Appeal No 185 of 1966
Appeal by special leave from the judgment and order dated March 20 1962 of the Mysore High Court in Writ Petition No 109 of 1960
AK Sen R Ganapathy Iyer and R Gopalakrishnan for the appellants
DNarsaraju T A Ramachandran and R N Sachthey for the respondent
The Judgment of the Court was delivered by Ramaswami J
This appeal is brought by special leave from the judgement of the Mysore High Court dated March 20 1962 dismissing writ petition No 109 of 1960
The appellants had prayed therein for the grant of writ for quashing a notice dated January 16 1960 issued by the respondent under section 15 of the Excess Profits Tax Act 1940 Act XV of 1940 hereinafter called the Act  calling upon the appellants to submit a return of the standard profits and the profits actually made during the chargeable accounting period from October 30 1943 to October 30 1944 on the ground that the profits had been under assessed
The appellants carried on a business constituting themselves into a partnership called Guduthur Thimmappa  Brothers in 1934
On the date of commencement of the business the part ners were G Thimmappa G Ekambarappa and G Padmanabhan each of the partners representing their respective joint families
The business of the firm was in Bellary town and the partners of the firm were residents of Bellary town during the period the firm was carrying on business
The firm was dissolved on October 16 1944
Thimmappa one of the partners died on April 13 1955
For the chargeable accounting period from October 30 1943 to April 30 1944 the Excess Profits Tax Officer had taken steps to assess the escaped profits of the firm
He issued the necessary notices to G Padmanabhan and G Ekambarappa as the partners of the dissolved firm
He also issued notice to G M Prabhu and G Lakshmidevamma as the representatives of G Thimmappa
The contention of the appellants before the High Court was that as from November 1 1956 the Act must be 866 deemed to have been repealed so far as Bellary district is concerned and therefore the respondent was not competent to take any proceedings for determining the escaped income under section 15 of that Act
The High Court rejected the contention on the ground that though the Act stood repealed by reason of the inclusion of Bellary district in Mysore State the liability to pay tax on the escaped profits continued by virtue of section 6 of the General Clauses Act
The question to be considered in this appeal is whether the appellants continued to be liable to be proceeded against under section 15 of the Act on the profits which had escaped taxation
The present Bellary district was a part of the old Madras State which was a Part A State under the Constitution of India till its merger with the Mysore State on October 1 1953 which was a Part B State
The Mysore State continued to be a Part B State till November 1 1956
The Act extended when first promulgated to
the territory of former British India
After the Constitution came into force section 12 of the Act was adapted so as to extend the operation of the Act to the whole of India except Part B  States by the Adaptation of Laws Order 1950
After the formation of new States in pursuance of the States Reorgani sation Act 1956 Act 37 of 1956 sub section
2 of section 1 of the Act was adapted by the President by Adaptation of Laws No 3 Order 1956 dated December 31 1956
Section 12 of the Act as adapted read as follows  It extends to the whole of India except the territories which immediately before the 1st November 1956 were comprised in part B  state The result of the adaptation was that all the provisions of the Act stood repealed so far as the district of Bellary was concerned with effect from December 31 1956
It was contended on behalf of the appellants that it is not a case of repeal of the Act and so the provisions of section 6 of the General Clauses Act could not be invoked to sustain the validity of the notices issued by the respondent under section 15 of the Act
It was argued that so far as the Act was con cerned the Adaptation of the Laws Order 1956 only modified the provisions of section 1 2 of the Act and did not repeal the Act as such and the effect of the modification was that the provisions of the Act were no longer applicable to the Bellary district which was comprised in the territory of Part B  State of Mysore immediately before November 1 1956
In our opinion there is no justification for the argument put forward on behalf of the appellants
The result of the Adaptation of Laws Order 1956 so far as the Act was concerned was that the provisions of that Act were no longer applicable or in force in Bellary district
To put it differently the Act was repealed so far as the area of Bellary 8 6 7 district was concerned
Repeal of an Act means revocation or abrogation of the Act and in our opinion section 6 of the General Clauses Act applies even in the case of a partial repeal or repeal of part of an Act
