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PETITIONER: THE UNION OF INDIA

       Vs.

RESPONDENT: MADAN GOPAL KABRA.

DATE OF JUDGMENT: 16/12/1953

BENCH: SASTRI, M. PATANJALI (CJ) BENCH: SASTRI, M. PATANJALI (CJ) MAHAJAN, MEHR CHAND DAS, SUDHI RANJAN HASAN, GHULAM JAGANNADHADAS, B.

CITATION:  1954 AIR  158            1954 SCR  541  CITATOR INFO :  R          1954 SC 163  (4)  R          1957 SC 692  (5)  F          1961 SC  56  (3,5,6)  R          1961 SC1534  (15)  F          1962 SC 141  (3)  RF         1962 SC1006  (55)  R          1962 SC1753  (18)  R          1963 SC 274  (37)  R          1963 SC 966  (19)  R          1966 SC1260  (15)  RF         1968 SC 162  (15)  RF         1968 SC1138  (23)  RF         1972 SC2455  (12)  F          1973 SC1034  (13)

ACT:  Indian Income-tax Act (XI of 1922, as amended by Finance Act  (XXV of 1950), s. 3-Taxable territories-Meaning of  -Section  2  (14-A)  proviso  (b) (i)  and  (iii)-Income  accruing  to  assessee  in  State  of Bajasthan  in  1949-50-Liability  to  income-tax-Sections 3 and 4 of Indian Income-tax Act and  s.  2  of  Finance Act and proviso to the amended s.  2  (14-A)-  Constitution of India, Arts. 245 and 246 read with entry  82  of List I of Seventh Schedule-Parliaiiment competent to make  laws  with  respect  to  taxes  for  the  whole  of   lndia-  Constitution  competent  to make laws  having  retrospective  operation for pro-Constitution period.

HEADNOTE: Respondent  was  residing and carrying on  business  in  the District  of  Jodhpur in Rajasthan, a Part  B  State,.   His income  arising therein during the  accounting  year-1949-50 -was-- sought-to assessed to income-tax ’for the year  1950- 51 under the Indian Income-tax Act ’as amended by the Indian Finance Act.  He presented’ a petition under art. 226 to the High Court praying 542 for the issue of a writ directing the Union of India not  to assess  income-tax  on his income which had accrued  to  him

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prior  to April 1, 1950, because no income-tax was  leviable in  Rajasthan  (except  in the State  of  Bundi)  under  any provision  of  law in force there.  The  High  Court  having accepted  his  petition, the Union of  India  preferred  the present appeal to the Supreme Court. Section  3  of the Finance Act 1950 (Act XXV of  1550)  made certain amendments in the Indian Income-tax Act with  effect from the 1st day of April, 1950" and substituted therein the present  el. (14-A) in s. 2 in place of previous el.  (14-A) defining "taxable territories". Held, that under sub-el. (i) of el. (b) of the proviso,  the whole of the territory of India including Rajasthan is to be deemed  taxable territory for the purpose of s. 4-A  of  the Indian  Income-tax Act "as respects any period"   The  words "any period" mean any period before or after March 31, 1950. Respondent was therefore resident in the taxable territories during   the  accounting  year  -1949-50  and  his   income, whetherderived within or without the taxable territories was taxable  under s. 4 sub-s. (I) cl. (b) sub-el. (ii)  of  the Indian Income-tax Act. Further, all that s. 2 (14-A) does is to define what the ex- pression  "taxable territories" means in certain  cases  and for  certain purposes. wherever that expression is  used  in the various provisions of the Indian Income-tax Act, and  as the  expression is used in the charging s. 4  in  connection with the conditions which are to determine liability to tax, sub-el.  (iii) of cl. (b) of the definition must, when  read with  s. 4 of the Indian Income-tax Act, have  reference  to chargeabiiity  of income and not merely to its  computation, and therefore ss. 3 and 4 of the Indian Income-tax Act  read in the light of the definition in proviso (b) to the amended s.  Y. (14-A) and s. 2 of the I inance Act, 1950,  authorise the  imposition  of Indian income-tax and super tax  on  the income derived by the respondent in the year 1949-50 in  the territory of Rajasthan. Held  also, that while it is true that the Constitution  has no   restrospective  operation  except  where  a   different intention clearly appears, it is not correct to say that  in bringing  into existence now legislatures and conferring  on them   certain  powers  of  legislation,  the   Constitution operated retrospectively. Articles 245 and 246 reda with entry No. 82 of List I of the Seventh  Schedule  empower Parliament to make laws  with  to taxes  on  income  for  the whole  territory  of  India  and limitation   or   restriction  is  imposed  in   regard   to retroactive  legislation &ad it is, therefore competent  for Parliament to make a law imposing a tax on the income of any year  prior to the  the amendment of s. 2, cl (14-A) of  the Indian income tax     Act by the Finance act by the  Finance act the Indian Income-tax Act by the Finance ,1950, so as to the  authorise the levy of the authorise the levy of tax  on income  accuring in the territory of Rajasthan in  the  year 1949-50 ie therefore valid. 543

