1. This is a petition under Article 226 of the Constitution. The petitioner prays for the issue of a writ of mandamus or any other appropriate writ, order or direction, directing the Fourth Income-tax Officer, City Circle V, the first respondent, to forbear from collecting from it the sum of Rs. 20,000 in pursuance of his notices Under Section 46(5-A) of the Indian Income-tax Act dated 18-6-1959 an;! 21-3-1961.
2. The facts are briefly as follows. The petitioner is a firm carrying on business as producer of films. The first respondent issued a notice to the petitioner on 18-6-1959 Under Section 46(5-A) of the Income-tax Act stating that it had engaged the services of a certain T. S. Baliah a cine artist, and, that the remuneration payable by the petitioner to Baliah stood attached and that it should be credited to the Government as he was in arrears of income-tax to the extent of about Rs. 46,819-15. The petitioner sent a reply on 26-6-1959, and submitted that it had not engaged Baliah for acting in any film produced by it and that there was no subsisting service agreement between them. The department did not send any further notice as apparently it was satisfied that the petitioner did not owe any money to Baliah. Two years elapsed and in the meantime the; arrears of tax payable by Baliah amounted to Rs. 86,1.11-12. On 21-3-1961, the department issued a further notice to the petitioner Under Section 46(5-A) of the Act attaching all payments due by it to Baliah.
3. It must be mentioned that in between these two notices the petitioner had entered into a contract with Baliah on 28-3-1960. The contract was that Baliah should play a role in the petitioner's production No. 2 (tamil) for a consolidated remuneration of Rs. 20,000/-. On the; date of the contract Baliah is said to have been paid a sum of Rs. 7000/-. It is alleged that there were two further payments by the petitioner to Baliah, Rs. 6000/- in cash on 9-2-1961 and Rs. 7000/- in cash on 18-3-1961. These payments are borne out by the books of account maintained by the petitioner.
4. On receipt of the notice from the department in March 1961. the petitioner replied stating that there were no payments due or payable to Baliah at that time. Finding that the petitioner had entered into a contract with Baliah subsequent to the first notice from the department Under Section 46(5-A), the Income-tax Officer addressed another communication to the petitioner on 26-4-1961. in these terms:
'I wish to draw your attention to this office notice Under Section 46(5-A) issued to you on 18-6-1959, and your reply dated 26-6-1959, wherein you had stated your inability to pay the dues to Sri Baliah to the Income-tax department. I have to, therefore, presume that the payment of Rs. 20,000/- made by you to Sri Baliah is in violation of the notice Under Section 46(5-A) issued on 18-6-1959, and as such I cannot take cognizance of this payment. I therefore, request you to pay the sum of Rs. 20,000/- to the Income-tax department within 3 days from the receipt of this letter, failing which I will be constrained to take other steps for recovering the amount from you.'
The petitioner pointed out in its letter dated 26-6.1961 to the Income-tax Officer that there was no contract with Baliah on 18-6-1959, that no money was held by it on his account on that date, that the agreement with Baliah was subsequent to the notice dated 18-6-1959, that Baliah had received all the amounts due to him under that contract, and that it had not violated the provisions of Section 46(5-A) of the Act in making the disbursements to Baliah prior to the issue of the second notice, though subsequent to the first notice. The Department refused to accept the contentions of the petitioner and directed it to pay the money on or be fore 7-9-1961. The petitioner has therefore approached this Court for the issue of a writ of mandamus to forbear the income-tax department from collecting the sum of Rs. 20,000/- paid to Baliah after the first notice Under Section 46(5-A), in pursuance of a contract which did not exist at the time of the notice but was entered into subsequently.
5. It is necessary to set out the relevant statutory provision as the question whether the petitioner is liable to pay the sum of Rs. 20,000/- to the department really turns upon its proper interpretation. Section 46(5-A) reads:
'The Income-tax officer may at any time or from lime to time, by notice in writing (a copy of which shall be forwarded to the assessee at his address known to the Income-tax Officer) require any person from whom money is due or may become due to the assessee or any person who holds on may subsequently hold money for or on account of the assessee to pay to the Income-tax Officer, either forthwith upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held) so much of the money as is sufficient to pay the amount due by the tax-payer in respect of arrears of income-tax and penalty or the whole of the money when it is equal or less than that amount ...... Any person making any payment in compliance with a notice under this subsection, shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in the receipt.
Any person discharging any liability to the assessee after receipt of the notice referred to in this sub-section shall be personally liable to the Income-tax Officer to the extent of the liability discharged or to the extent of the liability of the assessee for tax and penalties, whichever is less.
