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Kamakshya Narain Singh v. Commr. Of Income-Tax B. & O. Opposite Party.
Factual and Procedural Background
The assessee is Raja Bahadur Kamakshya Narain Singh of Ramgarh. The disputed assessment years are 1941-1942 and 1942-1943. For these years the Income-tax Officer estimated the rent from house properties at Rs. 970 (for 1941-42) and Rs. 1,738 and odd (for 1942-43) and assessed the Raja Bahadur in his individual capacity as the holder of an impartible estate.
On appeal the Appellate Assistant Commissioner relied on the Privy Council decision in Commr. of Income-tax Punjab v. Krishna Kishore (AIR 1941 PC 120) and held that income from the house property could not be assessed in the hands of the Raja Bahadur. The Income-tax Appellate Tribunal affirmed that view and held the income should be taxed on the Hindu undivided family (HUF).
The Income-tax Officer then proceeded under S. 34 and assessed the income under S. 12; the Appellate Assistant Commissioner on 24-5-1947 rejected the assessee's appeal against that assessment. The assessee filed a further appeal to the Appellate Tribunal on 14-8-1947.
On 8-9-1948 the Dominion Legislature enacted the Income-tax Amending Act (Act 48 of 1948) which inserted a new sub-section (4) in S. 9 of the Income-tax Act providing that "for the purposes of this section, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate." Section 1(2) of the Amending Act stated that Sections 3 to 12 shall be deemed to have come into force on 30-3-1948 and that certain amendments shall apply in relation to assessments subsequent to the assessment for the year ending 31-3-1948.
The Appellate Tribunal heard the pending appeals after the Amending Act came into force and on 10-3-1950 dismissed the appeals, holding that by virtue of the amendment of S. 9(4) it was not open to the assessee to contend that the house property income should be taxed on the HUF rather than on the holder of the impartible estate.
The Tribunal then referred the following question of law to the High Court: "Whether on the facts and circumstances of the case the rent income from the house property is assessable in the hands of the holder of the impartible estate under S. 9(4)?"
Legal Issues Presented
- Whether the Tribunal was correct in applying the provisions of S. 9(4) as enacted by the Income-tax (Amendment) Act of 1948 in disposing of the appeals.
- Whether the Tribunal was correct in holding that the Amending Act of 1948 affected the assessments for the years 1941-1942 and 1942-1943 and thereby made the Raja Bahadur taxable for the income from the house property for those assessment years.
- Whether, on the facts and circumstances of the case, the rent income from the house property is assessable in the hands of the holder of the impartible estate under S. 9(4) (the specific question submitted to the High Court by the Tribunal).
Arguments of the Parties
Assessee's Arguments (as recorded)
- Mr. Mazumdar, for the assessee, contended that the Amending Act of 1948 (specifically Section 4 inserting S. 9(4)) was not retrospective so as to affect the assessment years 1941-42 and 1942-43.
- He argued that Section 4 should be given retrospective effect only from 30-3-1948 (the date indicated by Section 1(2) as the deemed commencement for Sections 3–12), and that this date is the backward limit of any retrospective operation; consequently, S. 4 could not be applied to assessments prior to the year 1947-48.
