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Revula Subba Rao and anr. Vs. the Commissioner of Income-tax, Madras - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberCase Referred Nos. 32 of 1948 and 31 of 1950
Judge
Reported inAIR1952Mad127; [1951]20ITR337(Mad); (1951)2MLJ424
ActsIncome Tax Act, 1922 - Sections 26A and 59; Income Tax Rules - Rules 2 and 6; Powers of Attorney Act, 1882 - Sections 2
AppellantRevula Subba Rao and anr.
RespondentThe Commissioner of Income-tax, Madras
Appellant AdvocateK. Bhimasankaram, Adv.
Respondent AdvocateC.S. Rama Rao Sahib, Adv.
Cases ReferredPaul Co. v. The Wheat Commission
Excerpt:
direct taxation - sign - sections 26a and 59 of income tax act, 1922, rules 2 and 6 of income tax rules and section 2 of powers of attorney act, 1882 - rules 2 and 6 are explicit and mandatory which require all partners other than minors to personally sign their application for registration of firm - such applications cannot be validly signed by duly authorised agent on behalf of partner - in case of renewal of certificate same procedure to be followed - said rules are intra vires rule making authority. - - the partnership was registered in the first instance on 29th july 1946, and applications for renewal of the registration were made thereafter by hariprasada rao both in his individual capacity as well p. if such a power is recognised, it would lead to very serious and perhaps.....satyanarayana rao, j.1. in r. c. nos. 32 of 1948 and 31 of 1950, the appellate tribunal referred to the decision of this court two questions:1. whether the word 'personally' in rule 6 of the income-tax rules, as framed under section 59 of the income-tax act, would exclude a duly authorised agent of a partner from signing an application on behalf of the partner under section 26-a of the income-tax act? 2. if the answer to the above question is in the affirmative, whether rules 2 and 6 are not ultra vires the rule making authority? the reference in both the cases arises out of the same facts and relates to the validity of the order made by the income-tax authorities refusing the application of the assessee firm for renewal of registration of the firm under section 26-a of the income-tax.....
Judgment:

Satyanarayana Rao, J.

1. In R. C. Nos. 32 of 1948 and 31 of 1950, the Appellate Tribunal referred to the decision of this Court two questions:

1. Whether the word 'personally' in Rule 6 of the Income-tax Rules, as framed under Section 59 of the Income-tax Act, would exclude a duly authorised agent of a partner from signing an application on behalf of the partner under Section 26-A of the Income-tax Act?

2. If the answer to the above question is in the affirmative, whether Rules 2 and 6 are not ultra vires the rule making authority? The reference in both the cases arises out of the same facts and relates to the validity of the order made by the Income-tax authorities refusing the application of the assessee firm for renewal of registration of the firm under Section 26-A of the Income-tax Act. The applications were made in different years and were refused. Hence these references.

2. The assessee firm consisted of two partners, Rao Bahadur Revula Subba Rao and Hariprasada Rao, Chirala, who are brothers. The partnership was formed under a deed of partnership of the 10th February 1941. Prior to that, Subba Rao, was carrying on business as sole proprietor and he later took in his brother as a partner. On 1st July 1940, he executed a general power of attorney in favour of Hariprasada Bao as he' then intended to go on a pilgrimage. The power-of-attorney authorised Hariprasada Rao, 'inter alia': 'to carry on my business, viz., Burmah Shell Agency at Chirala, Bezwada, Guntur and Chijakalurpet, Parry & Co., (Madras) Agency, etc., and other businesses to conduct and manage the affairs of all of my movable and immovable properties, including buying and selling thereof, to collect the outstandings and pay liabilities of the above-said business to sign on my behalf vakalathnamas, petitions and plaints for filing suits against the defaulting debtors, to sign and present on my behalf all papers to be filed in Courts in conception with suits pending at present to sign and file on my behalf all papers to be filed by me in any of the Courts and offices.. to carry and conduct on my behalf all my businesses and other affairs.'

3. After the formation of the partnership, however, Subba Rao left the place on a long pilgrimage. The partnership was registered in the first instance on 29th July 1946, and applications for renewal of the registration were made thereafter by Hariprasada Rao both in his individual capacity as well P.s in his capacity as the power-of-attorney agent of his brother. The applications were rejected by the Income-tax Officer on the ground that all the partners did not sign personally the renewal applications as required by Rule 6 of the Income-tax ' rules.

4. The question whether the word 'personally' occurring in Rule 6 of the Income-tax Rules precluded the power-of-attorney agent from signing on behalf of the partner an application for renewal of registration of the firm under Section 26-A of the Act came up for consideration with reference to this very assessee firm on a prior occasion on a reference to the High Court by the Income-tax Appellate Tribunal under Section 66 (1) of the Income-tax Act, 1922, as amended by later Acts. The point then considered and the question referred was restricted to the interpretation of the word 'personally' occurring in Rule 6 of the Income-tax Rules. The question was answered against the assessee on the ground that the word 'personally' used In Rule 6 necessarily excluded acting by an authorised agent and that the special provision in the rule overrides the provision in Section 2 of the Power-of-Attorney Act, 1882 (Act VII of 1882.) An attempt was made then to raise the question that Rules 2 and 6 were 'ultra vires' the rule-making authority, viz., the Central Board of Revenue; but as that question was not referred to the High Court, this Court declined to express any opinion on it. The same assessee, therefore, raises now in this reference the question which this Court on that occasion declined to consider and answer. The decision of the High Court is 'Commissioner of Income-tax, Madras v. Subba Rao, ILR (1947) Mad 167.

4-a. Sub-section 2 of Section 26-A of the Indian Income-tax Act, 1922, provides that: 'the application shall be made by such person or persons, and at such time and shall contain such particulars and shall be in such form, and be verified in such manner as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.' Section 59 of the Act empowers the Central Board of Revenue, subject to the control of the Central Government, to make rules for carrying out the purposes of the Act and for the ascertainment and determination of any class of income. Sub-section 3 of that section enacts:

'without prejudice to the generality of the fore going power, such rules may:

* * * * *

(e) provide for any matter which by this Actis to be prescribed.'

