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J.K.K. Angappan Vs. Income-tax Officer - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 4587 of 1970
Judge
Reported in[1974]94ITR397(Mad)
ActsGeneral Clauses Act, 1897 - Sections 6; Income Tax Act, 1961 - Sections 280K, 280R, 280T and 280X; Finance Act, 1966
AppellantJ.K.K. Angappan
Respondentincome-tax Officer
Appellant AdvocateK. Srinivasan, Adv. for ;S.V. Desikan, Adv.
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Cases ReferredStoneware Pipes (Madras) Ltd. v. Union of India
Excerpt:
direct taxation - recovering annuity deposit - section 6 of general clauses act, 1897, sections 280k, 280r, 280t and 280x of income tax act, 1961 and finance act, 1966 - petition for issuance of writ of prohibition prohibiting respondent from recovering amount of annuity deposit under income-tax act - petitioner had option not to pay annuity deposit - option to be exercised before relevant date - petitioner did not exercise his option - petitioner's liability has accrued in event of not exercising option available to him - held, income-tax officer entitled to proceed to levy annuity deposit in course of assessment proceedings. - - 3. it is contended that chapter xxii-a dealing with annuity deposit was inserted in the income-tax act, 1961, by section 44 of the finance act of 1964 with..........of tax payment in the comparatively higher income groups are required to make out of their total income deposits at the specified rates on the adjusted total income with the central government. the amount so deposited is made retunable with interest in ten annual instalments. in computing the total income of the year in which it is made the deposit is an admissible deduction. but the instalment due in any year is liable to be adjusted in the total income of the year in which it is due. the taxpayer, however, has the option not to pay the deposit, and pay tax on his total income and fifty per cent. of the amount saved by not making the deposit. '6. under this scheme the taxpayers of certain categories are required to make annuity deposit for every assessment year commencing from.....
Judgment:

Ramanujam, J.

1. This is a petition for the issue of a writ of prohibition prohibiting the respondent from recovering the amount of the annuity deposit for the assessment year 1965-66 under the Income-tax Act, 1961, in pursuance of his notice of demand dated March 22, 1970.

2. For the assessment year 1965-66 the respondent passed an assessment order dated March 23, 1970, in the petitioner's case under Section 143(3) of the Income-tax Act, 1961. In that order the taxable income of the petitioner was computed at Rs. 4,98,700 after giving deduction of Rs. 71,130 towards annuity deposit payable by him under Section 280. The petitioner had paid a sum of Rs. 8,610 as annuity deposit during the year and deducting the said sum, a demand had been issued on March 22, 1970, for the balance of the annuity deposit of Rs. 62,520 in Form 37B under Section 156 of the Income-tax Act read with Rule 48A(ii) of the Income-tax Rules, 1962. The petitioner has challenged the validity of that demand in this writ petition on various grounds.

3. It is contended that Chapter XXII-A dealing with annuity deposit was inserted in the Income-tax Act, 1961, by Section 44 of the Finance Act of 1964 with effect from 1st April, 1964, that under the said scheme of annuity deposit the taxpayers have the option to make or not to make deposit, that the annuity deposit not being tax, there cannot be any compulsion to pay the same, and that in the event of non-payment of the annuity deposit the only course open to the assessing authority is to tax the total income as well as 50% of the amount saved by not making the deposit as provided in the scheme. It is further contended that by Section 32 of the Finance Act of 1966, Sections 280K, 280R and 280T and the words '(including annuity deposit referred to in Chapter XXII-A)' in Section 156 of the Income-tax Act, 1961, had been omitted with effect from April 1, 1967, and that as a result of these omissions there is, in fact, no machinery by which the annuity deposit amounts could be assessed and recovered under the Income-tax Act. The petitioner contends that the annuity deposit could not be recovered unless an order is passed under that section, that in this case the Income-tax Officer has not passed nor could he pass any order under Section 280K after the omission of that section by the Finance Act of 1966, that as the omission of Section 280K from the statute by the Finance Act of 1966 does not amount to repeal, Section 6 of the General Clauses Act is inapplicable and that even if Section 6 of the General Clauses Act is attracted on the facts of this case, still Clauses (c) and (d) of Section 6 cannot obviously apply, and, therefore, the Income-tax Officer cannot pass an order under Section 280K invoking Section 6 of the General Clauses Act and that Rule 48A which enabled the Income-tax Officer to demand the annuity deposit has become obsolete and unenforceable after April 1, 1967, in view of the omission of Section 280K. Thus the main submission of the petitioner is that after April 1, 1967, there cannot be any levy, demand or collection of the annuity deposit amount. The respondent, though he does not dispute the factual averments, takes exception to the main legal contention put forward by the petitioner. According to him even after the omission of Sections 280K, 280R and 280T of the Income-tax Act, 1961, by Section 32 of the Finance Act of 1966, by virtue of Section 6 of the General Clauses Act, the Income-tax Officer has still the power to assess and demand the annuity deposit accrued due before April 1, 1967, and that, therefore, the impugned notice of demand issued by the Income-tax Officer and the steps taken for recovery of the amount as per that demand are perfectly valid and within his jurisdiction. In the face of these rival contentions we have to consider whether the impugned demand is illegal and without jurisdiction as contended by the petitioner.