The opinion does not contain a detailed account of the Income-tax Department's specific arguments in the form of separate counsel submissions; the Department's position is reflected in the Tribunal's earlier conclusions applying the Amending Act to the pending appeals.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commr. of Income-tax Punjab v. Krishna Kishore, AIR 1941 PC 120 | The Privy Council's view that an impartible estate is owned by the joint family and income from house property could not be charged in the hands of the holder of the impartible estate (despite the holder's legal disposal rights under Hindu law). | The Appellate Assistant Commissioner and the Appellate Tribunal initially relied on this authority to hold that the house property income should be taxed on the Hindu undivided family rather than on the individual holder. |
| Lachmeshwar Prasad v. Keshwar Lal, AIR 1941 FC 5 | Confirmed that the hearing of an appeal in India is in the nature of a re‑hearing and that an appellate court may take into account facts and events which have come into existence after the decree appealed against; appellate courts have power to mould relief with regard to subsequent events including legislative changes. | The court invoked this principle to justify the Appellate Tribunal taking into account the legislative change (the Amending Act of 1948) when disposing of the appeals pending before it. |
| Shyamakant Lal v. Rambhajan Singh, AIR 1939 FC 74 | Supports the proposition that powers of appellate courts are not less extensive than those of High Courts and that appeals are to be treated as re-hearings. | Cited within the Lachmeshwar Prasad passage (as authority supporting the re-hearing nature of appeals) and relied upon generally in reasoning about appellate powers to consider subsequent events. |
| Quilter v. Mapleson, (1882) 9 QBD 672 | English authority cited for the principle that a court of appeal has power to make further or other orders as the case may require (O. 53, R. 5 language). | Used in the chain of authorities (via Lachmeshwar Prasad) to demonstrate that appellate courts possess broad powers when moulding relief on appeal. |
| Attorney-General v. Birmingham, Tame and Rea Drainage Board, 1912 AC 788 | English authority cited for the same appellate-power principle (ability to make such further or other orders as the case requires). | Relied on in the discussion of appellate powers forming part of the basis to permit consideration of subsequent legislative changes on appeal. |
| Kristnama Chariar v. Mangammal, 26 Mad 91 | Earlier Indian authority explaining that hearing of an appeal is in the nature of a re-hearing; courts have recognized appellate power to take further evidence. | Referenced in the Lachmeshwar Prasad analysis to support the re-hearing character of appeals under Indian procedure. |
| Nash v. Rochford Rural Council, 1917-1 KB 384 | English case on allowing further evidence; discussed as part of comparative practice about appellate powers to receive additional evidence. | Cited in the paraphrase of Lachmeshwar Prasad's reasoning to indicate that similar limitations/practices exist in England and India with respect to allowing further evidence on appeal. |
Court's Reasoning and Analysis
The Court addressed two principal matters: (1) whether the Tribunal could take into account the legislative change effected by the Income-tax (Amendment) Act of 1948 when disposing of appeals pending before it; and (2) whether the Tribunal correctly construed the Amending Act as applying retrospectively to the assessment years 1941-42 and 1942-43.
On the first point the Court held that the Tribunal acted correctly in applying the amended law when disposing of the appeals. The Court relied on the statutory powers of the Appellate Tribunal under Section 33(4) of the Income-tax Act, which allow the Tribunal, after giving both parties an opportunity to be heard, to "pass such orders thereon as it thinks fit." The Court observed that these powers are extensive and greater than those of an Appellate Court under Section 107 of the Code of Civil Procedure. The Court further relied on the reasoning in Lachmeshwar Prasad v. Keshwar Lal (and related authorities) establishing that appeals are in the nature of re-hearings and appellate courts may take into account facts and events (including legislative changes) which have arisen after the decision under appeal. Applying that principle, the Tribunal was entitled to consider the 1948 legislative amendment in disposing of the pending appeals.
On the second and dispositive point the Court considered the language and effect of the Amending Act. It analysed Section 4 (which inserted S. 9(4)) and Section 1(2) of the Amending Act:
- The Court concluded that Section 4 considered by itself did not have retrospective effect. The wording of S. 4 did not use an expression such as "always" to indicate that the deeming should be applied for all past times; rather, the word "deemed" creates a legal fiction for the purpose of taxation by treating the holder of an impartible estate as the individual owner even though under Hindu law the holder may not have legal title. Thus S. 4 alone was not an express retrospective provision.
- However, Section 1(2) of the Amending Act provides that "Sections 3 to 12 shall be deemed to have come into force on the 30th day of March 1948" and makes certain amendments operative so as to apply to assessments subsequent to the assessment for the year ending 31-3-1948. The Court interpreted these provisions together to mean that the retrospective operation conferred was limited: Sections 3–12 are to be treated as effective from 30-3-1948 and the operative effect is intended for the assessment year 1947-48 and for assessments subsequent to that year.
- Accordingly, the Court held that the Dominion Legislature intended S. 9(4) to apply to the assessment year 1947-48 and subsequent years, but not to reach back to affect assessments for years prior to 1947-48 (i.e., the assessment years 1941-42 and 1942-43 in this case).
On this basis the Court concluded that the Tribunal was incorrect in construing the Amending Act as affecting the assessments for 1941-42 and 1942-43. The Court therefore answered the question referred in favour of the assessee and against the Income-tax Department. The Court also awarded the costs of the reference to the assessee (hearing fee Rs. 250).