Section 2(10) defines the word 'prescribed' as meaning 'prescribed by rules made under this Act.' Sub-section (2) of Section 26-A, it will be seen, empowers the rule-making authority to prescribe by rules the conditions to be complied with for making an application under Section 26-A of the Act. In pursuance of the authority vested under Section 59 of the Act, the Central Board of Revenue made among others two rules in that behalf, viz., Rules 2 and 6-Rule 2 provides that:

'any firm constituted under an Instrument of Partnership specifying the individual shares of the partners may, under the provisions of Section 26-A of the Indian Income-tax Act, 1922 (hereinafter in these rules referred to as the Act), register with the Income-tax Officer the particulars contained in the said Instrument on application made in this behalf.Such application shall be signed by all the partners (not being minors) personally........'

Rule 6 states:

'Any firm to whom a certificate of registration has been granted under Rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year, such application shall be signed personally by all the partners (not being minors) of the firm, or where the application is made after dissolution of the firm, by all persons (not being minors), who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased, and accompanied bya certificate in the form set out below. The application shall be made within the time and subject to the conditions, if any, which are specified in Clause (a), Clause (b), Clause (c). Clause (d), or Clause (e) as the case may be, of Rule 2.'

It prescribes also the form in which an application for renewal of registration of a firm under Section 26-A of the Act is to be made. The Powers-of-Attorney Act was enacted for the purpose of amending the law relating to powers-of-attorney and came into force on. 1st May 1882. Section 2 of the Act provides:

'The donee of a power-of-attorney may, if he thinks fit, execute or do any assurance, instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by the authority of the donor of the power; and every assurance, instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof. This section applies to powers-of-attorney created by instrument executed either before or after this Act comes into force.'

Section 3 validates payments made under a power-of-attorney by an agent without notice of the deathof tile donor of the power. Section 5 relates topowers-of-attorney of married woman and enablesher to appoint an attorney on her behalf for the purpose of executing any non-testamentary instrumentor doing any other act which she might herselfexecute or do. The power to appoint an agent isconferred upon a person who has attained theage of majority by Section 183 of the Indian ContractAct 1872 Section 2 of the Powers-of-Attorney Actrecognises and confers upon the donee of a powerof attorney power to execute or do any assurance,Instrument or tiling in and with his own nameand signature by virtue of the authority, of thedonor of the power and the effect of such executionis to make such execution and the act done inexercise of the power as effectual in law as if itwas executed or done by the donor himself. Thesection proceeds on the assumption that the donoris a person who is competent under law to actthrough an agent. If the substantive law prohibitsby a specific provision or otherwise a person fromacting through an agent in any particular matter,Section 2 of the Powers-of-Attorney Act does not validate such acts by the agent and does not treat themas the acts of the principal. The validity of theact in question is a matter to be determined entirely by the substantive law relating to the particular matter. All that Section 2 intends to lay down isthat in matters in which the law permits a principal to act through an agent, an execution of aninstrument or the doing of any act on behalf of aprincipal by an agent duly authorised under apower-of-attorney, is as effective in law as if theprincipal himself executed the instrument or didthe act.

5. Section 59 of the Income-tax Act confers on the Central board of Revenue the power to make rules within the limits prescribed by the section in order to carry out the purposes of the Act and for the ascertainment and determination of any class of income. In respect of matters on which it is open to the authority concerned to provide by rules if rules are made under the section they should be published in the official gazette and thereupon the rules will have effect as if enacted in the Act; in other words the rules will be read as part of the main provisions of the Act itself. Sections 20 to 24 of the General Clauses Act, 1897 (Act X of 1897) lay down certain provisions relating to orders, rules, etc., made under various enactments. These provisions confer power upon the rule-making authority to add, to amend or vary or even rescind such rules and also for the procedure for the publication of the rules framed under the various Acts.

6. The grounds urged by Mr. Bhimasankaram learned Advocate for the assessee is that Rules 2 and 6 are ultra vires the rule-making authority as the power conferred on it by Section 59 of the Act does not extend the scope of that power so as to abrogate or alter or affect other statutory provisions a rule-making power, according to him, must always be exercised within the limits laid down by law but so as not to entrench upon other enactments. A power to make rules is in the nature of a subordinate legislation and does not stand on the same footing as the power of the Legislature to enact laws so as to affect other statutory provisions. He does not dispute the power of the Legislature to delegate a power to make rules for the purpose of effectuating the objects of the Act. It is a common feature of modern legislative enactments to lay down in the sections of the Act, the principles and the policy of the Legislature leaving out details to be filled in and worked out by regulations or rules made either by the executive Government or by some other authority. This kind of legislation is described very often as subordinate legislation and is justified on the ground that the Legislature has neither the time nor the material to consider and enact rules relating to various details as they may not be acquainted fully with the facts and circumstances relating to the subject-matter and may have no time even to consider such details. In my Judgment in 'Kalyanam Veerabadrayya In re', 1949 2 M L J 683 . I have adverted to this form of legislation and attempt to draw the line of demarcation between a legislative power, which cannot be delegated and a non-legislative power, though it cannot be said that it is always easy to fix the boundary between the two. However, as there is no dispute regarding the validity of the delegation it does not require further consideration.

7. The short point, therefore, is whether a subordinate legislative power of this nature can be exercised so as to alter or affect or abrogate a legislative provision in other statutes. If such a power is recognised, it would lead to very serious and perhaps disastrous consequences. An executive government or some other authority upon whom the power of making rules is conferred may under the guise of the exercise of such a power repeal or affect or alter the provisions of any other statute. In other words, it would claim to exercise not a power of subordinate legislation which is really non legislative in character but clothe itself with a power to legislate which legitimately and under the Constitution belongs to the Legislature and to no other authority. If, for example, by virtue of the exercise of this power provisions of the Contract Act or Sale of Goods Act or Partnership Act are attempted to be altered by the rule-making authority, it would undoubtedly be the exercise of a legislative power and cannot be upheld.

