Case: The Union Of India Vs. Madan Gopal Kabra

--- 5 Ind App 178 (PC) (C) which defined the powers of legislatures created but 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 period prior to its birth unless the Constitution itself clearly and explicity conferred such power. In support of this argument certain observations of one of the Judges in an Australian case (--- Ex parte Walsh and Johnson: In re Yatcs, 37 CLR 36 at pp. 80, 81 (D) 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 legislature of the State. 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 (C) apply in full force. The observations in the Australian case, to which reference has been made, seem to us to go too far and cannot be accepted as sound constitutional doctrine.15. Nor can it be said, in strictness, that the Finance Act, 1950 is retroactive legislation. That Act, as already noticed, purports by S. 2 to charge income-tax and super-tax at specified rates "for the year beginning on the 1st 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 effect 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, White chapel, (1848) 12 Q B 120 at p. 127 (E) :"It was said that the operation of the statute is confined to persons who have become widows after the Act 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 requisite for its action is drawn from time antecedent to its passing".It is, however, unnecessary to pursue this aspect of the matter further as we have held that Parliament has the power to make retroactive laws.16. Secondly, it was said that S. 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 Art. 395 of the Constitution, by S. 6 of the general Clauses Act, 1897 (which is made applicable to the interpretation of the Constitution by Art. 367(1) as a "right" or "privilege" acquired under the repealed enactment, and so continued to operate under Art. 372(1) as a constitutional limitation on the power of Parliament, with the result that Parliament had no power to impose tax contrary to S. 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, S. 101 of the Government of India Act created no right or privilege in the subjects of the United State of Rajasthan which notwithstanding the repeal of the Section could be regarded as still ensuring 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 S. 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 November 23, 1949 declared and directed that the Constitution of India when brought into force "shall be the Constitution for the Rajasthan State" and it expressly "super-seded 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 restriction imposed on the Dominion Legislature by the Instrument of Accession and enforced by S. 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 disappeared except, of course, in regard to matters in which such distinction has been preserved by the Constitution itself, e. g., by Art. 238 and Art. 371.It follows that

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

Explanation:
1[ds]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 S. 4(1) (a) and S. 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 form tax under S. 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 respondents income accruing in Rajsthan 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 S. 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.And as the expression is used in the charging Section 4 in connection with the conditions which are to determine liability to tax, sub-cl. (iii) of cl. (b) of the definition must, when read with S. 4 of the Indian Act, have reference to chargeability of income. The result is that Ss. 3 and 4 of the Indian Act, in the light of the definition in proviso (b) to the amended S. 2(14-A) and S. 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 the year 1949-50 in the territory of Rajasthan.Nor can S. 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 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.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 --- Keshvan v. State of Bombay, AIR 1951 SC 128   (B), the power of legislation conferred by the Constitution upon Parliament could not extend so as to charge retrospectively the income accruing prior to the commencement of the Constitution. This is a fallacy.While it is true that the 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 Art. 245 and Art. 246 read with list I of the Seventh Schedule could obviously be exercised only after the Constitution came into force and no retrospective operation of the Constitution is involved in the conferment of those powers. But it is different thing to say that Parliament in exercising the powers thus acquired is precluded form making a retroactive law. The question must depend upon the scope of the powers conferred, and that must be determined, with reference to the "terms of the instrument by which affirmatively, the legislative powers were created and by which, affirmatively, they were245 of the Constitution enacts that subject to its provisions Parliament may make laws for the whole or any part of the territory of India and Art. 246 proceeds to distribute legislative powers as between Parliament and the State Legislature in the county. 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 theare 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 legislature of the State. 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 (C) apply in full force. The observations in the Australian case, to which reference has been made, seem to us to go too far and cannot be accepted as sound constitutional doctrine.15. Nor can it be said, in strictness, that the Finance Act, 1950 is retroactive legislation. That Act, as already noticed, purports by S. 2 to charge income-tax and super-tax at specified rates "for the year beginning on the 1st 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 effect acts done in thecompetency 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 restriction imposed on the Dominion Legislature by the Instrument of Accession and enforced by S. 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 disappeared except, of course, in regard to matters in which such distinction has been preserved by the Constitution itself, e. g., by Art. 238 and Art. 371.It follows that the amendment of S. 2, cl. (145-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.