If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Income-tax Officer, further proceedings may be taken by and before the Collector on the footing that the Income-tax Officer's notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-section (2) of Section 46.
Where a person to whom a notice under this sub-section is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such person to pay any such sum or part thereof, as the case may be. to the Income-tax Officer '
6. This provision is modelled upon the provision of the Australian Act, Section 218. It is need less to reproduce the corresponding provision in the Australian Act. At page 1099 of 'Income-tax Law and Practice (Commonwealth)' by Challener and Greenwood, second edition, it is observed as follows in discussing the scope of the Australian enact merit:
'The purpose of Section 218 is to enable the Commissioner to collect unpaid taxes from persons owing money to the tax-payer without having to proceed to judgment and issue execution. Thus, sub-section (1) authorises the Commissioner to give notice to any person mentioned in (a), (b), (c) on (d) of the sub-section to pay to the Commissioner either forthwith or at or within a time specified in the notice, not being a time before the money becomes due or is held, such amount as is sufficient to pay the tax due and any financial costs. or the whole of the money if it is not greater than (he amount due. A copy of the notice is to be forwarded to the tax-payer. Any person making payment pursuant to such a notice is deemed to have been acting under the authority of the taxpayer and is indemnified in respect of the payment (sub-section 4), whilst any person failing to comply with such a notice is guilty of an offence (sub-section 2).
For a case in which Section 218 was considered, Re, Whiting 1951 VLR 205 has been referred to. We have not been able to get at this report and we do not know the decision therein.'
7. The section provides a machinery for the department to collect tax arrears from the debtors of the assessees. It is in substance the familiar garnishee proceedings under the Civil Procedure Code. The basic foundation would appear to be the subsistence of a relationship of a debtor and creditor, between the garnishee and the assessee. The scope of this section came in for consideration by this Court in a different context. That is the decision in Adam v. Income-tax Officer : 33ITR26(Mad) In that case, an assessee was in arrears of tax He had an overdraft account with a banker The limit of overdraft allowed by the banker was Rs. 1,37,500, of which the assessee had drawn up to Rs. 1,31,301/ . This latter amount was debited to the assessee in the banker's books of account. The Income-tax Officer served a notice on the banker to the effect that the banker should pay to the officer any amount due or becoming due from the banker to the assessee of any money which the banker may hold subsequently for or on account of the assesses. upto the amount of arrears The banker then informed the officer that there was no amount which was payable to the assessee and that the assessee had pledged his goods and executed a mortgage of certain properties. The Income-tax Officer replied by letter dated 24-11-1955 that the notice will come into operation as and when the assessee make future payments. The Banker refused to pay the assessee any further sum on his overdraft account and the assessee filed a petition' under Article 229 of the Constitution questioning the validity of the notice and the letter. This Court held that an unutilised overdraft account does not render the banker a debtor in any sense and the banker is. therefore, not a person from whom money is due to the customer. It further held that the banker in such a ease is not a 'person from whom money became due' Accordingly a writ was issued. Rajagopala Aiyangar, J., as he then was, referring to the provision of Section 46(5-A), in : 33ITR26(Mad)
'Unless the bank were a debtor there could be no attachment and an unutilised overdraft account does not render the bank a debtor in any sense, and, therefore, the bank is not a person from whom money is due to the customer. Nor does the bank in such a ease fall within the expression 'person from whom money may become due.'
Again, at page 32, he observes.
'Section 46(5-A) of the Act cannot on any construction be intended as a credit-freeze, with this feature super-added, that if there was any thawing, the resultant credit released became immediately payable to the department. Of course, if at any stage the account of the customer is in credit, Section 46(5-A) would come into play and the sum so standing to the credit of the assessee might be directed to be paid over. The present is not such a case and this undoubted right of the department is not what is now sought to be asserted. What the impugned order of the Income-tax Officer directs is virtually that the bank should pay over to the department the difference between the limit of the overdraft allowed to the petitioner and the amount drawn by him upto the date of the notice Under Section 46(5-A) This in my judgment is not within the scope of the provision'
The debate before us has very largely centered upon the proper interpretation of the words 'any person from whom money is due or may become due to the assessee.' It is common ground in the present case that the petitioner was not holding and did not subsequently hold money for, or, on account of the assessee. Now, what does the expression 'may become due' mean? Can it be understood as money which would become payable by the garnishee to the assessee in future after the service of the notice as a result of a pre-existing liability, or, would it also cover a case where the liability itself comes into existence after the service of such a notice? The assessee's contention is that the words describe a class of eases which can be compendiously described as debitum in present solvendum in futuro and that their meaning should not be extended beyond such categories of cases. The department, however, contends that the words must be given their plain grammatical meaning and that therefore ''may become due' would sufficiently cover even a case where a relationship of debtor and creditor is established after proceedings arc initiated Under Section 46(5-A).