8. The very essence of subordinate legislation of the description now under consideration is that the body of the Act has laid down the general provisions and the policy of the legislature leaving out the details of the provisions of the Act to be carried out by the rule-making authority by making rules. The rule-making authority can only make rules with a view to effectuate the object of the Act and if the Legislature in its wisdom did not think it fit to modify any of the statutory provisions relating to other branches of law, the subordinate legislative authority cannot claim to exercise such power. It would be contrary to the very spirit and the basis of subordinate legislation to recognise a power of that kind. This limitation on the rule-making is recognised both in England and in America. Maxwell on Interpretation of Statutes, 9th Edn., at page 302, says:

'Rules and by-laws made under statutory powers enforceable by penalties are construed like other provisions encroaching on the ordinary rights of persons. They must, on pain of invalidity be clear and definite and free from ambiguity, and should not make unlawful things that are otherwise incorrect. They must not be in excess of the statutory power authorising them, 'nor repugnant to that statute or to the general principles of law.' If the subject is deprived of his right to resort to the Courts of law of his country, it must be by express enactment and not by bylaw' (The italics are mine,)

Craies on Statute Law at page 272 enumerates five main grounds on which by-laws may be treated as ultra vires: .

(a) That they are not made, sanctioned and published in the manner prescribed by the statute which authorise the making,

(b) That they are repugnant to the laws ofEngland.

(c) That they are repugnant to the statute underwhich they are made,

(d) That they are uncertain.

(e) That they are unreasonable.

He also recognises, like Maxwell, that rules and bylaws should not be repugnant to the laws of England and should not be repugnant to the statute under which they are made. There is a further requirement with reference to the invalidity of bylaws made by public bodies in exercise of statutory powers such as municipalities, local boards, etc., vis., that the by-laws should not be unreasonable but such a restriction is not recognised in the case of rules framed by virtue of a statutory power by an authority on which such a power is conferred by the statute. Of the cases cited by Maxwell at page 303 in foot-note (n) most of them seem to relate to by-laws made by public bodies and are not therefore of much assistance. The decision cited by him in foot-note (c) 'Paul Co. v. The wheat Commission', (1937) AC 139 is Of assistance. In that case, the Wheat Act of 1932 empowered by Section 5, Sub-section (i), the Wheat Commission to make by-laws for giving effect to the provisions of the Act and Sub-section (ii) of that section inter alia empowered the Wheat Commission to make by-laws for the final determination by arbitration of disputes arising as to such matters as may be specified in the by laws. The Wheat Commission, the authority making the bylaws in exercise of the power therein contained, made a by law providing that any dispute arising between the Wheat Commission anil other person as to whether any substance is flour shall be referred to arbitration and that the decision of the referee as to the matter in dispute shall be final and conclusive. The 'application of the Arbitration Act, 1889, was also excluded. The validity of the byelaw made by the Wheat Commission in the matter of arbitration was the subject-matter of consideration by the House of Lords who held the by-law to be 'ultra vires' the rule making authority as it has the effect of ousting the Jurisdiction of the Court. At page 154, Lord MacMlllan in his speech observes:

'The Arbitration Act is a statute of general application and it confers a valuable and important right of resort to the Courts of law. To exclude its operation from an arbitration is to deprive the parties to the arbitration of the rights which the Act confers. When a public general statute provides for the reference of disputes to arbitration it is to be presumed that it intends them to be referred to arbitration in accordance with the general law as to arbitrations, with all the attendant rights which the general law confers. I do not think that when Parliament enacts by one statute that disputes under it are to be referred to arbitration at can be presumed to have empowered by implication the abrogation of another statute which it has enacted for the conduct of arbitrations. Rather the contrary. If this is intended, express words to that effect are in my opinion essential, and there are here no such express words. I am accordingly of opinion that the Wheat Commission exceeded their powers when they made a byelaw that every dispute as to whether any substance is flour should be determined by an arbitration to which the Arbitration Act should not apply. I have only to add that the by-law must, in my opinion, be condemned as a whole and that it cannot be solved by the excision of the objectionable provision, which is not a severable but a vital part of the bye law.'

9. Crawford on Statutory Construction deals at page 29, paragraph 17, with the power to promulgate rules and regulations under a statutory power He states as follows:

'The Legislature can, as we have already indicated, under certain circumstances, delegate to executive officers and administrative boards, the authority to adopt and promulgate rules and regulations. Before such a delegation is lawful, however, the Legislature must declare the policy of the law and fix the legal principles which areto control in given cases; that is, a definite or primary standard must be provided to guide those empowered to execute the law. So long as a policy is laid down and a proper standard established by statute, there is no unconstitutional delegation of legislative power when the Legislature leaves to selected instrumentalities, the duty of making subordinate rules, within the prescribed limits, even though there is conferred upon the officer or board a large measure of discretion. As can be readily seen, there is a distinction between the delegation of power to make a law and the conferring of an authority or discretion to be exercised under and in pursuance of the law as the power to make law necessarily involves a discretion as to what it shall be. The authority to make rules and regulations in order to carry out an express legislative purpose, or to effect the operation and enforcement of a law, is not a power exclusively legislative in character but is rather administrative in its nature. The rules and regulations adopted and promulgated, however, must be 'subvert nor be contrary to existing statutes'.' (Italics are mine).

These principles stated by him in the aforesaid paragraph are in consonance with the principles recognised in England and are not in any manner affected by the consideration that under the American Constitution, the executive, judicial and legislative functions are more or less in the nature of watertight compartments.