Section 6 of the General Clauses Act states Effect of repeal
Where this Act or any Central Act or Regulation made after the commencement of this Act repeals any enactment hitherto made or hereafter to be made then unless a different intention appears the repeal shall not c affect any right privilege obligation or liability acquired accrued or incurred under any enactment so repealed or Section 319 of the General Clauses Act defines an enactment as including a Regulation and also as including any provision contained in any Act or in any such Regulation as aforesaid
The argument was also stressed on behalf of the appellants that even if section 6c of the General Clauses Act was applicable there was no liability incurred or accrued as there was no assessment of escaped profits before November 1 1956 when the adaptation was made
We do not think there is any substance in this argument
The liability of the appellants to tax arose immediately at the end of the chargeable accounting period and not merely at the time when it is quantified by assessment proceedings
It follows therefore that the notice issued under section 15 of the Act was legally valid and the appellants representing the original partners of the firm continued to be liable to be proceeded against under that section for the profits which had escaped taxation
In Wallace Brothers and Co Ltd vs Commissioner of income tax1 the Judicial Committee expounded in clear terms the scope of a tax liability under the Income tax Act
It was observed by the Judicial Committee as follows    the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment will necessarily be made after the close of that year
But the liability to tax arises by virtue of the charging section alone and it arises not later than the close of the previous year though quantification of the amount payable is postponed
 The same view has been expressed by this Court in Chatturam Horilram Ltd vs CIT 2 in which the legal position was reviewed 1  244
PC 2 868 with regard to the question of charge to income tax
In that case the assessee company carrying on business in Chota Nagpur was assessed to tax for the year 1939 40 but the assessment was set aside by the Income tax Appellate Tribunal on March 28 1942 on the ground that the Indian Finance Act 1939 was not in force during the assessment year 1939 40 in Chota Nagpur which was a partially excluded area
On June 30 1942 a Regulation was promulgated by which the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from March 30 1939
Thereupon the Income tax Officer made an order holding that the income of the assessee for the year 1939 40 had escaped assessment and issued to the assessee a notice under section 34 of the Income tax Act
The validity of the notice was questioned
It was held by th Court that though the Finance Act was not in force in that area in 1939 40 the income of the assessee wasliable to tax in that year and therefore it had escapdently of the passing of the Finance Act but until the Finance Act It was pointed out that the income was chargeable to tax independing dently of the passing of the Finance Act but until the Finance Act was passed no tax could be actually levied
The same principle was reiterated by this Court in Kalwa Devadattam vs Union of Indial
The question in that case was whether the liability of a Hindu undivided family arose before or after partition of the family
In that case this Court speaking through Shah J stated in clear terms thus  Under the Indian Income tax Act liability to pay income tax arises on the accrual of the income and not from the computation made by the taxing authorities in the course of assessment proceedings it arises at a point of time not later than the close of the year of account
 The same view has been taken in a recent case by this Court in State of Kerala vs N Sami lyer 2  
In view of the principle expressed in these authorities we are of the opinion that the liability to pay excess profits tax accrued immediately at the end of the chargeable accounting period and that liability was preserved under section 6 c of the General Clauses Act even though the Act stood repealed so far as Bellary district was concerned with effect from November 1 1956
Mr Narsaraju contended in the alternative that on the combined operation of section 53 of the Andhra Pradesh Act Act 30 of 1953 and s  119 of the State Reorganisation Act Act 37 of 1956 all the provisions of the Excess Profits Tax Act 1940 remained in operation in Bellary district in spite of the Adaptation of Laws Order 1956
Section 53 of the Andhra Pradesh Act states as follows 1 2 AIR 1966 SC 1415
8 69 lm15 The provisions of Part 11 shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies and territorial references in any such law to the State of Madras or of Mysore shall until otherwise provided by a competent Legislature or other competent authority continue to have the same meaning  lm0