Holding and Implications
Holding: The question referred by the Tribunal is answered in favour of the assessee and against the Income-tax Department. The Court held that the provisions of Section 4 (S. 9(4)) of the Income-tax Amendment Act of 1948 do not, in the light of Section 1(2) of that Act, operate so as to make the holder of an impartible estate liable to be taxed in respect of the house property income for the assessment years 1941-1942 and 1942-1943.
Implications:
- Direct effect: The assessee (Raja Bahadur Kamakshya Narain Singh) is not liable to be taxed as the holder of an impartible estate in respect of the rent income from the house property for the assessment years 1941-42 and 1942-43; the question is answered for the assessee and costs of the reference awarded to him (hearing fee Rs. 250).
- Scope of retrospective application: The Court's construction confines the retrospective effect of the Amending Act to the assessment year 1947-48 (by deeming Sections 3–12 to have come into force on 30-3-1948) and to assessments subsequent to the assessment for the year ending 31-3-1948; it does not extend the amendment so as to affect earlier assessment years.
- Precedential note: The opinion applies established principles about appellate powers and the limited circumstances in which legislative amendments may be given retrospective operation; it does not purport to set a novel general rule beyond the statutory construction and application to the facts of this case.
Question answered accordingly. Costs to the assessee; hearing fee Rs. 250.
1. In this case the assessee is Raja Bahadur Kamakshya Narain Singh of Ramgarh. The assessment years are 1941-1942 and 1942-1943. For these two years the Income-tax Officer estimated the rent of the house properties to be Rs. 970/- and Rs. 1738 and odd and held that the Raja Bahadur was liable to be taxed in his individual capacity as the holder of an impartible estate. The matter was taken in appeal and the Appellate Assistant Commissioner held that in view of the decision of the Privy Council in ‘Commr. of Income-tax Punjab v. Krishna Kishore’, AIR 1941 PC 120 (A), the income from the house property could not be assessed in the hands of the Raja Bahadur. The view taken by the Privy Council was that the impartible estate was owned by the joint family and the income from the house property could not be charged in the hands of the holder of the impartible estate though according to the legal position in the Hindu law the holder of an impartible estate had complete right of disposal over the income from the house property.
2. The matter was taken in appeal on behalf of the Income-tax Department to the Income-tax Appellate Tribunal who affirmed the view of the Appellate Assistant Commissioner and held that income from the house property should be taxed not upon the Raja Bahadur but upon the Hindu undivided family. Thereafter the Income-tax Officer took proceedings under S. 34 of the Act and assessed the income from the house property under S. 12 of the Act. The assessee preferred an appeal to the Appellate Assistant Commissioner and on 24-5-1947 the Appellate Assistant Commissioner rejected the appeal holding that the assessment made by the Income-tax officer under S. 12 was proper.
3. The assessee took further appeal to the Appellate Tribunal. The appeal was actually filed on 14-8-1947. But on 8-9-1948 an important event took place. On that date the Dominion Legislature enacted the Income-tax Amending Act (Act 48 of 1948) with retrospective effect. By S. 4 of that Act a new Sub-s. (4) was added to Section 9 of the Income-tax Act. S. 4 states—
“In Section 9 of the said Act, after sub-s. (3), the following sub-section shall be added, namely:—
(4) for the purposes of this section, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate”.
4. Section 1 of the Amending Act of 1948 provided—
“(1) This Act may be called the Income-tax and Business Profits Tax (Amendment) Act, 1948.
(2) Sections 3 to 12 shall be deemed to have come into force on the 30th day of March 1948, and the amendment made in the Indian Income-tax Act 1922 (11 of 1922) by S. 2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the assessment for the year ending on the 31st day of March 1948.
5. Sections 13 to 15 shall be deemed to have come into force on the day on which the Business Profits Tax Act, 1947 (21 of 1947) came into force”.
6. The Appellate Tribunal took up the appeals for hearing after the Amending Act came into force. On 10-3-1950 the Tribunal dismissed the appeals holding that in view of the amendment of S. 9(4) by the Amending Act it was not open to the assesses to contend that the income from the house property should be taxed upon the Hindu undivided family and not upon the holder of an impartible estate.
7. In this state of facts the Appellate Tribunal has submitted the following question of law for the opinion of the High Court—
“Whether on the facts and circumstances of the case the rent income from the house property is assessable in the hands of the holder of the impartible estate under S. 9(4)?”