10. The Supreme Court in the recent decision in Commissioner of Agricultural, Income-tax v. Keshab Chandra', : [1950]18ITR569(SC) (SO, considered the question of the validity of a signature by an agent of the assessee in the form of a return of an individual assessee under the Bengal Agricultural Income-tax Act of 1944. The common law rule in 'The Queen v. The Justices of Kent', (1872) 8 Q B 305 that:

'where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it; nevertheless, there may be cases in which a statute may require personal signature '

was considered by the Supreme Court. After an elaborate examination of the Act and the decisions, English and Indian, bearing on the question to what extent it is permissible for a person to act through an agent in the matter of signing on his behalf, at page 580, Das, J., states his conclusion in these words;

'In ail these cases the common law rule was not applied, evidently because the particular statutes were held to indicate that the intention was to exclude that rule. This intention was gathered from the use of the word 'himself' or 'by him' or 'under his hand' or 'personally.' It is needless to say that such an intention may also be gathered from the nature of the particular statute or inferred from the different provisions of the statute and the rules framed thereunder. As already stated, there are many indications in the Bengal Agricultural Income-tax Act, 1944, and the rules made thereunder evidencing an intention to exclude the common law rule in the matter of the signature of the assessee, appellant or applicant on the return, appeal or application.'

The decision in 'Commissioner of Income-tax v. Subbarao', ILR (1947) Mad 187ation>, was also noticed. The question whether a rule-making authority could abrogate by a rule made in pursuance of that authority the statute law or a common law rule did not arise directly for consideration before their Lordships. The examination of the provisions of the statute itself in that case disclosed an intention on the part of the Legislature to exclude the intention of treating the signature of an agent as equivalent to the signature of the principal and the rule was in consonance with that intention. It was, therefore, not necessary for the Supreme Court to consider the question where the Act does not so indicate whether under a rule-making power a-rule could be made so as to affect a statutory provision as under the Powers-of-Attorney Act. Though the decision in 'Commissioner of Income-tax, Madras V. Subba Rao', ILR (1947) Mad 167, was referred to, the effect of the rules on the provisions of that Act was not considered and no contention seems to have been raised based on the powsrs-of-Attorney Act. Impliedly, however, the decision, it has been pressed before us and we are inclined to agree with that view -- though we express no final opinion on the point -- lays down that it is permissible to abrogate the common law rule. It is, however, not an express decision on that question even. But so far as statutory law is concerned, it Is not an authority for holding that a rule-making authority under the Income-tax Act or any other Act has the power to alter the statute law. Rule 6 by using the word 'personally' excludes the right to appoint an agent, a power conferred by the Contract Act, and to sign through a power of attorney agent as recognised by the Powers-of-Attorney Act. The rule which has such a far reaching effect cannot be upheld. For these reasons, I think that Rules 2 and 6 of the Income-tax Rules are ultra vires the rule-making authority and cannot be enforced. The result may be as pointed out by Sri Rama Rao Sahib, learned counsel for the Commissioner of Income-tax, inconvenient from the point of view of the Income-tax Department; but this defect can be rectified by enacting a provision in Section 26-A itself that the application must be signed personally by the partner himself and not by an agent.

11. None of the provisions in the Act so far as I am able to see -- and my attention was not drawn to any -- by implication excludes the power of a person to act through an agent. Section 26-A does not by implication exclude the power to sign through duly constituted power of attorney agent. It does not restrict the making of an application to a partner or partners only but it would be open under that section to permit the making of an application to such person or persons as may be prescribed. In other words any other person other than the partner may also be authorised to make the application under the rule-making power, it gives the liberty to the rule-making authority to prescribe by rules the conditions subject to which an application should be made for registration. It follows that the second question referred to us in R. C. No. 32 of 1948 must be answered in the affirmative. The two questions in R. C. No. 32 of 1948 and R. C. No. 31 of 1950 relating to the construction of Rule 6 no doubt must be answered in view of the decision of the Supreme Court and of the decision of this Court in 'Commissioner of income-tax Madras v. Subba Rao', ILR (1947) Mad 167 against the assessee and in favour of the department; but as the rule itself is ultra vires, the application made by the assessee for renewal of registration are valid. This is my answer to the questions referred to us.

12. I regret I have to differ from my learned brother whose judgment I had the privilege of reading. Under Section 66-A of the income-tax Act his judgment prevails and the questions referred to us have to be answered in the manner proposed by my learned brother in his Judgment.

13. VISWANATHA SASTRI, J.: The facts have been set out in the judgment now delivered. I regret to have to differ from my learned brother and I do so with great diffidence.

14. The two questions that have been referred to us are:

(1) Whether Rules 2 and 6 of the Income-tax Rules preclude an agent of a partner or one of the partners acting as agent for the others, from signing an application for registration of a firm or for renewal of a certificate of registration; and

(2) Whether in the event of the first question being answered in the affirmative, Rules 2 and 6 are 'ultra vires' and inoperative by reason of their repugnancy to the provisions of Section 2 of the Powers-of-Attorney Act (VII of 1882).

15. Section 26-A (1) of the Income-tax Act (hereinafter referred to as 'the Act') confers a special privilege on partners by way of registration of their firm if it is constituted under an Instrument specifying the individual shares of the partners. Registration enables the firm to get the benefit of lower rates of assessment to income-tax. No tax is levied on a registered firm as such, but each individual partner of the firm is taxed in respect of his share of the firm's profits. An unregistered firm is charged as a unit of assessment and the levy is made on the firm itself. Section 26-A (1) of the Act allows an application for registration of a firm to be made on behalf of the firm and Section 26-A (2) provides that the application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form and be verified in such manner, as may be prescribed; meaning thereby 'prescribed by rules made under the Act.' See Section 2 (10). Section 59 empowers the Central Board of Revenue to make rules, subject to the control of the Central Government, for carrying out the purposes of the Act and for providing for any matter which by the Act 'is to be prescribed.' Section 59, Sub-section (4) requires the previous publication of the rules proposed to be made and Subsection (5) provides that:

'rules made under this section shall be published in the Official Gazette and shall thereupon have effect as it enacted in the Act.'

The Central Board of Revenue observed the statutory formalities and framed Rules 2 and 6 dealing with registration of firms. Rule 2 provides that an application for the registration of a firm shall be signed by all the partners 'personally.' Rule 6 provides that an application for renewal of the certificate of registration of a firm should be signed personally by all the partners of the firm. Section 2 of the Powers-of-Attorney Act (Act VII of 1882), so far as is now material, runs thus:

'The donee may, if he thinks fit, execute or do any assurance, instrument or thing in and with his own name and signature ...... by the authority of the donor of the power; and every assurance, instrument or thing so executed and done shall be as effectual in law as if it had been executed or done by the donee of the power in the name and with the signature ...... of the donorthereof.'

