Case: Commissioner Of Sales Tax, U.P Vs. Bijli Cotton Mills, Hathras

In Chatturam Horiram Ltd.s case, 1955-2 SCR 290 : ((S) AIR 1955 SC 619 ) a previous assessment to income-tax of the assess fell through because the Indian Finance Act of 1939 was not in force in Chota Nagpur area where the assessee was carrying on business during the relevant assessment year. Thereafter Bihar Regulation IV of 1942 was promulgated by the Governor of Bihar with the assent of the Governor - General and thereby the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from March 30, 1939. On February 8, 1944, the Income- tax Officer issued a fresh notice under S. 34 of the Indian Income-tax Act, 1922, which resulted in the assessment of the appellant to income-tax, and the question which fell to be determined was whether the notice was properly issued under S. 34 of the Act. It was argued that when the High Court answered the earlier reference which negatived the claim of the Revenue to assess the assessee, Bihar Regulation IV of 1942 had in fact been enacted, and if the High Court had applied that Regulation the result would have been different, and in meeting that argument the Court observed that it was doubtful if the High Court had jurisdiction to take into consideration the subsequent legislation for answering a question other than the one which was actually raised. The doubt expressed was therefore in respect of the power of the Court to decide a question other than the question which was actually referred and not in respect of the power and indeed the duty of the High Court to apply to the question referred the law enacted with retrospective operation.8. In support of his contention Mr. Kapur relied upon the observation of Desai, C. J., in M/s. Rampur Distillery Chemical Works Ltd. v. Commissioner of Income Tax U. P., I. T. Ref. No. 362 of 1958 D/- 17-1-1964 (All) to the following effect:"The argument was that though the High Court has to answer the question referred to it with reference to the law in force in 1957 (when the Tribunal disposed of the appeal) what that law was has to be discovered today with reference to the law existing today. What was the law in 1957 on the basis of which the Tribunal disposed of the appeal has certainly to be decided by this Court today but what has to be decided is the law existing in 1957 and not deemed to exist in 1957 by virtue of an amendment in the law made in 1962.But in that case, in the view of the High Court the amendment made by the amending statute of 1962 which came into force after the reference was made by the Income-tax Tribunal had no retrospective operation, and the question referred by the Tribunal had to be answered by the High Court in the light of the relevant law applicable at the date of the transaction. The observation relied upon has to be read in the context of the finding of the High Court as to the character of the amending legislation. The observation therefore does not assist the contention that even in cases where the relevant statute has been amended with retroactive operation, so as to apply to the transaction which forms the subject-matter of the reference, the High Court or this Court is bound in recording its opinion on the question referred to ignore the amended law. If what counsel contends is true, the answer given by the High Court or by this Court would have no value whatever in cases where by retroactive amendment of the law, the old law has been superseded and is substituted by a new statutory provision. Undoubtedly the Tribunal called upon to decide a taxing dispute must apply the relevant law applicable to a particular transaction to which the problem relates, and what law normally is the law applicable as on the date on which the transaction in dispute has taken place. If the law which the tribunal seeks to apply to the dispute is amended, so as to make the law applicable to the transaction in dispute, it would be bound to decide the question in the light of the law so amended. Similarly when the question has been referred to the High Court and in the meanwhile the law has been amended with retrospective operation, it would be the duty of the High Court to apply the law so amended if it applies. By taking notice of the law which has been substituted for the original provision, the High Court is giving effect to legislative intent and does no more than what must be deemed to be necessarily implicit in the question referred by the Tribunal, provided the question is couched in terms of sufficient amplitude to cover an enquiry into the question in the light of the amended law, and the enquiry does not necessitate investigation of fresh facts. If the question is not so couched as to invite the High Court to decide the question in the light of the law as amended or if it necessitates investigation of facts which have not been investigated, the High Court may refuse to answer the question. Application of the relevant law to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tribunal decided the question the relevant law was not or could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the law which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In our view there is no substance in this contention. The question referred to the High Court posed a problem as to the liability of the respondent company to be assessed for the assessment year 1948-49. Two rival views were propounded before the Judge (Revisions) Sales Tax. One was that rates applicable to the fictional turnover for the year of assessment were those prevalent in the year 1948-49 and for the purpose of assessment they had to be applied to the turnover in the same proportion in which they would have applied if the option had not been exercised. That was the contention of the sales Tax Department. The contention of the assessee was that having opted, for the turnover of the previous year, the rates applicable to the turnover would be crystallised on the first day of the year of assessment and any modification since the commencement of the year in the rates would be inapplicable. This Court in the Modi Sugar Mills Ltd.s case, 1961-2 SCR 189  : (AIR 1961 SC 1047  ) accepted the contention raised by the assessee. But for the amendment, the question which was posed by the Judge (Revisions) Sales Tax would have to be answered as it was answered by the High Court. The Legislature has, however, amended the Act and has declared that notwithstanding the option exercised by the assesssee the tax would have to be computed in the light of the rates prevailing in 1948-49 as if they were projected upon the turnover of the previous year. The Legislature has expressly stated that this rule will prevail as if it was in force during the assessment year and all assessments will be made in the light of this amended rule. In answering the question which was submitted by the Judge (Revisions) Sales Tax, therefore, the law enacted by the Legislature is the law found incorporated in S. 31 by Amending Act III of 1963. This Court in giving its opinion on the question in the light of the amending Act is seeking to apply a legislative provision which was, by express enactment, in force at the time when the liability arose, for S. 31 enacted by Act III of 1963 is to be deemed to have been in operation at all material times in supersession of the previous rule declared by this Court. This Court is, therefore, not seeking to apply any law to the question posed before the High Court which was not in force on the date of the transaction which is the subject-matter of theobservation relied upon has to be read in the context of the finding of the High Court as to the character of the amending legislation. The observation therefore does not assist the contention that even in cases where the relevant statute has been amended with retroactive operation, so as to apply to the transaction which forms the subject-matter of the reference, the High Court or this Court is bound in recording its opinion on the question referred to ignore the amended law. If what counsel contends is true, the answer given by the High Court or by this Court would have no value whatever in cases where by retroactive amendment of the law, the old law has been superseded and is substituted by a new statutory provision. Undoubtedly the Tribunal called upon to decide a taxing dispute must apply the relevant law applicable to a particular transaction to which the problem relates, and what law normally is the law applicable as on the date on which the transaction in dispute has taken place. If the law which the tribunal seeks to apply to the dispute is amended, so as to make the law applicable to the transaction in dispute, it would be bound to decide the question in the light of the law so amended. Similarly when the question has been referred to the High Court and in the meanwhile the law has been amended with retrospective operation, it would be the duty of the High Court to apply the law so amended if it applies. By taking notice of the law which has been substituted for the original provision, the High Court is giving effect to legislative intent and does no more than what must be deemed to be necessarily implicit in the question referred by the Tribunal, provided the question is couched in terms of sufficient amplitude to cover an enquiry into the question in the light of the amended law, and the enquiry does not necessitate investigation of fresh facts. If the question is not so couched as to invite the High Court to decide the question in the light of the law as amended or if it necessitates investigation of facts which have not been investigated, the High Court may refuse to answer the question. Application of the relevant law to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tribunal decided the question the relevant law was not or could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the law which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.