4. The question, therefore, mainly depends upon the effect of the omission of Sections 280K, 280R and 280T as also the deletion of the words '(including annuity deposit referred to in Chapter XXII-A)' from Section 156 and the applicability or otherwise of Section 6 of the General Clauses Act to the said omissions. It cannot be disputed by the revenue that if Section 6 of the General Clauses Act does not apply to the omissions and deletions made in the Income-tax Act by Section 32 and Schedule II of the Finance Act of 1966, the demand in question could not be sustained. Thus, the substantial question to be considered in this case is whether Section 6 of the General Clauses Act enables the Income-tax Officer to apply the provisions of Sections 280K, 280R and 280T even after their omission with effect from April 1, 1967, for purposes of recovery of the amount which has accrued due before that date.

5. Before proceeding to deal with the main contention, it is necessary to consider the nature of the annuity deposit scheme and the effect of the omission of the provision to Sections 280K, 280R and 280T from the Income-tax Act, 1961, by the Finance Act of 1966, The scheme of annuity deposit introduced by Section 44 of the Finance Act of 1964 has been explained by the Supreme Court in Hari Krishna Bhargav v. Union of India, : [1966]59ITR243(SC) as follows:

'Broadly stated, the scheme of Chapter XXII-A is that certain classes of tax payment in the comparatively higher income groups are required to make out of their total income deposits at the specified rates on the adjusted total income with the Central Government. The amount so deposited is made retunable with interest in ten annual instalments. In computing the total income of the year in which it is made the deposit is an admissible deduction. But the instalment due in any year is liable to be adjusted in the total income of the year in which it is due. The taxpayer, however, has the option not to pay the deposit, and pay tax on his total income and fifty per cent. of the amount saved by not making the deposit. '