I am clearly of opinion that Rules 2 and 6 of the Income-tax Rules are explicit and mandatory and require all the partners, other than minors, personally to sign their application for registration of the firm or for renewal of a certificate of registration and that an application cannot be validly signed by a duly authorised agent on behalf of a partner. It was so held by this Court in 'Commissioner of Income-tax v. Subba Rao'. ILR (1947) Mad 167. See also 'Commr. of Income-tax v. Gelli Krishnamurthi : [1940]8ITR121(Mad) A firm seeking the statutory privileges conferred upon it by registration must strictly comply with the requirements of Section 26-A and Rules 2 and 6 exclude the common law rule 'qui facit per alium facit per se' in the matter of the signature of the partners to an application for registration of the firm or renewal of a certificate of registration.

16. Mr. Bhimasankaram, the learned Advocate for the assessee, argued that it was not competent to the Legislature to delegate to an outside body the power to make rules which might have the effect of abrogating 'pro tanto' the existing law, whether it was the common law or the statute law of the land. According to him, an essential legislative power like the power to frame rules qualifying or modifying an existing law cannot be validly delegated by the Legislature to an outside body. The practice has become increasingly common both here and in England for the Legislature overburdened with work and incapable of dealing adequately with the details of the subject on which it legislates, to delegate to departments of Government, public bodies or designated officials more or less wide powers 'for determining some facts or state of things upon which a law makes, or intends to make, its own action depend.' This has been styled conditional legislation. As early as 'Empress v. Burah', 4 Cal 172 (PC), the Judicial Committee upheld the validity of an Act empowering the Lieut.-Governor of Bengal to determine by notification when and whether the Act, or any part of it, should be applied to certain districts so as to remove them from the jurisdiction of the ordinary Courts of the land. Lord Selborne, L. O., said: 'Their Lordships think that it is a fallacy to speak of the powers thus conferred upon the Lieut. Governor (large as they undoubtedly are) as if when they were exercised, the efficacy of the acts done under them would be due to any other legislative authority than that of the Governor-General-in-Council. Their whole operation is, directly and immediately, under and by virtue of this Act (XXII of 1869), itself. The proper Legislature has exercised its judgment as to place, person, laws, powers, and the result of that judgment has been to legislate conditionally as to all these things. The conditions having been fulfilled, the legislation is now absolute. Where plenary powers of legislation exist as to particular subjects, whether in an Imperial or in a Provincial Legislature, they may be well exercised, either absolutely or conditionally. Legislation, conditional on the use of particular powers or on the exercise of a limited discretion, entrusted by the Legislature to persons in whom It places confidence is no uncommon thing and in many circumstances, it may be highly convenient.' In 'Russell v. Reg', (1882) 7 AC 829, the Judicial Committee upheld the validity of a provision in the Temperance Act of Canada empowering the Governor-General to bring the Act into operation in any State or Province by the issue of a notification on a petition by the majority of electors. The contention that the provision In question was 'ultra vires' the Legislature as constituting a delegation of legislative power was overruled in these words:

'The short answer to this objection is that the Act does not delegate any legislative powers whatever. It contains within itself the whole legislation on the matters with which it deals. The provision that certains parts of the Act shall come into operation only on the petition of a majority of electors does not confer on these persons power to legislate. Parliament itself enacts the condition and everything which is to follow upon the condition being fulfilled. Conditional legislation of this kind is in many cases convenient, and is certainly not unusual, and the power so to legislate cannot be denied to the Parliament of Canada, when the subject of legislation is within its competency.'

In 'Ma Mi v. Kallander Animal', 5 Rang 7 (PC), the Judicial Committee recognised that Section 1 of the Transfer of Property Act empowering the Provincial Government to extend the provisions of the Act to provinces to which the Act was not initially made applicable was validly enacted and that the Provincial Government could, by notification, validly extend the operation of the Act to the Provinces originally exempted from it. In 'King Emperor v. Benoari Lal Sarma', 1945 1 M L J 76 PC the Judicial Committee upheld the validity of an Ordinance of the Governor-General providing for the setting up of special Courts in super session of the ordinary Courts at the time and within the territorial limits judged to be necessary by the Provincial Government. Viscount Simon, L. C., observed :

'This is not delegated legislation at all. It Is merely an example of the not uncommon legislative arrangement by which the local application of the provisions of a statute is determined by the judgment of a local administrative body as to its necessity. The power to extend the territorial operation of an Act or to extend an Act to persons and objects not specified in the Act or to put the Act In motion and operation would be instances of conditional legislation.'

17. In 'State of Bombay v. Narottamdas', : [1951]2SCR51 , the Supreme Court accepted and acted upon the principles enunciated by the Judicial Committee and distinguished a prior decision of the Federal Court in 'Jatindranath Gupta v. Province of Bihar', 1949) 2 M L J 356, where the majority of the Judges had held that a grant of power to extend the life of a self-expiring enactment with such modifications to the enactment as might be thought fit was not 'conditional' legislation but an invalid delegation of legislative power. Whether the same view would be taken of similar legislation under the present Constitution is not clear. Two of the learned Judges of the Supreme Court have reserved their right to consider this point as if it were 'res integra' and sooner or later the whole question will have to be considered by that tribunal.

