- Bookmark
- Share
- CaseIQ
Messrs Bhuramal Paluram v. Commissioner Of Income-Tax, B. And O. Opposite Party.
Structured Summary of the Provided Legal Opinion
Factual and Procedural Background
The assessee is a partnership firm comprised of two equal partners: Bhuramal Tewari and Paluram Agarwal. The firm was registered under Section 26-A of the Income-tax Act for the assessment years 1945-1946, 1946-1947 and 1947-1948. For the assessment year 1948-1949 the firm applied for renewal of registration.
On 8-9-1948 the firm filed an application for renewal accompanied by a partnership deed dated 29-7-1944. That application was signed by Paluram but not personally by Bhuramal; instead a third person, Surajmal, signed on Bhuramal's behalf. On 31-7-1949 a second application was filed, accompanied by a partnership deed dated 29-6-1949; this second application was signed by Paluram and by Jutaram, who held a power of attorney from Bhuramal.
The Income-tax Officer rejected the application for registration on three grounds, one being that Bhuramal did not personally sign the application. An appeal by the assessee to the Appellate Assistant Commissioner succeeded, and the Income-tax Officer was directed to register the firm. The Department appealed to the Appellate Tribunal, which allowed the appeal (i.e., ruled against the assessee), taking the view that the firm was not entitled to registration under Section 26-A because Bhuramal did not personally sign the application form. The Appellate Tribunal submitted two questions of law to the High Court for opinion.
Legal Issues Presented
- Whether Rule 6 of the Income-tax Rules, 1922, which requires that an application for renewal of registration should be signed personally by the partners, is ultra vires.
- Whether the word “personally” in Rule 6 (and Rule 2) of the Income-tax Rules would exclude a duly authorised agent of a partner from signing the application for renewal of registration under Section 26-A of the Act on behalf of that partner.
Arguments of the Parties
Assessee's Arguments (as presented by Mr. Dutt)
- Rules 2 and 6 of the Income-tax Rules are repugnant to the Powers-of-Attorney Act (specifically Section 2 of that Act) and therefore exceed the statutory power of the Central Board of Revenue; accordingly, they should be held to be ultra vires.
- Section 26-A of the Income-tax Act itself does not expressly require that an application for registration must be signed personally by each individual partner; the section provides that the application shall be made by such person or persons and in such form as may be prescribed, but does not by its terms mandate personal signatures.
- Counsel relied on Section 2 of the Powers-of-Attorney Act, which states that a donee of a power-of-attorney may execute instruments in his own name and signature by authority of the donor and that such execution shall be as effectual in law as if executed by the donor in the donor's name.
- Mr. Dutt further invoked the general principle that rule-making authorities must not enact rules repugnant to other legislative enactments or to common law principles (citing Craies on Statute Law and authorities such as Hall v. Nixon).
Department's Arguments
The opinion does not contain a detailed account of the Department's legal arguments presented before the High Court.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Institute of Patent Agents v. Lockwood, 1894 AC 347 | Illustrates that where a statute provides that rules made under it shall have effect "as if enacted in this Act", such subordinate rules are to be treated as equivalent to statutory enactments and thereby largely insulated from ultra vires challenge. | The court relied on this decision to support the proposition that Section 59(5) of the Income-tax Act — which makes rules "have effect as if enacted in this Act" — precludes enquiry into whether Rules 2 and 6 are ultra vires. |
| Kandasami Pillai v. Emperor, AIR 1919 Mad 24 | (Cited as a supporting authority on the same point reached in Institute of Patent Agents — that rules equivalent to statute are not open to the usual forms of challenge.) | The court cited this Madras High Court decision as further support for treating the rules as having statutory force. |
| Subba Rao v. Commr. of Income-tax, AIR 1932 Mad 127 | Contains a dissenting judgment by Satyanarayana Rao J.; there is also a contrary line in the majority (Viswanatha Sastri J.). | The court noted the dissenting view relied on by counsel for the assessee but rejected it, stating preference for the judgment of Viswanatha Sastri J. and considered that Viswanatha Sastri J.'s statement of law was correct. |
| Hall v. Nixon, (1875) 10 QB 152 | Authority cited in Craies on Statute Law to illustrate that by-laws or subordinate rules repugnant to statute or general law are void. | The court quoted Craies (which cites Hall v. Nixon) in setting out the general principle relied upon by the assessee, but then explained why that general principle did not apply in the present statutory context. |
| Commr. of Agricultural Income-tax v. Keshab Chandra Mandal, AIR 1950 SC 265 | Holds (as applied here) that the word "personally" in rules requiring personal signature excludes a duly authorised agent from signing on behalf of the partner. | The court accepted that, in view of this Supreme Court decision, the word "personally" in Rules 2 and 6 would exclude an agent signing under a power of attorney; this concession influenced the answer to the second question. |
| Commr. of Income-tax v. Ravula Subba Rao, AIR 1946 Mad 411 | A Madras High Court decision that, as cited, aligns with the conclusion that "personally" excludes a duly authorised agent. | The court relied on this authority, along with the Supreme Court decision, when answering the second question against the assessee. |
Court's Reasoning and Analysis
The court addressed the two referred questions sequentially.