6. Under this scheme the taxpayers of certain categories are required to make annuity deposit for every assessment year commencing from 1964-65, at the rates prescribed in the Second Schedule to the Finance Act of 1964, By the Explanation to the said Second Schedule, the expression 'total income' under the Schedule means the total income computed in the manner laid down in the Income-tax Act without making any allowance under Section 280-O of that Act. Under Section 280X as it then stood the taxpayer covered by the annuity deposit scheme should exercise option not to make the annuity deposit and he should intimate the same to the Income-Officer by a notice in writing before 30th June of the assessment year. The option once exercised is irrevocable and it operates in respect of that assessment year and all subsequent years. If the taxpayer exercises the option not to pay the annuity deposit, he has to pay, besides the income-tax payable on his total income, additional income-tax which is equal to half the amount which he saves by not making the deposit as per Section 280K. But an individual who, on the last day of the relevant previous year is more than 70 years of age, is exempt from payment of this additional income-tax. Section 280B defines amongst other expressions 'adjusted total income' a percentage of which is by the Second Schedule liable to be deposited as annuity deposit. Section 280C is akin to the charging section and it throws an obligation to make an annuity deposit if the option is not exercised by the taxpayer under Section 280X. It is not in dispute that the assessee in this case has not chosen to exercise the option under Section 280X within the time referred to therein, and in view of the option not having been exercised as contemplated in Section 280X, the petitioner is liable to pay the annuity deposit as per the scheme under Section 280C. Section 280K enables the Income-tax Officer to pass an order determining the annuity deposit required to be made by an assessee, by way of provisional or regular assessment and Section 280-0 provides for the deduction of the annuity deposit from computation of the total income assessable. The other provisions of Chapter XXII-A, inter alia, deal with the procedure for recovery of annuity deposit as determined under Section 280K. According to the petitioner, by the omission of Sections 280K, 280R and 280T the legislature has shown its intention not to enforce the levy and collection of the annuity deposit after 1st April, 1967, even in respect of the earlier assessment years, and there being no machinery provisions for the levy and collection of the annuity deposit after April 1, 1967, the levy and collection could not be made even for the anterior period as the omission of the sections will not amount to repeal, in which case alone, Section 6 of the General Clauses Act will apply. The learned counsel refers to the decision of the Supreme Court in Rayala Corporation (P.) Ltd. v. Director of Enforcement, A.I.R. 1970 S.C. 494 in support of his plea that where the legislature by an amending Act merely omits certain provisions of an existing statute, it will not amount to repeal and that, therefore, in cases of omissions Section 6 of the General Clauses Act will not apply. In that case the question arose as to what is the effect of omission of Rule 132A(2) of the Defence of India Rules, 1962, by Clause 2 of the Defence of India (Amendment) Rules, 1965. There a prosecution came to be launched under Rule 132-A(4) for contravention of Rule 132-A(2) prohibiting any person other than an authorised dealer to deal in any foreign exchange, after April 1, 1965, when the Rule 132-A(2) was omitted. It was contended on behalf of the prosecution that the violation of the prohibition contained in Rule 132-A(2) had taken place when that rule was in force, that, therefore, the accused became liable to punishment under Rule 132-A(2) and that the omission of the Rule 132-A will not affect the liability already incurred by the accused. The accused contended that as Rule 132-A had been omitted no new proceeding by way of prosecution could be initiated for an offence committed earlier when the rule was in force. To meet the said contention of the accused, the prosecution relied on Section 6 of the General Clauses Act. The Supreme Court expressed:

'In the case before us, Section 6 of the General Clauses Act cannot obviously apply on the omission of Rule 132-A of the Defence of India Rules for the two obvious reasons that Section 6 only applies to repeals and not to omissions, and applies when the repeal is of a Central Act or Regulation and not of a Rule. If Section 6 of the General Clauses Act had been applied, no doubt, this complaint against the two accused for the offence punishable under Rule 132-A of the Defence of India Rules could have been instituted even after the repeal of that rule.'

7. The above passage is strongly relied on by the learned counsel for the petitioner to show that the omission of Section 280K, Section 280R and Section 280T and the deletion of the words '(including annuity deposit referred to in Chapter XXII-A)' will not amount to repeal and as such Section 6 of the General Clauses Act cannot be invoked. According to the learned counsel wherever the legislature uses the word 'omit' instead of the word 'repeal' in an amending statute, it should be taken that the legislature has intended to exclude the application of Section 6 of the General Clauses Act and this position is said to be clear from the said observations of the Supreme Court.

8. But we are of view that the observations in that case are confined to the facts of that case. Their Lordships were concerned with the omission of a rule and, therefore, they stated that Section 6 of the General Clauses Act will not apply to an omission of a rule. It is true, the observation appears to suggest that Section 6 will apply only to repeals and not to omissions. But, as already stated, the observation has to be construed in the light of the facts of that case. In our view, the mere use of the word 'omit' instead of 'repeal' by the legislature cannot be taken to show its intention to exclude the application of Section 6 of the General Clauses Act as urged by the petitioner. As a matter of fact, the Supreme Court in an earlier decision in State of Punjab v. Mohar Singh, A.I.R. 1955 S.C. 84 had clearly ruled that unless the legislature shows its intention to destroy the old rights, Section 6 of the General Clauses Act will automatically apply. In that case it has been observed :

'Whenever there is a repeal of an enactment, the consequences laid down in Section 6 of the General Clauses Act will follow unless, as the section itself says, a different intention appears. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But, when the repeal is followed by fresh legislation on the same subject, the court would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention.