8. The most important word in the context is 'clue'. The Concise Oxford Dictionary gives the following meaning to it: 'owing, payable, as a debt or obligation (fall, become due, as bill reaching Maturity); that ought to be given to person'. Earl Jowitt in his Dictionary of English law at page 682 annotates the expression as follows:
'Anything owing; that which one contracts to pay or perform to another; that which law or justice requires to be paid or done. As applied to a sum of money 'due' means either that it is owing or that it is payable; in other words, it may mean that the debt is payable at once or at a future time.'
In common parlance the word 'due' is associated only with a liability to pay or an obligation to do It would be wholly inappropriate to describe an unborn future obligation or liability as something which is due. The relevant provision in the statute with which we are dealing, is intended only to collect the amount due to the department from persons who are liable to pay to the assessee. The liability to pay may be forthwith as on the date of the receipt of the notice, or, it may be that such liability would mature after the notice. But, in any event, the essential criterion is that on the date of service of notice, the person should be under an existing obligation to pay amounts to the assessee. Any other interpretation of the provision is likely to hamper the normal freedom of contract which citizens do possess in spite of taxing enactments. Any notice issued by the department Under Section 40(5-A) upon an alleged garnishee cannot hang upon him like a Damocles' sword and prevent him from entering into an;' contract with the assessee thereafter, and, from paying him any money under that contract. In our opinion, such a position cannot be envisaged and it is certainly not warranted by the language of the enactment.
9. A person carrying on business has necessarily to enter into contracts with others. Under such contracts he may incur obligations to be fulfilled forthwith on the completion of the contracts, or, at some future time. The other contracting party may thus acquire rights. If before the coming into existence of the contract, the obligor is served with notice Under Section 46(5-A) and intimated of a tax liability on the part of the obliged, is the obligor to inform the obliged that he will not be paid any amount under the contract till he gels a tax clearance certificate from the department? Such an attitude on the part of one of the contracting parties would scare away persons from entering into a contract the fruits of which would enure for the department. No one is so selfless as to work for liquidating his tax dues, or, in other words, to mortgage his future for discharging his past arrears of tax. If the law were to be that a notice Under Section 46(5-A) would remain in perpetual and continuous operation preventing the alleged garnishee from performing his contractual obligation incurred after the notice, there can be no doubt that the garnishee would be driven out of the trade or business and the assessee would in all probability retain his position as one in arrears of tax, A jeopardy of this kind should not be too readily assumed to have been created by any enactment which has in its purview only the levy and collection of tax. The tax can be collected from the person liable to pay the tax or from his debtor and not from a person who may become a debtor at some time in future.
10. An Act cannot be so construed unless the words arc compelling and do not admit of any doubt, so as to deprive parties of ordinary private rights. Express and unequivocal language would be necessary to achieve that result. The Court should not impute to the legislature the object of destroying rights by a side wind. Therefore rights, whether public or private, are not to be taken away or even hampered by mere implication from the language used in a statute. (London and North Western Railway Go. v. Evans. 18931 Ch. 16) In Walsh v. Secretary of State, (1863) 10 HLC 367 , Lord Westbury observes as follows:
'And it follows of necessity that consistently with every rule by which these acts of parliament ought to be interpreted, especially the rule that they should be so interpreted as in no respect to interfere with or prejudice a clear private right or title, unless that private right or title is taken away per directum, the right of action under the covenant remains unaffected.'
Plain words are necessary to establish an intention to interfere with common law or contractual rights (Deeble v. Robinson, 1954 1 QB 77).
11. If the statute is clear and unambiguous, the problem of interpretation is solved as the Court cannot hold that, the legislature speaking through the language of the enactment says something but means a different thing. But if however the statutory provision is indefinite or obscure, the legislative intent has to be ascertained by resorting to various aids Where a literal meaning leads to absurdity or contradiction, the spirit prevails over the latter. In such eases, the presumption is that the legislature did not intend to lay down a measure which is oppressive and unreasonable to an uncommon degree We would therefore prefer the view that the words 'may become due' mean 'may become payable' and not 'may become entitled' This would be a just and fair interpretation harmonious with the scheme of collection of tax.
12. With respect, we follow the view indicated by Rajagopala Aiyangar, J., in : 33ITR26(Mad) and we are. of opinion that the department is not entitled to call upon the petitioner to make good the sum of Rs. 20,0007already paid to Baliah as such payments did not contravene the notice Under Section 46(5-A) dated 18th June 1959.
13. In the result, the petition is allowed and the rule nisi is made absolute. There will be no order as to costs.