8. Two points were argued upon the hearing of this reference (1) whether the Tribunal were right in applying the provisions of S. 9(4) as enacted by the Income-tax Amendment Act of 1948 in disposing of these appeals; & (2) Whether the Tribunal were right in taking the view that the Amendment Act of 1948 affected the assessment for the years 1941-1942 and 1942-1943 and made the Raja Bahadur taxable for the income from the house property for these two assessment years.
9. On the first point we are definitely of opinion that the Tribunal adopted the correct procedure in taking into account the legal change brought into effect by the Income-tax Amendment Act of 1948. The powers of an Appellate Tribunal in hearing an appeal are stated in Section 33(4) of the Income-tax Act. S. 33(4) states—
“The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall communicate any such orders to the assessee and to the Commissioner”.
10. It is clear that the powers conferred on the Tribunal under S. 33(4) are of an extensive character. These powers are more extensive than the powers of an Appellate Court conferred by Section 107 of the CPC.
11. Section 107 states—
“(1) Subject to such conditions and limitations as may be prescribed, an Appellate Court shall have power (a) to determine a case finally; (b) to remand a case; (c) to frame issues and refer them for trial; (d) to take additional evidence or to require such evidence to be taken. (2) Subject as aforesaid, the Appellate Court snail have the same powers and shall perform as nearly as may be the same duties as are conferred and imposed by this Code on Courts of original jurisdiction in respect of suits instituted therein.”
12. In ‘Lachmeshwar Prasad v. Keshwar Lal’, AIR 1941 FC 5 (B), the Federal Court examined the powers of an appellate court and held that under the procedural law of India the hearing of an appeal was in the nature of re-hearing and therefore in moulding the relief to be granted to the parties of an appeal, the appellate court was entitled to take into account even facts and events which had come into existence after the decree appealed against. Consequently the appellate Court was competent to take into account legislative changes since the decision in appeal was given and its powers were not confined only to see whether the lower Court's decision was correct according to the law as it stood at the time when its decision was given. At page 13 of the report Varadachariar, J. states—
“As stated in — ‘Shyamakant Lal v. Rambhajan Singh’, AIR 1939 FC 74 (C), there is no reason to suppose that the powers of this Court when acting as a court of appeal are less extensive than those of the High Courts when hearing an appeal; and it has been a principle of legislation in British India at least from 1861 that a court of appeal shall have the same powers and shall perform as nearly as may be the same duties as are conferred and imposed by the Code of Civil Procedure on courts of original jurisdiction: see Act No. 23 of 1861, S. 37; Act No. 10 of 1877, S. 582; Act No. 14 of 1882, S. 582; and Act No. 5 of 1908, S. 107(2). The very words of O. 53, R. 5 of the Rules of the Supreme Court, on which Bowen L.J laid stress in — ‘Quilter v. Mapleson’, (1882) 9 QBD 672 at p. 678 (D) and Lord Gorell in — ‘Attorney-General v. Birmingham, Tame and Rea Drainage Board’, 1912 AC 788 at p. 801 (E), namely that the court of appeal has power to make such further or other order as the case may require, have been reproduced in O. 41, R. 33 of the CPC of 1908; and even before the enactment of that Code, the position was explained by Bhashyam Iyengar, J. in — ‘Kristnama Chariar v. Mangammal’, 26 Mad 91 at pp. 95, 98 (FB) (F) in language which makes it clear that the hearing of an appeal is under the processual law of this country in the nature of a re-hearing. The Indian Codes have from 1859 conferred upon a court of appeal the power given by O. 58. R. 4, Supreme Court Rules, to allow further evidence to be adduced; and though the English rule does not in terms impose the same limitations on this power as the Indian Codes do, these limitations are implied in the reference to ‘special grounds’ in the English rule and have in effect been insisted on even in England as a matter of practice: see — ‘Nash v. Rochford Rural Council’, 1917-1 KB 384 (G). In view of these provisions, it seems to me to make no difference that it is not explicitly stated in the Indian statutes (as in O. 58, Supreme Court Rules) that an appeal is by way of re-hearing. It is also on the theory of an appeal being in the nature of a re-hearing that the courts in this country have in numerous cases recognized that in moulding the relief to be granted in a, case on appeal, the court of appeal is entitled to take into account even facts and events which have come into existence after the decree appealed against.”
13. Applying a similar line of reasoning to this case we think that the Appellate Tribunal was entitled, to take into account the legislative change brought into effect by the Amendment Act of 1948, in disposing of the appeals preferred by the assessee.
