstick based on previous years.
The difference is well illustrated by the distinction that in England the source of income must still be extant in the year of assessment but that that is not of relevance in India. Their Lordships may refer to the able judgment of Rankin C.J., in Behari Lal Mullick v. Commr. of Income-tax, Bengal : AIR1927Cal553 , with which they agree.
In the second place, it should be remembered that the Indian Income-tax Act, 1922, as amended from time to time, forms a code, which has no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. This may be illustrated by pointing out that there was no charge on the 1938-30 income either of the appellant or his daughters, nor assessment of such income, until the passing of the Indian Finance Act 1939, which imposed the tax for 1939-40 on the 1938-39 income and authorised the present assessment.
By Sub-section (1) of Section 6 of the Indian Finance Act, 1939, income-tax for the year beginning on 1-4-1939 is directed to be charged at the rates specified in Part I of Schedule II, and rates of super-tax are also provided for, and by Sub-section (3) it is provided that 'for the purpose of this section and of Schedule II, the expression 'total income' means total income as determined for the purposes of income-tax or super-tax, as the case may be, in accordance with the provisions of the Indian Income-tax Act, 1922.' This can only refer to the Indian Income-tax Act, 1922, as it stood amended at the date of the Indian Finance Act, 1939, and necessarily includes the alterations made by the Amending Act, which had already come into force on 1-4-1939.'
But it is not easy to understand how these decisions can be of any use to Mr. Bhatt. In the first place, it is clear that the liability to tax under the Coorg Agricultural Income-tax arises under that very Act and does not depend on any further or other enactment to be made for that purpose. Secondly, all that was decided in those two cases was that since it is the annual Finance Act imposing the tax for a particular fiscal year that renders the Income-tax Act applicable for its recovery, the determination of the liability to pay such tax, should be in accordance with the Income-tax Act as it stcod at the date of the Finance Act.
That is not the same thing as saying that, no tax is exigible on the income of the previous year, unless the law charging it, is in operation on the date of the commencement of the assessment year.
34. The question whether the income of the previous year ending on 31-3-1951 was in this case chargeable to agricultural income-tax depends therefore, entirely on the construction of Section 3 of the Coorg Agricultural Income-tax Act. That section provides that
'Agricultural income-tax at the rate or rates specified in the Schedule to this Act shall be charged for each financial year in accordance with and subject to the provisions of this Act, on the total agricultural income of the previous year of every individual, Hindu undivided family, Marumakkattayam tarwad or tavazhi, Aliyasantana family or branch, firm, company, association of persons, whether incorporated or not and institution capable of holding property.'
What that section means is that Income-tax at the rates specified in the schedule to the Act, shall be charged for each Financial Year on the income of the previous year. Although the Financial year commencing on 1-4-1951 had already commenced when the impugned Act came into force, it was still running and had not expired.
If, as it is clear, from the scheme of the Act, what is chargeable to tax is the agricultural Income of a year and for the purpose of computing such income each year is a separate self-contained period of time, it is difficult to understand why it should be held that the income of the previous year is not chargeable to tax merely because the law imposing it came into force sometime during the currency of the Financial year and not at the date of its commencement.
In my opinion, there can be no justification for the construction that Section 3 of the Act did not, as it read when enacted, permit an assessment for the financial year commencing from 1-4-1951. That being so the contention that the assessment of the petitioner's income for the previous year ending on 31-3-1951, was made without authority, has to fail.
35. There is, it appears, one more answer to this contention. After the enactment of the impugned Coorg Agricultural Income-tax Act, by a law made by Parliament under Article 240 of the Constitution, known as the ''The Government of Part C States Act, (XLIX of 1951)', a body called the Coorg Legislative Assembly was created to function as a Legislature for the State of Coorg. This Legislative Assembly replaced the Coorg Legislative Council which had made the impugned law.
During the pendency of these two Writ petitions, this new body functioning as the legislature for the State of Coorg enacted a law called the Coorg Agricultural Income-tax (Amendment) Act, 1955, which received the assent of the President on 20-3-1955. The relevant provisions of this enactment are as hereunder:
Act No. II of 1955 (Received the assent of the
President on 29-3-1955)
An Act further to amend the Coorg Agricultural Income-tax Act, 1951.
Be it enacted in the Coorg Legislative Assembly in the Sixth year of the Republic of India as follows:
1. Short title, extent and commencement.--(1) This Act may be called the Coorg Agricultural Income-tax (amendment) Act, 1955.
(2) It extends to the whole of the State of Coorg.
(3) It shall come into force on such date as the Chief Commissioner may, by notification in the official gazette, appoint.
2. Amendment of Section 1, Act I of 1951.--In Section 1 of the Coorg Agricultural Income-tax Act, 1951 (hereinafter referred to as the principal Act), for Sub-section (3), the following shall be substituted and shall be deemed always to have been substituted, namely:-- '(3) It shall be deemed to have come into force on the 1-4-1951.Explanation:-- For the purpose of calculating the tax due during the assessment year 1951-52 the income derived by the assessees from 1-4-1950 to 31-3-1951 shall be taken as the income for assessment.'