JUDGMENT: CIVIL APPELLATE JURISDICTION: Case No. 296 of 1951. Appeal  against  the  Judgment  and  Order  dated  the  16th January, 1951, of the High Court of Judicature for the State of Rajasthan at Jodhpur (Nawal Kishore and Kanwar Lal  Bapna JJ.) in D. B. Civil Miscellaneous Case No. 15 of 1950.  M.  C. Setalvad, Attorney-General for India (G.  N.  Joshi, with him) for the appellant.

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N.C. Chatterjee, Senior Advocate (G.  L. Agarwal, with  him) for the respondent. 1953.  December 16.  The Judgment of the Court was delivered by  PATANJALI  SASTRI C. J.-This is an appeal from an order  of the  High Court of Rajasthan directing by writ issued  under article  226  of the Constitution that the Union  of  India, appellant  herein, should not levy income-tax on the  income of the respondent accruing, arising or received in Rajasthan (excluding  the  area  of the former  covenanting  State  of Bundi) prior to April 1, 1950. The  respondent  resides  and carries  on  business  in  the District of Jodhpur in Rajasthan which is one of the  States specified   in  Part  B  of  the  First  Schedule   to   the Constitution (hereinafter referred to as Part B States).  In May,  1950, the respondent was required to file a return  of his  income for the previous year, that is the  year  ending March   31,   1950,  for  assessment  to   income-tax,   and subsequently was also asked to produce the relevant  account books before the Income-tax Officer, Jodhpur, on August  11, 1950.  Thereupon the respondent presented the petition,  out of  which this appeal arises, on August 23,  1950,  invoking the, jurisdiction of the High Court under article 226 of the Constitution  for  the  issue  of "a  writ  of  mandamus  or certiorari or other appropriate writ"directing the appellant not  to take a any action under the Indian  Income-tax  Act, 1922, (hereinafter referred to as the Indian Act) as amended by the Indian Finance Act, 1950, for the assessment or levy 544 of  income-tax on the income which accrued or arose  to  the respondent or was received by him prior to April 1, 1950, on the  ground that such income was  not liable   to be charged "under  the  provisions  of  any law  validly  in  force  in Rajasthan." The  petition  was heard by a Division Bench  of  the   High Court  (Nawal Kishore and Kanwarlal Bapna JJ.) who  accepted the petition and issued a writ as already stated, overruling sundry preliminary objections to which no reference need  be made  as they have not been raised by the  appellant  before us. As  is well-known, after the Indian Independence Act,  1947, came  into force, various Indian States (as they  were  then known)  which  had  been  recognised,  subject  to   certain restrictions   and   limitations  not  material   here,   as independent principalities were brought into the Dominion of India  from,  time  to time under  arrangements  with  their Rulers,  and  this process of accession  and  integration  . resulted  in  the  expansion of the territory  of  India  in successive  stages.  So far as Rajasthan is  concerned,  the Rajaputana  States,  as they were  then  called,  integrated their  territories into the United State of  Rajasthan,  and the  new  State  acceded  to the Dominion  of  India  by  an Instrument  of Accession executed by the head of  the  State (Rajpramukh)  on  April  15,  1949,  and  accepted  by   the Governor-General of India on May 12, 1949.  By clause (3) of the   Instrument  the  Rajpramukh  accepted   "all   matters enumerated in Lists I and III of the Seventh Schedule to the Act  (the  Government  of India Act,  1935)  as  matters  in respect of which the ]Dominion Legislature may make laws for the  United  State, provided that nothing contained  in  the said  Lists or in -any other provisions of the Act shall  be deemed  to empower the Dominion Legislature to  impose  -any tax  or  duty  in the territories of  the  United  State  or prohibit   the  imposition  of  any  duty  or  tax  by   the Legislature  of the United State in the said  territories.":