The line of enquiry would be, not whether the new Act expressly keeps alive old rights and liabilities but whether it manifests an intention to destroy them. The court cannot, therefore, subscribe to the broad proposition that Section 6 of the General Clauses Act is ruled out, when there is repeal of an enactment followed by a fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law and the mere absence of a saving clause is by itself not material. '

9. It is in the light of these principles that we now proceed to examine the facts of the present case. If the said decision were to apply to the facts of this case, it will be apparent that the intention of the legislature in respect of the annuity deposit amounts already accrued due for the period prior to April 1, 1967, is not to give up the same. If such were the intention of the legislature it would have used clear words to that effect in the amending Act. The legislature would not have had such an intention for the reason that carrying out such an intention would clearly amount to a hostile discrimination between persons against whom the omitted sections have already been enforced before their omission from the statute book and those against whom it was not so enforced. The petitioner's contention that wherever the legislature uses the word 'omit' instead of 'repeal', it should be construed as not attracting Section 6 of the General Clauses Act, is directly opposed to the wording of Section 6. Section 6 uses the words ' repeals any enactment' and 'enactment' has been denned under Section 2(19) of the said Act as including any provision contained in any Act. Therefore, when a provision in an Act is repealed, it will amount to a repeal of an enactment referred to in Section 6. Repealing a provision is the same thing as omitting a provision. We are, therefore, of the view that Section 6 of the General Clauses Act will stand attracted on the omission of certain sections by the Finance Act of 1966.

10. The learned counsel for the petitioner then contends that even if Section 6 were to apply, still there being no actual liability under the annuity deposit scheme before April 1, 1967, neither Sub-clause (c) nor Sub-clause (d) of Section 6 will apply. According to the petitioner the liability to make the annuity deposit is optional and the consequences of non-payment will be that the petitioner will be liable to pay an additional tax as per Section 280-X. But we find that the learned counsel is not right in saying that the amount has not become due. Though the petitioner had option not to pay the annuity deposit, that option has to be exercised before the relevant date. It is not in dispute that in this case the petitioner has not exercised bis option. In the event of the petitioner not exercising the option, the Income-tax Officer is entitled to proceed to levy the annuity deposit in the course of the assessment proceedings. We are of the view that under the scheme the petitioner's liability has accrued as he has not exercised the option to opt out of the annuity deposit scheme. It has been held in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax, : [1966]59ITR767(SC) that a liability to pay income-tax is a present liability though the tax became payable after it is quantified in accordance with ascertainable data, and that it becomes a perfected debt at any rate on the last day of the accounting year. The learned counsel for the petitioner would, however, rely on the decision in VE. Sivagami Achi v. VR. VE. VR. Ramanathan Chettiar, : [1967]64ITR36(Mad) in support of his contention that there was no liability before April 1, 1967. But we find that the said decision cannot support the petitioner's stand. In that case Section 137 of the Income-tax Act which merely declared that the particulars mentioned therein should be treated as confidential does not create an obligation or privilege or right which could be regarded as having been incurred, acquired or having accrued, and, therefore, the result of the omission of Section 137 cannot attract section 6(c) of the General Clauses Act, Stoneware Pipes (Madras) Ltd. v. Union of India, : AIR1971Mad442 is also referred to. In that case the question arose as to whether the proceedings for recovery of premium due under the provisions of the Emergency Risks (Factories) Insurance Act, 1962, could be continued after the Act ceasing to have force on revocation of emergency. In that connection the scope of Section 6 of the General Clauses Act came up for consideration. The court held that Section 6 of the General Clauses Act cannot be invoked as the liability under the Act is contingent upon the determination of facts and no such determination has been made before the Act was repealed, no liability has obviously been incurred prior to the repeal and, therefore, there will be no saving of that liability after the repeal. But that decision was rendered with reference to the provisions of that particular statute and cannot be said to have a general application. The learned judges in that case construed Section 11 of the Act and Clause 13 of the Scheme framed under that Act and held that until a determination is made of the extent of the under-insurance and the premium is fixed on that basis, the payment of which has been evaded, there is neither a right acquired by the Government nor a liability incurred by the defaulter, and that the liability to pay the premium evaded arises only on its determination and a demand being made on the defaulter. We have to, therefore, reject the petitioner's contention that there is no accrued liability before April 1, 1967, so as to invoke Section 6 of the General Clauses Act. In this case, there being a liability to pay the annuity deposit, the Income-tax Officer was justified in issuing the demand based on the order of assessment which can also be construed as an order under Section 280K. The petition, therefore, fails and is dismissed with costs. Counsel's fee Rs. 250.


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