Case: Karimtharuvi Tea Estate Ltd Vs. State Of Kerala

year, even if the assessment is actually made after the amendments come into force.9. In Scindia Steam Navigation Co. Ltd. v. Commr. of Income-tax, (1954) 26 ITR 686 : (AIR 1955 Bom 230 ), a Division Bench of the Bombay High Court, consisting of Chagla, C. J., and Tendolkar, J., considered the question as to the effect of an amendment which came into force after the commencement of financial year. The facts in that case were these. The assessees ship was lost as a result of enemy action. The Government paid the assessee in 1944 a certain amount as compensation which exceeded the original cost of the ship. The Income-tax Officer included the difference between the original cost and the written down value of the ship in the total income of the assessee for the assessment year 1946-47. The Tribunal upheld that decision and referred the question, whether the sum representing the difference between the original cost and the written down value was properly included in the assessees total income computed for the assessment year 1946-47. It was argued that the fourth proviso to S. 10 (2) (vii) of the Income-tax act (inserted by the Amendment Act of 1946 with effect from May 4, 1946) under which the inclusion of the amount was justified by the department, had no application to the case.10. The learned Judges held that as it was the Finance Act of 1946 that imposed the tax for the assessment year 1946-47, the total income had to be computed in accordance with the provisions of the Income-tax Act as on April 1, 1946; that as the amendments made by the Amendment Act of 1946 with effect from May 4, 1946 were not retrospective, they could not be taken into consideration merely because the assessee was assessed after that date; and that the assessee was not liable to pay tax on the sum because the fourth proviso to S. 10 (2) (vii) of the Income-tax Act under which it was sought to be taxed was not in force in respect of the assessment year 1946-47.11. This Court affirmed this decision in Commr. of Income-tax, Bombay v. Scindia Steam Navigation Co. Ltd., (1962) 1 SCR 788 : (1961) 42 ITR 589 : (AIR 1961 SC 1633 ), where it was stated at p. 816 (of SCR) : (at p. 1646 of AIR), as follows :"On the merits, the appellant had very little to say. He sought to contend that the proviso though it came into force on May 5, 1946, was really intended to operate from April 1, 1946, and he referred us to certain other enactments as supporting that inference. But we are construing the proviso. In terms, it is not retrospective, and we cannot import into its construction matters which are ad extra legis, and thereby alter its true effect."12. In Commr. of Sales Tax, Uttar Pradesh v. Modi Sugar Mills Ltd., (1961) 2 SCR 189 : (AIR 1961 SC 1047 ), this Court held by a Majority at p. 199 (of SCR) : (at p. 1051 of AIR), As follows :"A legal fiction must be limited to the purposes for which it has been created and cannot be extended beyond its legitimate field. The turnover of the previous year is fictionally made the turnover of the year of assessment : it is not the actual or the real turnover of the year of assessment. By the imposition of a different tariff in the course of the year, the incidence of tax liability may competently be altered by the Legislature, but for effectuating that alteration, the Legislature must devise machinery for enforcing it against the tax payer and if the Legislature has failed to do so, the Court cannot resort to a fiction which is not prescribed by the Legislature and seek to effectuate that alteration by devising machinery not found in the statute."13. In the instant case, there is no escape from the conclusion that the Surcharge Act not being retrospective by express intendment, or necessary implication, it cannot be made applicable from April 1, 1957, as the Act came into force from September 1, of that year.14. The High Court has, however, relied upon a decision of this Court in I.-T. Commr. v. I. S. Lines, AIR 1953 SC 439 , where it was held as follows :"It will be observed that we are here concerned with two datum lines : (1) the 1st of April, 1940, when the Act came into force, and (2) the 1st of April 1939, which is the date mentioned in the amended proviso. The first question to be answered is whether these dates are to apply to the accounting year or the year of assessment. They must be held to apply to the assessment year, because in income-tax matters the law to be applied is the law in force in the assessment year unless otherwise stated or implied. The first datum line, therefore, affected only the assessment year of 1940-41, because the amendment did not come into force till the 1st of April 1940. That means that the old law applied to every assessment year up to and including the assessment year 1939-40."This decision is authority for the proposition that though the subject of the charge is the income of the previous year, the law to be applied is that in force in the assessment year, unless otherwise stated or implied. The facts of the said decision are different and distinguishable and the High Court was clearly in error in applying that decision to the facts of the present case.15. The Surcharge Act having come into force on September 1, 1957, and the said Act not being retrospective in operation, it could not be regarded as law in force at the commencement of the year of assessment 1957-58. Since the Surcharge Act was not the law in force on April 1, 1957, no surcharge could be levied under the said Act against the appellant in the assessment year 1957-58.16.

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

Explanation:
1[ds]8.Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force.In the instant case, there is no escape from the conclusion that the Surcharge Act not being retrospective by express intendment, or necessary implication, it cannot be made applicable from April 1, 1957, as the Act came into force from September 1, of that year.14. TheSurcharge Act having come into force on September 1, 1957, and the said Act not being retrospective in operation, it could not be regarded as law in force at the commencement of the year of assessment 1957-58. Since the Surcharge Act was not the law in force on April 1, 1957, no surcharge could be levied under the said Act against the appellant in the assessment year 1957-58.