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This  limitation  on the power of the  Dominion  Legislature thus  imposed by agreement between the two States was  given effect to as a 545 constitutional  limitation by section 101 of the  Government of  India Act, 1935, as adapted by the  Governor-General  in August, 1949, in exercise of the powers conferred on him  by the  Indian Independence Act, 1947.  That  section  provided that "nothing in this Act shall be co nstrued as  empowering the Dominion Legislature to make laws for an acceding  State otherwise   than  in  accordance  with  the  Instrument   of Accession  of  that  State  and  any  limitations  contained therein."   The   position  thus  was  that   the   Dominion Legislature had no power to make any law imposing any tax or duty  in the territories of the United State  of  Rajasthan. In July, 1949, however, the.  Indian States Finances Enquiry Committee  appointed  by the Government of  India  submitted their report recommending, among other things, the financial integration of the acceding States and the imposition of the Indian income-tax in their territories as from the first day of  April, 1950.  Meanwhile the framing of the  Constitution of  India by the Constituent Assembly, which  also  included duly  appointed representatives of the acceding States,  was Hearing  completion, and in November, 1949, the  Rajpramukh, in  exercise of his powers as the duly constituted  head  of the  State,  issued a Proclamation whereby he  declared  and directed  that  the  "Constitution of India  shortly  to  be adopted  by the Constituent Assembly of India shall  be  the Constitution for the Rajasthan State as for the other  parts of India, and shall- be enforced as such in accordance  with the  tenor of its provisions and that the provisions of  the said   Constitution   shall,  as  from  the  date   of   its commencement,    supersede    and   abrogate    all    other constitutional  provisions inconsistent therewith which  are at present in force in this -State."  The  Constitution of India then came into force on  January 26,  1950.  It repealed the Government of India  Act,  1935, including  section 101 thereof, and brought all the  Part  B States,  including  Rajasthan, within the  Union  of  India, incorporating  the  territories of all those States  in  the "territory  of  India"  as defined in  article  1  (2).   It created a new Central 546 Legislature  for the Union called Parliament  and  empowered that Legislature by article 245 "to make laws for the  whole or  any  part  of the territory of  India"  subject  to  the provisions of the Constitution and, by article 246 (1)  read with entry No. 82 of List 1, it conferred "exclusive  power" to  make  laws with respect to"taxes on  income  other  than agricultural income". In exercise of that power and pursuant to there commendation of the Indian States Finances  Enquiry Committee referred to above, Parliament enacted the  Finance Act, 1950 (Act XXV of 1950) providing by section 2 (1)  that income-tax  and  super-tax shall be charged  "for  the  year beginning on the first day of April, 1950," (i.e.,  1950-51) at the rates specified in Parts I and 11 respectively of the First  Schedule to that Act.  Section 3 made certain  amend- ments  in the Indian Act "with effect from the first day  of April,  1950."  Among  these was  the  substitution  of  the present  clause (14-A) in section 2 in the place  of  clause (14-A) as it stood before.  The new clause defines " taxable territories  "  as  respects  different  periods  so  as  to correspond  to  the successive stages of  expansion  of  the territory of India after the Indian Independence Act,  1947. The material part of that clause as amended runs thus:-