It is not disputed that this amending Act came (into force consequent on the issue of the required Notification under Sub-section (3) of Section 1 of the Amending Act. Nor is the constitutionality of this Amending Act assailed. It is urged by the learned Advocate-General that the effect of the enactment of this amending Act, was that, the impugned principal Act must be deemed to have come into force on 1-4-1951 and that as stated in the explanation to Sub-section (3) of Section 1 of the amended Act the income derived by the petitioner from 1-4-1950 to 31-3-1951 was the income on which agricultural income-tax was charged under the Act, for the assessment year 1951-52.
36. The learned Advocate-General has argued that the amendments made to Section 1 of the Actprovide a sufficient answer to the contention raised on behalf of the petitioner. In my opinion the argument is irrefragable.
37. Mr. Bhatt has however endeavoured to meet this argument by contending that the amending Act was a curative statute and could not affect vested rights or validate an act originally done without authority. He has urged that the impugned assessment, made as it was, prior to the enactment of the amending Act, was an act done without authority and could not be validated by the amendments made under the later Act, which was enacted long after the appeal and the revision petition against such, assessment had been heard and decided.
He therefore contends that the only ques-tion that this Court should decide is whetherrespondent 2, the Income-tax officer, when hemade the assessment, had under the law then inforce, the authority to make it. The amendingAct, it is urged, does not contain the usual validating provision, validating assessments madeunder the impugned Act and could not thereforerender valid an assessment which being onewhich could not be regarded as one made underthe Act, was a nullity. Mr. Bhatt has referredto two passages on pages 677 and 578 of Craw-ford's book on 'Statutory Construction', whichread-
'Nevertheless, there are even limitations on. the extent of the retroactive operation of curative acts. Obviously, they cannot violate provisions of the constitution. Nor should they interfere with or destroy vested rights of third parties.'
'On the other hand a curative statute cannot validate an act originally done without authority.'
38. It seems to me that this contention cannot be accepted. In the first place, it cannot be said that the amending Act is merely a curative Statute. The effect of that legislation which provides that the principal Act shall be deemed to have come into force on 1-4-1951, is that the Act should be treated as having come into force on that date although in fact it had not so came into force.
Similarly the effect of the explanation to Sub-section (3) of Section 1 of the Act as amended which 'shall be deemed always to have been substituted' is that Sub-section (3) of Section 1 of the Act which should be treated as having come into force on 1-4-1951, should also be regarded as having contained that explanation although in fact it did not. In other words, the Act as amended, must be regarded and treated as the Act under which the Income-tax officer made his assessment and the assessee could not be allowed to contend that the law in force on 1-4-1951 was not the Act as it stood after the amendment.
Similarly the decision of the Court as to the existence or otherwise of the authority to make such assessment has necessarily to rest on the provisions of the amended Act, which the Court is bound to treat as the law in force on 1-4-1951.
39. But it is contended that the assessment for the assessment year 1951-52 having been completed under the principal Act before its amendment, this Court, in these Writ petitions has only to see whether respondent 2 had the authority to make that assessment when it was made. It is argued that the only question before this Court is whether that order of he Income-tax officer was right according to the law as it stood at the time when the assessment was made. Iam unable to agree that this is the correct position.
40. On the question whether the court is entitled to take into account legislative changes during the pendency of the litigation, the rule adopted by the Supreme Court ol the United States is, what was stated in Patterson v. Alabama, (1935) 294 US 600 . In that case. Hughes C. J., said:
'We have frequently held that in the exercise of our appellate jurisdiction we have power not only to correct error in the judgment under review but to make such disposition of the case as justice requires. And in determining what justice does require, the Court is bound to consider any change, either in fact or in law, which has supervened since the judgment was entered.' As pointed out by Gwyer C.J., in Lachmeshwar Prasad v. Keshwar Lal , that rule, was what commended itself to their Lordships of the Federal Court of India. In that case, in the course of his judgment, Varada-chariar J. said this:
'In the recent case of K.C. Mukherjee v. Ram Batan , it would appear from the report of the arguments in 63 IA 47 (P), that Quiltar v. Mapleson, (1882) 9 QBD 672 , was referred to, and it was observed by Lord Thankerton in the course of the argument that the duty of a Court is to administer the law of the land at the date when the Court is administering it.
This adds significance to the fact that their Lordships in that case did not deal with the judgment of the Patna High Court on its merits, hut dismissed the appeal on the strength of a provision contained in an enactment which was passed only during the pendency of the appeal before His Majesty in Council. In these circumstances I am of opinion that we should follow the law as laid down in the latter case'.
