Obul Reddy, C.J.
1. In this writ petition filed by the Andhra Pradesh State Road Transport Corporation, Hyderabad, the constitutional validity of Section 241 of the Income-tax Act, 1961 (Act 43 of 1961) (hereinafter referred to as ' the Act '), is challenged.
2. The petitioner is carrying on the business of road transport in the State of Andhra Pradesh and it was assessed to income-tax for the assessment years 1960-61 and 1961-62 under the provisions of Act 11 of 1922 (hereinafter referred to as ' the old Act ') and for the assessment year1962-63 under the provisions of the new Act. The petitioner paid a sum of Rs. 54,65,396 as income-tax for the said three assessment years. The validity of the assessments was questioned before the Appellate Assistant Commissioner on the ground that the income derived by the petitioner on its transport business is exempt under the provisions of the old Act and the new Act and the Appellate Assistant Commissioner allowed the appeals. Against his orders, the Commissioner of Income-tax preferred appeals before the Income-tax Appellate Tribunal and the appeals were allowed by the Tribunal. Then, at the instance of the petitioner, the question of its liability to pay income-tax under the provisions of both the Acts was referred to this court. This court, by its judgment dated December 3,1971, in R.C. No. 14 of 1970, allowed the reference on the ground that the Corporation is an institution meant for the advancement of the object of general public utility not involving the carrying on of any activity for profit and, therefore, its income is exempt from assessment to tax under, Section 4(3)(i) of the old Act and Section 11 of the new Act. In compliance with the opinion expressed by this court, the Tribunal cancelled the assessments in question by its order dated August 28, 1972. The petitioner, therefore, asked for refund of the amount paid by way of income-tax. Without refunding the amount, the respondents issued an order dated December 18, 1972, under Section 241 of the Act withholding the amount refundable to the petitioner and also adjusting a part of the amount for the next two assessment years on the ground that the appeal preferred by the revenue against the judgment of this court is pending before the Supreme Court. It is this action of the respondents withholding the amount of Rs. 54,65,396 on the ground that the revenue had preferred an appeal to the Supreme Court that is challenged as ultra vires.
3. The learned Advocate-General appearing for the petitioner contended that Section 241 of the Act is ultra vires for two reasons : (1) that the Income-tax Officer, even if it be with the previous approval of the Commissioner, has no jurisdiction to render the judgment of the High Court ineffective on the ground that the appeal preferred by the revenue against the judgment of this court is pending before the Supreme Court or that the grant of the refund is likely to adversely affect the revenue ; and (2) that the section confers an arbitrary exercise of power on the Income-tax Officer and does not provide for any guidelines or classification thus offending Article 14 of the Constitution. Another point urged by the learnedAdvocate-General is that, even assuming that the provision is not ultra vires, it has no retrospective application and it can cover only the subject-matter of an appeal or further proceedings under the provisions of the Act, and not proceedings under the provisions of the old Act. Section 241 reads :
'241. Where an order giving rise to a refund is the subject-matter of an appeal or further proceeding or where any other proceeding under this Act is pending, and the Income-tax Officer is of the opinion that the grant of the refund is likely to adversely affect the revenue, the Income-tax Officer may, with the previous approval of the Commissioner, withhold the refund till such time as the Commissioner may determine.'