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(14-A) I taxable territories’ means-. (a)..... (b)..... (c).... (d)as respects any period after the 31st day of March, 1950, and  before  the 13th day of April, 1950, the  territory  of India  excluding  the  State of Jammu and  Kashmir  and  the Patiala and East Punjab States Union, and  (e)  as  respect any period after the 12th  day  of  April, 1950,  the territory of India excluding the State  of  Jammu and Kashmir: Provided  that the taxable territories shall be deem  ed  to include- (a).... 547 (b)the  whole of the territory of India excluding the  State of Jammu and Kashmir-- (i)  as respects any period, for the purposes of sections4-A and 4-B, (ii) as  respects  any period after the 31st day  of  March, 1950, for any of the purposes of this Act, and (iii)as respects any period included in the previous yearfor the.purpose  of making any assessment of the  yearending  on the 31st day of March, 1951, or for any subsequent year." The  definition,  it may be observed in passing,  is  by  no means  a model of perspicuity.  Parts of it  seem  redundant and even mutually contradictory.  For instance, (leaving out the   State  of  Jammu  and  Kashmir  altogether   in   this discussion) whereas clause (d) excludes the Patiala and  the East  Punjab  States Union from the taxable  territories  as respects  the period from April 1, 1950, to April 12,  1950, subclause  (ii) of clause (b) of the proviso would  seem  to include that State also within such territories as  respects the  same  period,  and while clauses (d)  and  (e)  of  the substantive  part of the definition when read together  seem apt by themselves to bring the territory of India within the taxable  territories as respects the period after March  31, 1950,   sub-clause  (ii)  of  clause  (b)  of  the   proviso apparently seeks to bring about the same result by means  of a fiction. Now,  the  scheme  of  the Indian Act is  to  tax  a  person resident in the taxable territories during the previous year on  all  his income of the previous  year  whether  accruing within  or  without the taxable territories, and  to  tax  a person  not  resident in the taxable  territories  upon  his income  accruing within the taxable territories  during  the previous year.  Residence in the taxable territories has  to be  determined in accordance with the provisions of  section 4-A which, in the case of an individual, takes into  account his  having been in such territories within the -five  years preceding  the  year  of assessment.   If  Rajasthan  was  a taxable territory in the year 1949-50, the respondent  would be chargeable in 72 548 respect   of   his   income  whether   derived   within   or without .Rajasthan. It is, however, argued on his behalf  by Mr.  Chatterjee  that section 3 of the  Finance  Act,  1950, having substituted the amended clause .(14-A) " with  effect from  the  first day of April, 1950," Rajasthan  was  not  a taxable  territory during the accounting year  1949-50,  and that  no income-tax being admittedly leviable in that  State on  the income accruing there in that year, the  new  clause (14-A) should not be construed so as to impose liability  to pay  Indian incometax on such income.  According to  learned

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counsel the word "assessment" in sub-clause (iii) of  clause (b) of the proviso must be taken to mean only computation of income  and not the imposition of liability.  In support  of the  construction  he relied on the decision  of  the  Privy Council  in Commissioner of Income-tax, Bombay v.  Khemchand Ramdas(1)  where it was said that the word "assessment"  was used in the Indian Income-tax Act as meaning "sometimes  the computation  of income, sometimes the determination  of  tax payable  and sometimes the whole procedure laid down in  the Act for imposing liability on the taxpayer." Mr.  Chatterjee reinforced  the argument by referring to the  repealing  and saving  provisions  of section 13 which he read  as  keeping alive a State law of incometax in.force in any Part B  State "for the purposes of levy, assessment and collection of tax" not  only in respect of the income of the year  1948-49  but also on the income of,1949-50 which is the previous year for assessment  for the year ending March 31, 1951 (i.e.,  1950- 51).   The  result, therefore, according to  him,  was  that where any State law of income-tax was in force in any Part B State  before  April 1, 1950, so as to make  the  income  of 1949-50  chargeable  to  tax,  the  amended  clause   (14-A) authorised the computation of such income for the purpose of taxation as, for example, in the State of Bundi.  But where, as in the rest of the territory of Rajasthan, no  income-tax was  leviable  on  the  income  of  the  year  1949-50,  the amendment  by the Finance Act, 1950, which took effect  only from April 1, 1950, did not, on its true construction, bring (1) I.L.R. 1938 Bom. 487. 549 the income of the year 1949-50 into charge under the  Indian Act. This  argument found favour with the learned Judges  in  the High  Court but we are unable to accept it.  A short  answer to  it  is provided by sub-clause (i) of clause (b)  of  the proviso  under  which the whole of the  territory  of  India including  Rajasthan is to be deemed taxable  territory  for the  purpose of section 4-A of the Indian Act  "as  respects any period." The words "any period" cannot be taken to  mean "any  period after March 31, 1950," for the period  referred to  in the next clause is expressly limited in that  sense.’ Those  limiting  words cannot be read  into  sub-clause  (i) which  must,  therefore, be understood as referring  to  any period   before  or  after  March  31,  1950.   As   already indicated,  residence in the taxable territories within  the meaning of section 4-A can, in some cases, relate back to as many  as five years before the year of assessment, and  that is  obviously  the reason why the period mentioned  in  sub- claure  (i) is not limited as in sub-clause (iii) of  clause (b)  of the proviso.  Indeed, if the words "any  period"  id sub-clause (i) were intended to mean any period after  March 31,  1950,  that sub-clause of the proviso  which  enacts  a fiction,  would be wholly unnecessary, for clauses  (d)  and (e) of the substantive part of the definition taken together clearly  have the effect, as already stated, of  making  the territory of India a taxable territory , during that period. If  Rajasthan  was thus a part of  the  taxable  territories during  such period preceding the assessment year,  1950-51, as  would be necessary to make the respondent "resident"  in such territories within the meaning of section 4-A, then the income accruing or. arising, to him in Rajasthan during  the year 1949-50 would be taxable though, Rajasthan was not part of the taxable territories in that year, for, in the case of a  person  resident  in  the  taxable  territories,   income accruing  or arising to him without the taxable  territories is  also chargeable to tax under section 4, sub-section  (1)