Section 119 of the State Reorganisation Act reads as follows The provisions of Part It shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies and territorial references in any such law to an existing State shall until otherwise provided by a competent Legislature or other competent authority be construed as meaning the territories within that State immediately before the appointed day
 Section 120 of this Act states  For the purpose of facilitating the application of any law in relation to any of the States formed or territorially altered by the provisions of Part II the appropriate Government may before the expiration of one year from the appointed day by order make such adaptations and modifications of the law whether by way of repeal or amendment as may be necessary or expedient and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered repealed or amended by a competent Legislature or other competent authority
Explanation
In this section the expression appropriate Government means a as respect any law relating to a matter enumerated in the Union List the Central Government and b as respects any other law i in its application to a Part A State the State Government and ii in its application to a Part C State the Central Government
 it was pointed out that the Act was in force in Bellary district When the Constitution came into force and the effect of section 53 of the Andhra Pradesh Act was to continue the operation of that Act so far as Bellary district was concerned
The effect of section 119 870 of the State Reorganisation Act was to preserve the territorial operation of the law which was immediately in force before the date of the promulgation of that Act until such law was repealed by the competent legislature or a competent legislative authority
There is great force in
the argument advanced by Mr Narsaraju on this point
But it is not necessary for us to express any concluded opinion on this aspect of the case because we have already given reasons for holding that the appeal must be dismissed on the ground that the Act stood repealed by reason of the Adaptation of Laws Order 1956 and the liability to pay tax on escaped profits continued under section 6 of the General Clauses Act
We accordingly affirm the judgment of the Mysore High Court dated March 20 1962 and dismiss this appeal with costs
GC Appeal dismissed


Summary:
The District of Bellary originally belonged to the Part A  State of Madras in British India
On October 1 1953 it merged in the Part B  State of Mysore
The Excess Profits Act 1940 applied only to British India
When Bellary District went to the Part B  State of Mysore the Act ceased to apply to it
After the  Mysore also became a Part A  State
But according to section 12 of the Adaptation of Laws No 3 Order dated December 31 1956
the aforesaid Excess Profits Tax Act was to extend to the whole of India except the territories which immediately before November 1 1956 were comprised in a Part B  State
 In 1960 the Excess Profits Tax Officer Bellary gave a notice to the appellants under section 15 of the Act in respect of the period October 30 1943 to October 30 1944
The appellants objected that the Act did not apply to Bellary district as immediately before November 1 1956 it was in a Part B  State
The plea was rejected by the departmental authorities as well as by the High Court in a writ petition under article 226 of the Constitution
In appeal
by special leave to this Court it was contended that so far as Bellary District was concerned it was not a case of repeal but only of non application of the Act and thus section 6 of the General Clauses Act was not attracted
It was further urged that even if section 6 applied no liability bad accrued or been incurred in terms of cl
e of the section as there was no assessment of escaped profits before November 1 1956 when the adaptation was made
HELD  i The result of the Adaptation of Laws Order 1956 so far as the Act was concerned was that the provisions of the Act were no longer applicable or in force in Bellary district
To put it differently the Act was repealed so far as the area of Bellary district was concerned
Repeal of the Act means revocation or abrogation of the Act and section 6 of the General Clauses Act applies even in the case of a partial repeal or repeal of part of an Act
866H 867A iiThe case was covered by section 6e of the General Clauses Act
The liability of an assessee to tax arises immediately at the end of the chargeable accounting period and not merely at the time when it is quantified
by assessment proceedings
It followed therefore that the 865 notice issued under section 15 of the Act was legally valid and the appellants representing the original partners of the firm continued to be liable to be proceeded against under that section for the profits which had escaped taxation
867 E F Wallace Brothers  Co vs Commissioner of Income tax  Chatturam Horilram Ltd vs CIT  Kalwa Devaduttam vs Union of India and State of Kerala V N Same lyer AIR 1966 SC 1415 relied on