4. The scheme of the section is this : If there is an order directing refund of the tax paid by an assessee and that order is carried in appeal or further proceeding, the Income-tax Officer is given the discretion to withhold the refund. The Income-tax Officer cannot exercise that power unless he obtains the previous approval of the Commissioner. The Income-tax Officer must first form an opinion that the grant of the refund is likely to adversely affect the revenue. It is then that he moves the Commissioner and any action taken under Section 241 by him is subject to the approval of the Commissioner. Section 240, which provides for refund of amounts to an assessee under the orders of the appellate authority, is controlled by Section 241. What the learned Advocate-General contends is that when once this court gives an opinion in favour of the assessee and against the revenue and consequently orders are passed by the Tribunal in conformity with the opinion of this court, it is not open to the Income-tax Officer, purporting to act under Section 241, to nullify the effect of the judgment of this court. According to him, the legislature cannot set at naught the decision of this court so as to empower the revenue to retain the amounts illegally collected as tax. In support of his contention, the learned Advocate-General invited our attention to the decision in Municipal Corporation of the City of Ahmedabad v. New Shorrock Spinning and Weaving Co., : 1SCR288 . That was a case where the collection of property tax by the Municipal Corporation of Ahmedabad under the provisions of an amending Act was challenged. Prior to the amendment, under the provisions of the Bombay Provincial Municipal Corporation Act, buildings were assessed on the basis of what came to be known as ' flat rate ' method. Those assessments were challenged in the High Court of Gujarat by the companies whose buildings were assessed adopting the ' fiat rate ' method. The High Court dismissed the writ petitions. The Supreme Court considered the vires of Section 152A(3) as introduced by the Gujarat Amendment Act. That provision reads :
' Notwithstanding anything contained in any judgment, decree or order of any court, it shall be lawful, and shall be deemed always to have been lawful, for the Municipal Corporation of the City of Ahmedabad to withhold refund of the amount already collected or recovered in respect of any of the property taxes to which Sub-section (1) applies till assessment or reassessment of such property taxes is made, and the amount of tax to be levied and collected is determined under Sub-section (1),
Provided that the Corporation shall pay simple interest at the rate of six per cent. per annum on the amount of excess liable to be refunded under Sub-section (2), from the date of decree or order of the court referred to in Sub-section (1) to the date on which such excess is refunded.'
5. The Supreme Court struck down that provision on the ground that it attempted to make a direct inroad into the judicial powers of the State, The Supreme Court held :
' The legislatures under our Constitution have within the prescribed limits, powers to make laws prospectively as well as retrospectively. By exercise of those powers, the legislature can remove the basis of a decision rendered by a competent court thereby rendering that decision ineffective. But no legislature in this country has power to ask the instrumentalities of the State to disobey or disregard the decisions given by courts.'
6. In so holding, the Supreme Court relied upon its earlier decision in Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, : 79ITR136(SC) . Hegde J., who expressed the view of the court in Municipal Corporation of the City of Ahmedabad v. New Shorrock Spinning and Weaving Co. Ltd., again reiterated the view of the Supreme Court in State of Tamil Nadu v. M. Rayappa, : 1SCR288 . Relying upon these decisions, the learned Advocate-General contended that unless the basis of illegality which was struck down by this court in R. C. No. 14/70, on the basis of which decision the refund was directed to be paid by the Tribunal, is removed by the legislature, the Income-tax Officer gets no jurisdiction to render the decision of this court ineffective. It should be remembered in the first place, that the judgment of the High Court has not become final. Admittedly, an appeal against the judgment has been filed by the revenue under Section 261 of the Act. When an appeal is pending, it cannot be said that the Income-tax Officer, by his order dated December 18, 1972, has rendered the judgment of this court ineffective. Until the Supreme Court pronounces its judgment, there is no finality of the question as to the exemption claimed by the petitioner for payment of income-tax. The High Court, in the reference, had not struck down any provision of the statute on the basis of which the assessments were set aside. The question was only as regards the claim put forth by the petitioner for exemption from payment of income-tax. Therefore, the case on hand cannot be likened to the cases of the Supreme Court.
7. The Supreme Court in Orient Paper Mills v. State of Orissa, : 1SCR549 considered the validity of a sales tax legislation depriving assessees of right to obtain refund of tax paid under error of law. Upholding the validity of the Orissa Sales Tax Act as amended by Act 28 of 1958, Shah J. (as he then was), observed :
' The Orissa Sales Tax (Amendment) Act, 28 of 1958, which incorporates Section 14-A, depriving the assessees of the common law right to claim refund of the amounts paid as tax under an error of law that it was recoverable by the taxing authority and providing that refund shall be claimable only by the person from whom the dealer has actually realised the amounts by way of sales tax, is not beyond the competence of the State legislature. Nor is it void on the ground that it imposes an unreasonable restriction upon the assessees' fundamental right guaranteed under Article 19(1)(f) of the Constitution......The legislature of the Orissa Statewas, therefore, competent under Schedule 7, List 2, item 54, to exercise power in respect of the subsidiary or ancillary matter of granting refund of tax improperly or illegally collected.'
8. Again, the same learned judge, in Burma Construction Co. v. State of Orissa, : AIR1962SC1320 held that Section 14 of the Orissa Sales Tax Act was not ultra vires on the ground that granting refund of tax improperly or illegally collected and the restriction on the exercise of that right were both ancillary or subsidiary matters relating to the primary head of tax on the sale of the goods.