18. There is another type of cases where the Legislature passes an Act expressing its intention in general terms leaving the mode of carrying out that intention to be settled by rules and regulations ' made by a public body or department charged with the administration of the matter legislated upon. This has been called 'departmental legislation' or 'subordinate legislation.' In 'Hodge v. The Queen', (1884) 9 AC 117, the Judicial Committee upheld the validity of an Act of the Ontario Legislature which entrusted to a local authority the power of enacting regulations with respect to the Liquor Licence Act, 1877, by creating offences for breach of these regulations and annexing penalties thereto. The argument based on the incapacity of local Legislatures to delegate legislative power to extraneous bodies was thus met: 'When the British North America Act enacted that there should be a Legislature for Ontario, and that its Legislative Assembly should have exclusive authority to make laws for the Province and for Provincial purposes in relation to the matters enumerated in Section 92, it conferred powers not in any sense to be exercised by delegation from or as agents of the Imperial parliament, but authority as plenary and as ample within the limits prescribed by Section 92 of the Imperial Parliament in the plenitude of its powers possessed and could bestow. Within these limits of subjects and area, the local Legislature is supreme and has the same authority as the Imperial Parliament, or the Parliament of the Dominion, would have had under like circumstances to confide to a municipal institution or body of its own creation authority to make bylaws or resolutions as to subjects specified in the enactment, and with the object of carrying the enactment into operation and effect. It is obvious that such an authority is ancillary to legislation, and without it an attempt to provide for varying details and machinery to carry them out might become oppressive or absolutely fail.'

19. In 'Powell v. Appolip Candle Co.', (1885) 10 AC 282, the same tribunal upheld the validity of an Act of the Legislature of New South Wales empowering the Governor-in-Council to levy a duty on certain articles, the nature of which was left to him to determine. After referring to their earlier decisions in 'Empress v. Burah', 4 Cal 172 and 'Hodge v. The Queen', (1884) 9 AC 117, the Judicial Committee observed:

'These two cases have put an end to a doctrine which appears at one time to have had currency that a Colonial Legislature Is a delegate of the Imperial Legislature. It is a Legislature restricted in the area of its powers; but within that area unrestricted and not acting as an agent or a delegate.'

In Tort Frances Pulp and Power Co. v. Manitoba Free Press Co., Ltd.', (1923) AC 695, the Judicial Committee upheld the validity of a Colonial Act empowering an officer styled the 'Paper Controller' to regulate the supply of newsprint and fix its price. In 'G. W. Shannon v. Lower Mainland Dairy Produets Board', (1938) AC 708 (PC), while upholding the validity of the British Columbia Act empowering the Lieut.-Governor-in-Council to set up Boards to control and regulate the transportation and marketing of natural products and to vest in those Boards powers considered necessary to exercise those functions, Lord Atkin observed:

'The ......objection is that it is not within thepowers of the Provincial Legislature to delegate the so-called legislative powers to the Lieutenant Governor-in-Council or to give him powers of further delegation. This objection appears to their Lordships subversive of the rights which the Provincial Legislature enjoys while dealing with matters falling within the classes of subjects in relation to which the Constitution has granted legislative powers. Within its appointed sphere the Provincial Legislature is as supreme as any other Parliament and it is unnecessary to try to enumerate the innumerable occasions on which Legislatures, Provincial, Dominion and Imperial, have entrusted various persons and bodies with similar powers to those contained in this Act'

20. The principle behind the cases above referred to is the same. Within the prescribed limits, the Indian Legislature has plenary powers of legislation as large and of the same nature as those of the British Parliament, within the area of powers entrusted to it, the Legislature has unrestricted authority. There is no objection, therefore, in principle to a delegation of legislative powers to a public body under an Act of the Legislature. There is no need for any alarm at the sight of 'delegated legislation.' According to English Constitutional Law, delegation of legislative power under an enactment of the Legislature would be unconstitutional if, and only if, a parallel Legislature is set up by the side of the Legislature erected by the Constitution, or if there is abdication or surrender of legislative power in favour of an outside body, instances of such objectionable delegation have been very rare indeed. The only limitation suggested to the extent of the power of delegation is found in the following observation of Lord Selborne, L. C., in 'The Empress v. Burah', 4 Cal 172 :

'Their Lordships agree that the Governor-General-in-Council could not, by any form of enactment, create in India, and arm with general legislative authority a new legislative power not created or authorised by the Councils Act.'

21. Lord Haldane in 'In re the Initiative and Referendum Act (1919) AC 935 observed :

'No doubt a body with a power of legislation on the subjects entrusted to it so ample as that enjoyed by the Provincial Legislature of Canada, could, while preserving its own capacity intact, seek the assistance of subordinate agencies, as had been done in 'Hodge v. The Queen', (1884) 9 AC 117; but it does not follow that it can create and endow with its own capacity a new legislative power not created by the Act to which it owes its existence. There Lordships do no more than draw attention to the gravity of the constitutional questions which thus arise.'

22. The actual decision of the Judicial Committee in the last case rested on the simple principle that where the Constitution provides a particular machinery for its amendment another method cannot be substituted for the original constitutional mandate. The observation above cited means and can only mean that the Legislature cannot divest itself of its entire legislative power in favour of a parallel legislature sought to be created by it.

23. During the pre-independence days in India, there was a tendency on the part of the lawyers and Courts to look askance at a delegation of legislative power to the executive head of a Province or to a department of Government in spite of the decisions of the Judicial Committee to which reference has been made. The inspiration came from the United States of America. It was an American doctrine that legislative power cannot be delegated either to other branches of the Government or to an independent body or commission. It was said that the American Constitution, in distributing the powers of Government, created three distinct and separate departments -- legislative, executive and Judicial -- and that the separation was not merely a matter of convenience but its object was basic and vital, namely, to prevent the concentration of these different powers of Government in the same hands. It was also said that the Legislature was an agent of the people and therefore under a disability to delegate power entrusted to it to another body. 'Delegate potestas non potest delegari.' This doctrine or dogma had so many exceptions engrafted on it by later day decisions in America that It is now difficult to say whether the dogma or the exceptions embody the American rule today. Without disgressing into an examination of the American cases, it is enough to 'say that recent decisions show a marked tendency to regard constitutional power as implying a power of delegation of authority under it sufficient to effectuate its purposes. In Crawford on 'Statutory Construction' it is observed at page 13:

'It is therefore apparent that the division ofGovernmental departments Into legislative, executive and the Judicial is an abstract and generaldivision and probably was never intended to bestrictly adhered to in actual operation.'