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clause  @b) sub-clause.(ii) of the Indian Act.  This  aspect of the matter does not appear to have been sufficiently 550 appreciated  in  the court below.  The learned  Judges  say: "The  first  clause  in proviso (b) means to  say  that  the earlier  residence  in  Part B States will be  taken  to  be residence in taxable territories while taking account of the residence for a certain prior period." Having thus correctly construed  the clause, they failed to realise its effect  on the operation of section 4 (1) (b) (ii), for they  proceeded to consider the construction of proviso (b) (iii) observing: "The  next important question calling for  determination  is whether  Rajasthan  became  taxable  territory  during   the financial  year  in this case, i.e., 1949-50,  for,  if  the answer  is in the negative, the petitioner must be  held  to be’  Immune  from liability to assessment on the  income  of that -year." This, as pointed out above, is a misconception. It may well be that proviso (b) (iii) was designed to  bring the  income,,  profits and gains of the  year  1949-50  into charge  under  section 4 (1) (a) and section  4(1)  (c),  in which cases receipt or accrual, as the case may be,, in  the taxable territories is the test of chargeability. it may  be mentioned here that the exemption from tax under section  14 (2)  (c) of the Indian Act of income accruing within Part  B States  was abrogated, except as regards the State of  Jammu and Kashmir, by the amendment of that provision with  effect from the first day of April, 1950. Even assuming it were necessary for the Revenue to bring the case within proviso (b) (iii) in order to sustain the charge on the respondent’s income accruing in Rajasthan during  the year  1949-50,  we  are of opinion  that  the  construction, placed  by  the  learned Judges on  that  clause  cannot  be supported.   They  assume  that  proviso  (b)  (iii)  is   a provision authorising assessment of income-tax, and  proceed to  discuss  what  the word "’assessment"  in  that  context should  be taken to mean.  Charge of income to tax  and  its computation are matters governed by other provisions of  the Indian  Act.   All that section 2 (14-A) does is  to  define what  the expression "taxable territories" means in  certain cases  and for certain purposes wherever that expression  is used in the various provisions of the Indian Act. 551 And  as the expression is used in the charging section 4  in connection  with  the  conditions  which  are  to  determine liability  to  tax, sub-clause (iii) of clause  (b)  of  the definition must, when read with section 4 of the Indian Act, have  reference to chargeability of income.  The  result  is that sections 3 and 4 of the Indian Act read in the light of the definition in proviso (b) to the amended section 2  (14- A) and section 2 of the Indian Finance Act, 1950,  authorise the imposition of the Indian income-tax and super-tax on the income derived ’by the respondent in they are 1949-50 in the -territory of Rajasthan. As  already observed, the learned Judges below, in order  to reinforce  their construction of sub-clause (iii) of  clause (b)  of the proviso, read section 13 of the Finance  Act  as keeping  alive the law of income-tax in force in any Part  B State  for purposes of levy, assessment, and  collection  of tax  in  respect of the income -of 1949-50.   This,  in  our opinion,  is  not  the  effect of section  13  on  its  true construction.  After referring to the decision of the  Privy Council to which reference has been made, the learned Judges say-- "There are three stages in connection with the imposition of a  tax.   The  first is the declaration  of  liability,  the