In Kamakshya Narain Singh v. Commissioner of Income-tax, Bihar, 1947 15 ITR 311: AIR 1947 PC 48, it was held by their Lordships of the Federal Court of India that if pending a. litigation or pending an appeal some relevant legislation was enacted by the appropriate legislative authority, the deciding Tribunal must give effect to it. In that case, the assessee's income for the accounting year 1933-39 was assessed to income-tax on 14-2-1940.
The assessee appealed against that assessment to the Appellate Commissioner. On 26-5-1940, the Governor of Bihar, acting under Section 92(1) of the Government of India Act, 1935, issued a notification that the Indian Finance Act, 1940 should be deemed to have come into force on 6-4-1940 in the area in which the assessee was residing. It was subsequently discovered that the Indian Finance Act of 1939 was not in operation, on the date of the assessment.
By a further regulation which was enacted by the Governor of Bihar, acting under Section 92(2) of the Government of India Act, 1935, it was provid-ed that the Indian Finance Acts of 1938 and 1939 should be deemed to have come into force in that area on 26-3-1938 and 30-3-1939 respectively. But by the time this regulation was enacted, the Appellate Assistant Commissioner had dismissed the appeal of the assessee and his appeal to the Income-tax Appellate Tribunal was still pending.
It was contended on behalf of the assessee In that case that the Indian Finance Act of 1939 not having been made applicable to the area in which the assessee was residing at the time hisassessment was completed, the order of the Income-tax Officer was a nullity. It was further argued that the appellant's appeal having been dismissed by the Appellate Assistant Commissioner before that Finance Act was made applicable to that area, the subsequent regulation made by the Governor so applying that Act could not put life into what was already dead.
41. In rejecting that argument, Kania J., (as he then was) said this:
'In our opinion this argument is unsound. The assessment proceedings had not come to an end nor were they dead. The appellant had kept the proceedings alive by filing appeals and the proceedings were thus pending for decision.
X X X X X The fact that an appeal was pending against the assessment is a material fact. When an Appellate Tribunal (whether it is the Assistant Commissioner, or the Tribunal of Appeal, or the High. Court, or the Federal Court) decides the appeal it has to do so according to the law then in operation. If pending the litigation or pending the appeal some relevant legislation is enacted by the appropriate legislative authority, the deciding tribunal must give effect to it' On page 318 (of ITR): (at pp. 51-52 of AIR), he made the following further observations.
'The Court has therefore to consider whether when the Income-tax Appellate Tribunal decided the appeal and when the High Court expressed its view on the question of law submitted for its opinion, the same was according to the law then in operation. The dates mentioned at the commencement of the judgment show that by Regulation IV of 1942, Clause 3 of that Regulation was declared 'as deemed always to have been substituted' in place of Section 3 of Bihar Regulation I of 1941.
That clause included, inter alia, the Indian Finance Act of 1939 in the Acts which were declared as deemed to have come into force in the areas mentioned therein, on the dates therein specified. As already pointed out in the previous judgment in Civil Appeals Nos. III, IV and V of 1946, the effect of the words 'deemed to have been applied' is to treat as if they were in existence, although not so in fact, from the dates mentioned in the Regulation. Giving effect to the words used in the Regulaion it is therefore clear that the Finance Act of 1939 was in operation in the partially excluded area of Chota Nagpur when the Income-tax Appellate Tribunal and the High Court decided the points put before them.
The orders passed by those Tribunals are valid according to the law then in force and the fact that On the date the Income-tax Officer passed the assessment order the Finance Act of 1939 had not been extended to the Chota Nagpur Division, is irrelevant.'
The decision in the above case Is, in my opinion, a complete answer to the contention raised by Mr. Bhatt.
42. It is clear that Mr. Bhatt is not right in contending that the duty of this Court is limited to the examination of the question whether respondent 2 had the authority to make the impugned assessment according to the law as it stood when he made it. On the contrary the test to be applied in a case like this is whether respondent 2, if he was now making an as sessment for the assessment year 1951-52, would not have the authority to make it. That this is the correct position 13 clear from the following passage in Crawford's Book on 'Statutory Construction' at page 578 :
'For instance, where a curative act became effective during the pendency of an appeal, writ of error, or motion for a rehearing, the defect sought to be cured is cured the same as if the act had become effective before the action was instituted.'
43. It is therefore plain that the contention that the petitioner's income for the previous year ending on the 31st day of March 1951 was not liable to assessment, is without substance and has to fail.
44. At one stage during the argument, a complaint was made on behalf of the petitioner that respondent 2, in assessing his income for the assessment year 1952-53 adopted a wrong method of accounting; but Mr. Bhatt who had to admit that this method of accounting had, as revealed by the further affidavit produced by the learned Advocate-General on behalf of the respondents, turned out to be beneficial to the petitioner, stated that he would not press that contention.
45. In my opinion, these two writ Petitions must fail and are dismissed. No costs.
K.S. Hegde, J.
46. I agree.
47. Petitions dismissed.