14. The second and more important point is whether the Tribunal were right in the construction they have placed on the material provisions of the Income-tax Amendment Act of 1948. The view taken by the Tribunal was that the provisions of the Amendment Act were retrospective and that the income from the house property for the two assessment years (1941-1942 and 1942-1943) was taxable in the hands of the Raja Bahadur as the holder of an impartible estate.
15. Mr. Mazumdar on behalf of the assessee put forward the argument that the view taken by the Tribunal was erroneous and that the provisions of the Amendment Act of 1948 were not retrospective to the extent imagined by the Tribunal. It was argued by the learned counsel that Section 4 of the Amendment Act was made retrospective only with effect from 30-3-1948 and that was the backward limit from the point of view of time up to which Section 4 of the Amendment Act should be given retrospective effect.
16. In our opinion the argument of the learned counsel is correct. The language of Section 4 and Section 1 of the Amendment Act must be carefully examined in order to find out what is the extent of the retrospective effect of these provisions. Section 4 of the Act states:
“In S. 9 of the said Act, after sub-s. (3), the following sub-section shall be added, namely: ‘(4) For the purposes of this section, the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate’.”
17. We do not think that this section has any retrospective force standing by itself. The section does not say, for instance, that the holder of an impartible estate shall ‘always’ be deemed to be the individual owner of all the properties comprised in the estate. If the expression ‘always’ had been used in S. 4, it might have been contended with justification on the part of the Income-tax Department that S. 4 had express retrospective effect and that the assessments for 1941-1942 and 1942-1943 were affected by the Amendment Act.
18. We think that the expression ‘deemed’ has not been used in S. 4 for producing any retrospective effect. The expression ‘deemed’ has been used to create the legal fiction that the holder of the impartible estate is treated as owner for the purpose of imposing the tax though the legal position in the Hindu law is that the holder of an impartible estate has not the legal title of the owner. That is the real meaning of the expression ‘deemed’ in the newly substituted sub-s. (4) of Section 9 of the Income-tax Act. It is therefore manifest that Section 4 of the Amendment Act has not by itself any retrospective character.
19. But a limited retrospective effect is given to the I provisions of S. 4 by the language of S. 1(2) of ‘the Amendment Act. Section 1(2) states that:
“Sections 3 to 12 shall be deemed to have come into force on the 30th day of March 1948 and the amendment made in the Indian Income-tax Act, 1922 (11 of 1922) by S. 2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the assessment for the year ending on the 31st day of March 1948.”
20. It is clear that S. 1 confers on S. 4 of the Act a limited retrospective effect and according to S. 1(2), Ss. 3 to 12 shall be deemed to have come into force on 30-3-1948.
21. We think that the intention of the Dominion (Legislature in enacting S. 1(2) was that for the assessment year 1947-1948 the provision of S. 9(4) should be applied and for the assessment of that year the holder of an impartible estate should be taxed as an individual owner of all the properties comprised in the estate. To put it in other words, S. 1(2) of the Act makes the provision of S. 9(4) retrospective only so far as the assessment for the year 1947-1948 is concerned and the Act does not affect retrospectively the assessments made for the previous assessment years.
22. The correctness of this view is also borne out if we compare the language of the first part of S. 1(2) with the language of the latter part of that sub-section. The first part of the sub-section states that
“Sections 3 to 12 shall be deemed to have come into force on the 30th day of March 1948”
and the second part states that
“the amendment made in the Indian Income-tax Act, 1922, by S. 2 shall be deemed to be operative so as to apply in relation to all assessments subsequent to the assessment for the year ending on the 31st day of March 1948.”
23. It is manifest that the Dominion Legislature intended that S. 1(2) should apply to the assessment made subsequent to the assessment year 1947-1948 and that Ss. 3 to 12 shall apply to the assessment year 1947-1948 and subsequent years. If the view that we have expressed is a correct view as to the legal effect of Section 1 and Section 4 of the Income-tax Amendment Act of 1948 it follows that the assessee in this case is not liable to be taxed as the holder of an impartible estate for the income from the house property for the assessment years 1941-1942 and 1942-1943. For the reasons we have expressed we hold that the question referred to the High Court should be answered in favour of the assessee and against the Income-tax Department. The assessee is entitled to the costs of this reference. Hearing fee Rs. 250.
R.G.D
24. Question answered accordingly.
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