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second  is the assessment and the third is  the  collection. This clause makes the territory a taxable territory for  the purpose of making any assessment but not for the purpose  of chargeability.   The chargeability is left to arise by  some other law and that law is the previous State law referred to in  section 13, Finance Act, 1950.  It arises in  a  twofold manner.  In the first place, under section 6 of the  General Clauses  Act  the repeal of the State law as from  April  1, 1950  did  not  affect  any  liability  incurred  under  the repealed enactment and secondly, though the language used in section  13 is very complicated, a careful perusal makes  it clear  that  the State law is not only kept  alive  for  the purpose of levy, assessment and collection of, incometax the income of the year 1949-50, but also for the above purposes- in  the subsequent year.  The previous year. in relation  to the, subsequent year 1951-52 is the 552 year  1950-51 and the period not included therein  would  be the  year 1949-50 and the State law is directed to apply  if the  income remains untaxed under the  Indian  law.......... Therefore  if  somebody  is  liable  to  income-tax  in  any territory  where  such law was in force prior  to  April  1, 1950,  but  certain  period  has  not  been  included  while assessing  him to income-tax but the chargeability  existed, the  proviso  (b)  (iii) would become  applicable  for  such period as he was not charged but the liability had  accrued, and  the  territory would become taxable territory  for  the purpose of making any assessment of the year 1950-51. It  will  be  seen that the basis on  which  this  reasoning proceeds is that section 13 of the Finance Act, 1950, ,saves the  operation of the States laws relating to income-tax  in Part  B States in the year 1949-50 for the purpose of  levy, assessment and collection, and it is those laws that imposed the liability to tax on the income accruing in those  States during  that, year.  This is a misapprehension of  the  true meaning  and effect of section l3.  That section, so far  as it is material here, runs thus: "Repeal  and savings.-(1) If immediately before the 1st  day of April, 1950, there is in force in any Part B State  other than  Jammu  and Kashmir or in Manipur, Tripura  or  Vindhya Pradesh  or in the merged territory of Cooch-Behar  any  law relating  to  income-tax or supertax or tax  on  profits  of business, that law shall cease to have effect except for the purposes  of the levy, assessment and collection of  income- tax  and super-tax in respect of any period not included  in the  previous year for the purposes of assessment under  the Indian  Income-tax Act,, 1922, for, the year ending  on  the 31st   day   of  March,  1951,  or,   for   any   subsequent year...........A close reading of that provision will  -show that it saves the operaton of the-State law only in  respect of  1948-49 or any earlier period ’which is the  period  not included in the previous year (1949-50) for the purposes  of asessment  for  the  year 1950-51.  In  other  words,  there remained  no  State law of income-tax in operation,  in  any Part B State in the year 1949-50, No doubt, 553 there is the phrase "or for any subsequent year" immediately following the words "for the year ending on the 31st day  of March,  1951."  Relying on that phrase, the  learned  Judges argue  thus  :  Take the  "subsequent  year"  1951-52.   The previous  year  for  making  an  assessment  for  that  year would’be  1950-51.   The  year  1949-50  "is  a  period  not included"  in  that previous year.   Therefore,  section  13 saves  the  operation of any law relating to  income-tax  in force  in any Part B State in 1949-50 "for the  purposes  of