The result of the foregoing discussion is that delegation of legislative authority has been a featureof the Indian Constitution and Government in thepresent form cannot go on without delegation ofwide legislative authority. According to Englishconstitutional doctrines on which lawyers andjudges in India have been nurtured for more thana century, short of divesting itself of its entirelegislative power, there is nothing to preclude aLegislature acting within the ambit of its legislative powers, from delegating functions of variouskinds to the departments of Government for implementing the main or parent legislation. Theauthority that is confided to the departments insuch cases is of a legislative character. I am notaware that the view emphasised in the several decisions of the Judicial Committee already cited,that within the sphere allotted to it, the legislativepower of the Indian Legislature is 'as wide andplenary as that of the British Parliament' andthat acting within such limits it has 'plenarypowers of legislation as large and of the samenature as those of Parliament itself' has beenmodified or qualified by any compelling or competent authority. The Indian Legislature is now tothe fullest extent sovereign within the ambit of itspowers and it rests with that Legislature to decideby Its judgment what powers should be entrustedto subordinate bodies in order to effect its ends.The creation of a subordinate form of legislationis perfectly legitimate and constitutional. I, therefore, hold that the Indian Legislature may delegate power to determine the conditions or contingencies under which an enactment shall come intooperation. It may delegate power to make rulesand regulations consistent with the parent enactment, and for carrying out its objects and purposes,to heads of departments or public bodies. It mayalso confer power to other bodies to ascertain factsand to apply the provisions of an enactment, if thefacts called for its application.

24. Section 26-A read with Section 59 of the Act invests the Central Board of Revenue with power to make rules prescribing the person or persons by whom an application for registration of a firm should be signed and made and the form, veriacation and other particulars of such application. The validity of the rules framed by the Central Board of Revenue depends of course, on the terms of Sections 26-A and 59 which give the power to make them and from which their force is derived. If the rules are not within the powers entrusted by the Legislature to the Central Board of Revenue, they are liable to be challenged as 'ultra vires' in Courts, In order, therefore, to ascertain whether the particular statutory rules now in question are intra vires' or 'ultra vires', it is necessary to look at the terms of the authorising statutory provisions and find out whether the subsidiary or subordinate legislation in the shape of rules is within the limits of the mandate given to the rule-making authority. Ignoring, for the moment, the Powers-of-Attorney Act VII of 1882, it cannot be suggested that Rules 2 and 6 of the Income-tax Rules requiring an application for the registration of a firm or for renewal of a certificate of registration to be signed personally by all the partners (other than minors) transgresses the limits of subordinate legislation delegated to the Central Board of Revenue by Sections 26-A and 59 of the Act. The rules made in accordance with these provisions are, to quote the language of Section 59 (5), 'to have effect as if enacted in this Act.' The result is that a statutory rule, if validly made, has precisely the same effect as if it were part of the Income-tax Act itself. Every person must conform himself to the provisions of the rule. If a rule framed under Sections 26-A and 59 o the Income-tax Act is challenged as 'ultra vires' all that the Court has to do is to put the rule beside Sections 26-A and 59 of the income-tax Act and find out whether the former squares with the latter, it goes without saying that delegated authority of this kind must be exercised in accordance with the powers creating it and after complying with the conditions precedent for its exercise. If there is irreconcilable conflict between the rule and a provision of the Act, the Act must prevail and the rule which is subordinate to the Act must give way. There is no such repugnancy or inconsistency between the Act and the rules now In question. It is equally Impossible, in my opinion to contend that in framing Rules 2 and 6, the Central Board of Revenue exceeded the limits of the authority delegated to it by Sections 26-A and 59 of the Act. The words of Section 59 (5) that rules made under the section 'shall have effect as if enacted in this Act' mean exactly what they say. It is well established law that rules authorised to be made by an enactment, are as effectual as if they were a part of the Act itself, the question of their reasonableness, fairness or propriety not being a matter for the Courts to investigate; see 'Kandaswami Filial v. Emperor', 42 Mad 69, 'Institute of Patent Agents v. Lockwood', (1894) AC 347 and 'Minister of Health v. The King', (on the prosecution of) Yafee, (1931) AC 494 at p. 502. Rules framed under the Income-tax Act are not like by-laws of a corporation whose fairness or reasonableness is open to examination by Courts in judging their validity. Decisions like 'Kruse v. Johnson', (1858) 2 Q B 91 illustrating the wide diversity of Judicial opinion on questions of reasonableness or fairness of byelaws are not now in point.

25. I hold that Rules 2 and 6 of the Income-tax Rules have been framed in pursuance of the express power conferred by Sections 26-A (2) and 59 of this Act in order to effectuate the object of Section 26-A and to fill in details directed by that section to be filled up by rules framed by the Central Board of Revenue. These rules have, therefore, the same force as if they were part of the Act itself.

26. If it were a question of a conflict between these Rules and Section 2 of the Powers-of-Attorney Act, recourse might be had to the maxim legesposterioris priores contraria abrogant.' Later laws repeal earlier laws inconsistent therewith if the two cannot be reconciled. The doctrine, however, Is resorted to only when the provisions of the later enactment are so Inconsistent or repugnant to those of the earlier that the two cannot stand together. The right to have a partnership registered under the Act is a special statutory right conferred by Section 26-A, introduced in 1930 and this can be availed of only on strict compliance with the provisions of that section and the rules authorised to be made thereunder. The Powers-of-Attorney Act was a general enactment passed in 1882. In an apparent conflict between general and special legislation, the rule of construction to be adopted is that the special enactment overrides the general enactment in those particular cases to which the special enactment applies. The earlier general legislation is indirectly derogated from by the later special legislation. In cases coming within the latter, the special or particular provision must be deemed to be an exception to the general provision. Section 2 of the Powers-of-Attorney Act proceeds on the assumption that there is a power of delegation available or exercisable under' the existing law and provides that the donee of a power might act for and in the name of the principal. It does not empower an agency to be created or employed in every case. For instance, fiduciary duties cannot be delegated in spite of Section 2 of the Powers-of-Attorney Act. Statutory duties cast upon public bodies or officers cannot be delegated unless authorised by the statute creating or appointing them. The rules of the Civil Procedure Code provide that an applicant for leave to sue or appeal in 'forma pauperis' must present his application in person unlike other litigants paying court-fee who can present their plaints and appeals through duly empowered advocates. Many other rules of the Civil Procedure Code empower the Court to require the personal appearance of a suitor. To this extent they override the Powers-of-Attorney Act and the Act is displaced 'pro tanto' by rules made by the Rule Committee empowered under Section 122, Civil Procedure Code. Section 26-A of the Act read with Rules 2 and 6 prohibits delegation of the authority of a partner in the matter of applying for registration of the firm and thereby securing the privileges conferred by the Income-tax Act.