9. The power of the legislature to validate laws which were held to be invalid by a court was succinctly stated by Hidayatulla C. J. in Shri Prithvi Cotton Mills v. Broach Borough Municipality. To quote the learned Chief Justice :
' If the legislature has the power over the subject-matter and competence to make a valid law, it can at any time make such a valid law and make it retrospectively so as to bind even past transactions. The validity of a validating law, therefore, depends upon whether the legislature possesses the competence which it claims over the subject-matter and whether in making the validation it removes the defect which the courts had found in the existing law and makes adequate provisions in the validating law for a valid imposition of the tax.'
10. In this case, the legislature has not validated any provision that has been struck down by this court. The power to grand refund is ancillary to the power of taxation. The Supreme Court, in the two Orissa cases, has upheld the restrictions imposed on the right of the assessee to the refund on the ground that it was lawfully circumscribed in the interests of the general public. It is relevant to bear in mind that the right to ultimately get the refund of the tax paid by the petitioner is not denied by the revenue. The legislature has only imposed restriction on that right pending decision in an appeal or further proceeding. The right to the refund is only in the nature of an interim measure to safeguard the interests of the revenue and thus promote social justice. The power conferred on the Income-tax Officer is not absolute. In the first instance, he must be satisfied that the interests of the revenue will suffer by granting refund of the amount and also it should not, in the event of the revenue succeeding in appeal, result in protracted proceedings to recover the amount refunded to an assessee. The Income-tax Officer is not the final authority to withhold the payment of the refund. He could do so only if the Commissioner of Income-tax gives his prior approval. That check is put in order to obviate any possible arbitrary action on the part of the Income-tax Officer. Section 241 is not designed to encroach upon the judicial power of the court. That section is subject to the final decision of the High Court or the Supreme Court, as the case may be. Therefore, it cannot be said that Section 241 lays any inroads into the power of the judicial review. The power conferred upon the Income-tax Officer and the Commissioner of Income-tax is not an arbitrary power. We do not, therefore, see any infringement of the rights of the petitioner under Article 14 of the Constitution.
11. As regards the other contention of the learned Advocate-General that the provisions of the new Act are applicable only to the assessment year 1962-63, we see no merit in this contention. Section 297(2)(b) and (c) say :
'297. (2) Notwithstanding the repeal of the Indian Income-tax Act, 1922 (hereinafter referred to as the repealed Act),--
(b) where a return of income is filed after the commencement of this Act otherwise than in pursuance of a notice under Section 34 of the repealed Act by any person for the assessment year ending on the 31st day of March, 1962, or any earlier year, the assessment of that person for that year shall be made in accordance with the procedure specified in this Act;
(c) any proceeding pending on the commencement of tbis Act before any income-tax authority, the Appellate Tribunal or any court, by way of appeal, reference or revision, shall be continued and disposed of as if this Act had not been passed.'
12. It is not in dispute that, for the assessment year 1960-61, the original return was filed on September 20,. 1961, and the revised return was filed on May 28, 1964, and for the assessment year 1961-62, the return was filed on December 19, 1961. The claim for refund is made on the basis of thedecision of this court rendered in R.C. No. 14 of 1970 dated December 3, 1971. Long before the date of the judgment of this court, the new Act had come into force. It is true that, under the proviso to Section 66(7) of the old Act, the High Court is empowered, in cases where the Commissioner intends to ask for leave to appeal to the Supreme Court, to make an order authorising the Commissioner to postpone payment of refund until the disposal of the appeal to the Supreme Court and that power vested in the High Court is now vested in the Income-tax Officer subject to the prior approval of the Commissioner of Income-tax. To our mind, the right to ask for leave to appeal to the Supreme Court is not taken away. The forum, which has power to postpone payment of refund, has been changed. It is only a matter of procedure and within the competence of the legislature. The right to ask for refund, as already adverted to, accrued to the petitioner only on the High Court upholding the claim of the petitioner for exemption from payment of tax under Section 4(3)(i) of the old Act and Section 11 of the new Act. Since it is purely a procedural matter, it is not necessary that Section 241 should have been made retrospectively applicable. It is further to be noticed that the rights of the assessee are also protected as it is entitled to payment of interest on the amount ordered to be refunded in the event of the Supreme Court upholding the judgment of this court.
13. For the reasons recorded, the writ petition is dismissed with costs. Advocate's fee Rs. 100.