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the levy, assessment and collection of income-tax and super- tax  in respect of that period," that is to say, the  income accruing  in  1949-50  in a Part B  State  continues  to  be chargeable  under  the State law.  But  the  learned  Judges failed to see that, on this reasoning, the same thing  could be said of the income of 1950-51, 1951-52, etc. if you  take the "subsequent year" to be 1952-53, 1953-54, etc. and  work backwards.   On this construction of section 13,  the  State law   of  income-tax  would  continue  to  operate  for   an indefinite  period  even  after  the  commencement  of   the Constitution  during which period the Indian income-tax  and super-tax would be leviable.  In other words, the State  law of income-tax in Part B States for the levy, assessment  and collection  would  be  in operation side by  side  with  the Indian  Act  even after the financial integration  of  those States  with the Indian Union-a result manifestly  repugnant to  the  policy  underlying  the  Finance  Act,  1950.    No argument,  therefore, could be logically based on the  words "or  for any subsequent period", which evidently were  added with a view to catch the income of any broken. period  prior to  April 1, 1950, which might otherwise  escape  assessment both under the repealed.  State law and the newly introduced Indian Act. Nor can section 6 of the General Clauses.  Act, 1897,  serve to keep alive the liability to pay tax on the income of  the year 1949-50 assuming it to have accrued under the  repealed State  law, for a "different intention" clearly  appears  in sections  2  and  13 of the Finance  Act  read  together  as indicated  above.   In any case no question of  keeping  any such  liability  alive could arise in the  present  case  as admittedly no State law of 554 income-tax  was in operation in the territory of  Rajasthan, except  the former State of Bundi.  On this view  the  whole basis of the reasoning of the learned Judges below falls  to the ground. Even so, it was contended, the Finance Act, 1950, in so  far as  it  purports to authorise such levy is ultra  vires  and void as Parliament was not competent under the  Constitution to  make such a law.  The argument was put in two ways.   In the   first  place,  it  was  said  broadly  that   as   the Constitution  could not operate retrospectively as  held  by this  court in Kesava Madhava Menon’s case(1), the power  of legislation  conferred by the Constitution  upon  Parliament could not extend so as to charge retrospectively the  income accruing  a -prior to the commencement of the Constitu is  a fallacy.  While it is true that the tion.  This Constitution has  no  retrospective operation, except where  a  different intention clearly appears, it is not correct ’to say that in bringing  into existence new Legislatures and conferring  on them,  certain  powers  of  legislation,  the   Constitution operated retrospectively.  The legislative powers  conferred upon  Parliament under article 245 an article 246 read  with List I of the Seventh Schedule could obviously be  exercised only  after the Constitution came into force- and no  retro- spective  operation of the Constitution is involved  in  the conferment of those powers.  But it is a different thing  to say  that Parliament in exercising the powers thus  acquired is  precluded from making a retroactive law.   The  question must depend upon the scope of the powers conferred, and that must  be determined with reference by which,  affirmatively, to the "terms of the instrument the legislative powers  were created  and by which, negatively,’ they  were  restricted": [Queen  v.  Burah  (2)].  Article 245  of  the  Constitution enacts  that subject to its provisions Parliament  may  make

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laws  for the whole or any part -of the territory  of  India and article 246 proceeds to distribute legislative powers as between Parliament and the State Legislatures in the (1)  [1951] S.C.R. 228. (2)  51.A. 178,                             555 country.   Thus,  these articles read with entry No.  82  of List  I of the Seventh Schedule empower Parliament  to  make laws  with respect to taxes on income for the whole  of  the territory  of  India, and no limitation  or  restriction  is imposed  in  regard  to  retroactive  legislation.   It  is, therefore, competent for Parliament to. make a law  imposing a tax on the income of any year prior to the commencement of the Constitution.. It was said, however, that the line of decisions like, Queen v.  Burah(1),  which  defined  the  powers  of  legislatures created by the British Parliament, could have no application to  the  Union  Parliament which came into  life  as  a  new legislature on the commencement of the Indian  Constitution. It  could  not be assumed that such a  legislature  had  the power  of  making -a law having retrospective  operation  in relation   to  a  perio  prior  to  its  birth  unless   the Constitution  itself clearly and explicitly  conferred  such power.  In support of this argument certain observations  of one  of the Judges in an Australian case [Exparte Walsh  and Johnson ; In re Yates(2)] were relied on.  We are unable  to accept the argument.  Our Constitution, as appears from  the Preamble,  derives its authority from the people  of  India, and learned counsel conceded that it was open to the  people to   confer   on  the  legislatures   established   by   the Constitution,    which    they    framed    through    their representatives,  power  to make laws  having  operation  in relation  to  periods  prior  to  the  commencement  of  the Constitution.  But, it was insisted, such a power should  be given  in  clearly expressed terms.  There is,  however,  no question here of the Constitution operating  retrospectively in  bringing  into  existence the Union  Parliament  or  the legislatures  of  the States.  The only  question  is  ’What powers  have been conferred upon these legislatures  by  the representatives  of the people who framed  the  Constitution and, in determining that issue, the principles laid down  in cases.  like  Queen v.Burah (1) apply in  full  foree.   The observations in the Australian -case, to which reference has been made, seem to us (1)  5 I.A. 178. (2) 37 C.L. R. 36, at pp 80, 81, 73 556 to go too far and cannot be accepted as sound constitutional doctrine. Nor  can  it be said, in strictness, that the  Finance  Act, 1950,  is  retroactive legislation.  That  Act,  as  already noticed,  purports  by section 2 to  charge  income-tax  and super-tax at specified rates "for the year beginning on  the last  day of April, 1950".  The case,is thus one  where  the statute  purports  to operate only prospectively,  but  such operation  has,  under the scheme of the  Indian  income-tax law,  to take into account income earned before the  statute came  into  force.   Such  an  enactment  cannot,   strictly speaking, be said to be retroactive legislation, though  its operation may affect acts done in the past.  Dealing with  a statute  authorising the removal of destitute widows from  a parish,  it  was observed in an English case [Queen  v.  St. Mary,  Whitechapel(1) 1: "It was said that the operation  of the  statute is confined to persons who have  become  widows