27. It is true that the Central Board of Revenue cannot, under the guise of its rule-making power, abrogate a special enactment like the Limitation Act, or the Transfer of Property Act, or the Stamp Act. That is because no section of the Income-tax Act authorises the Board to frame rules affecting or relating to the subjects legislated upon in the several enactments above referred to. Rules framed under the Income-tax Act must conform to the legislative mandate contained in that Act. Section 26-A (2) expressly authorises the framing of rules as regards the person or persons who shall be entitled to make an application and also as regards the form, particulars and the verification of the application. Rules 2 and 6 which prescribe that the application shall be made personally by the parties seeking the registration of a firm or a renewal of the certificate of registration are strictly within the bounds of the authority conferred by Sections 26-A and 59. If these rules are to be condemned as 'ultra vires' it must be shown that they are repugnant to the provisions of the Income-tax Act or that they are clearly in excess of the rule-making power conferred by the Act. In my opinion that has not been done in the present case.

28. Reference has been made to a few decisions touching this point. In 'Commissioner of Agricultural Income-tax, West Bengal v. Keshab Chandra', : [1950]18ITR569(SC) , Das, J., speaking for the majority of the Supreme Court, observed that there were many indications in the Bengal Agricultural Income-tax Act, 1944, and the rules framed thereunder, excluding the common law rule that 'where a person authorises another to sign for him, the signature of the person so signing is the signature of the person authorising it.' It was held in that case that the personal signature of the assessee was required on his return of income or petition of appeal from an assessment under that Act. An examination of the decision shows that Rules 11, 13, 15 and 17 relating to returns, appeals and applications for refund were all framed under Section 57 of the Bengal Agricultural Income-tax Act. There was no provision either in the Act or in the rules specifically enjoining the personal signature of the assessee in returns, appeals or applications for refund. Nevertheless on an examination of the scheme of the rules, the Supreme Court held that the personal signature of the assessee was essential to their validity. I am unable to say, however, whether the argument now advanced by Mr. Bhimasankaran was missed by the counsel and the learned Judges of the Supreme Court, or dismissed as untenable. In 'Commissioner of Income-tax v. Subba Rao', ILR (1947) Mad 167, a Bench of this Court overruled the contention that Section 2 of the Powers-of-Attorney Act prevailed over Rule 6 of the Income-tax Rules in these words:

'The section merely states the general principle of agency and it cannot override the specific provisions of a rule made under a different statute which required that a particular act should be done by a person 'personally', i.e., by himself.' In my opinion, it is implicit in this decision that Section 2 of the Powers-of-Attorney Act must yield to the rules requiring an application for registration of a firm or renewal of a certificate of registration, to be signed in person by the partners. The decision of the House of Lords in 'Paul Co. v. The Wheat Commission', (1937) AC 139 turned on the interpretation of Section 5 (i) and (ii) of the Wheat Act of 1932 empowering the Wheat Commission to make by-laws for the final determination by arbitration of disputes arising as to such matters as might be specified in the bylaws. Purporting to act under this section, the Wheat Commission made a by-law excluding the applicability of the Arbitration Act, 1889, to reference to arbitration made under the Act and the bylaws. The bylaw excluding the application of the Arbitration Act to the arbitration of disputes specified in the bylaws, was held 'ultra vires' and outside the ambit of the delegated power of legislation conferred oh the Wheat Commission. The House of Lords held that it was the intention of Section 5 (i) and (ii) of the Wheat Act to authorise a reference to arbitration in accordance with the procedure prescribed by the Arbitration Act which was a public general statute embodying the general law as to arbitrations. Lord MacMillan who delivered the leading judgment held that the bylaw transgressed the legislative mandate and was therefore 'ultra vires.' He observed ; 'The Arbitration Act is a statute of general application and it confers a valuable and important right of resort to the Courts of law. To exclude its operation from an arbitration is to deprive the parties to the arbitration of the rights which the Act confers. When a public general statute provides for the reference of disputes to arbitration it is to be presumed that it intends them to be referred to arbitration in accordance with the general law as to arbitrations, with all the attendant rights which the general law confers. I do not think that when Parliament enacts by one statute that disputes under it are to be referred to arbitration it can be presumed to have empowered by implication the abrogation of another statute which it has enacted for the conduct of arbitrations. Rather the contrary. If this is intended, express words to that effect are in my opinion essential, and there are here no such express words.'

29. I consider that the Legislature in enacting Section 26-A conferred a special right to get a firm registered subject to such conditions and limitations, as were contemplated by that Section and left to be provided for by rules framed by the Central Board of Revenue under the powers expressly conferred.

30. I am, therefore, of opinion that Rules 2 and 6 preclude an authorised agent of a partner from signing an application on his behalf for the registration of a firm or for the renewal of a certificate of registration and that these rules are 'intra vires' the rule-making authority. I would, therefore, answer the question referred to us in R. C. No. 31 of 1960 in the affirmative and the first of the questions referred to us in R. C. No. 32 of 1948 in the affirmative and the second of the questions in the negative. As the questions are answered in both cases against the assessee and in favour of the Commissioner of Income-tax, the former shall pay the latter a sum of Rs. 250 as costs one set for both the cases.


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