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after the Act was passed and that the presumption against  a retrospective   statute   being  intended   supported   this construction.  But we have before shown that the statute  is in its direct operation prospective as it relates to  future removals  only  and  that  it  is  not  properly  called   a retrospective  statute because a part of the requisites  for its action is drawn from time antecedent to its passing." It is,  however, unnessary to pursue this aspect of the  matter further  as  we have held that Parliament has the  power  to make retroactive laws. Secondly, it was said that section 101 of the Government  of India Act, 1935, which gave effect to the stipulation in the Instrument  of  Accession  against  the  imposition  by  the Dominion Legislature. of any tax or duty in the territory of the   United   State   of   Rajasthan,   was   kept   alive, notwithstanding   its   repeal  by  article   395   of   the Constitution,  by  section 6 of the  General  Clauses  Act,, 1897, [which is made applicable to the interpretation of the Constitution  by  article  367  (1)]  as  a  "   right"   or "privilege" acquired under the repealed enactment, and so (1)  (1848) i2 Q.B. 120,127; ii6 E.R. 8ii, 814. 557 continued  to  operate  under  article 372  (1)  as  a  con- stitutional limitation on the power of Parliament, with  the result  that Parliament had no power to impose tax  contrary to  section 101 of the Government of India Act,  1935.   The argument  is  somewhat  ingenious  but  there  are   obvious difficulties  in the way of its acceptance.  For one  thing, section 101 of the Government of India Act, 1935, created no right  or privilege in the subjects of the United  State  of Rajasthan which, notwithstanding the repeal of that section, could  be  regarded  as still  enuring  for  their  benefit. Section  101 merely imposed a restriction upon the power  of the Dominion Legislature to make laws for an acceding  State inconsistent   with  the  stipulations  contained   in   the Instrument  of Accession.  When that section along with  the rest  of the Government of India Act, 1935, was repealed  by the  new  Constitution, which has created  new  legislatures with  power to make retroactive laws, it is idle to  suggest that   rights   or  privileges  acquired   while   the   old Constitution  Act  was in force are preserved  for  ever-for that must be the result of the argument-by section 6 of  the General  Clauses Act, which can have no application to  such cases.    Furthermore,   it  will  be  recalled   that   the Proclamation made by the Rajpramukh as Ruler of Rajasthan on 23rd   November,  1949,  declared  and  directed  that   the Constitution of India when brought into force "shall be- the Constitution  for  the  Rajasthan State"  and  it  expressly "superseded   and   abrogated   all   other   constitutional provisions inconsistent therewith" which were then in force. The  competency of the Rajpramukh as the Ruler of the  State to accept the Constitution of India as governing that  State also was not challenged before us, and it is manifest  that, after  such  declaration  and direction,  no  I  restriction imposed  on  the Dominion Legislature by the  Instrument  of Accession  and enforced by section 101 of the Government  of India  Act  could  prevail against  the  legislative  powers conferred  on Parliament by the Constitution of India.   The difference  in the constitutional position which  previously existed  between the Provinces and the acceding: States  has thus 558 disappeared  except,  of  course, in regard  to  matters  in -which   such   distinction  has  been  preserved   by   the Constitution  itself, e.g., by article 238 and article  371.

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It follows that the amendment of section’ 2 clause (14-A) of the Indian Act, by the Finance Act, 1950, so as to authorise the  levy  of  tax on income accruing in  the  territory  of Rajasthan  in the year 1949-50 is within the  competence  of Parliament and therefore valid. We accordingly allow the appeal, and set aside the  judgment of the High Court.  We make no order as to costs.                                   Appeal allowed.     Agent   for   the   appellant:   G.   H.   Rajadhyaksha. Agent for the respondent: Rajinder Narain.