- On the first question (whether Rule 6 is ultra vires), the court acknowledged the general legal principle that subordinate rules must not be repugnant to other statutes or general law. Counsel for the assessee relied on that principle to argue that Rules 2 and 6 conflicted with Section 2 of the Powers-of-Attorney Act.
-
The court rejected that contention for the following reasons (all as stated in the opinion):
- Section 59 of the Income-tax Act — which empowers the Central Board of Revenue to make rules — contains an express provision (Section 59(5)) that rules made under the section "shall thereupon have effect as if enacted in this Act." The power to prescribe the person or persons by whom applications should be signed is derived from Section 26-A read with Section 59; accordingly Rules 2 and 6 were made within the statutory power conferred by the Act.
- Because the Act itself provides that the rules shall have the effect of being enacted in the Act, those rules have the same force and effect as statutory provisions. As a result, the ordinary grounds for attacking subordinate legislation (e.g., repugnancy to other statute law or common law principles) do not apply in the same way.
- Where there is repugnancy between these rules (which have been given statutory effect by Section 59(5)) and the Powers-of-Attorney Act, the applicable maxim is leges posterioris priores contraria abrogant: the later statutory rule (here the Income-tax rules given statutory effect) overrides the earlier provision to the extent of any inconsistency.
- The court reinforced this analysis by reference to authoritative decisions: it relied on the House of Lords decision in Institute of Patent Agents v. Lockwood to show that a statutory provision making rules "as if enacted in this Act" precludes enquiry into ultra vires objections to such rules. The court also cited a supporting Madras High Court decision (Kandasami Pillai v. Emperor).
- Consequent to the foregoing legal analysis, the court concluded that Rules 2 and 6 are intra vires Section 59 and the Income-tax Act; they form part of the statutory framework for registration under Section 26-A and cannot be invalidated on the ground of repugnancy with the Powers-of-Attorney Act.
- On the second question (whether "personally" excludes an authorised agent), the court observed that Mr. Dutt conceded, in view of binding authorities, that the word "personally" in Rules 2 and 6 would exclude a duly authorised agent from signing the application on behalf of a partner. The court referenced the Supreme Court decision in Commr. of Agricultural Income-tax v. Keshab Chandra Mandal and the Madras High Court decision in Commr. of Income-tax v. Ravula Subba Rao in support of that point.
- The court also addressed Subba Rao v. Commr. of Income-tax (AIR 1932 Mad 127), noting a dissenting judgment in that case but stating a preference for the majority view (Viswanatha Sastri J.) and rejecting the line of reasoning relied upon by the dissent.
- The combined result of these analytical steps led the court to answer both referred questions against the assessee and in favour of the Income-tax Department.
Holding and Implications
The High Court answered both referred questions in favour of the Income-tax Department and against the assessee.
Implications and direct effects:
- Rules 2 and 6 of the Income-tax Rules are held to be intra vires the Income-tax Act (Section 26-A read with Section 59) and, by reason of Section 59(5), operate with statutory force equivalent to provisions enacted in the Act.
- To the extent that Rules 2 and 6 are repugnant to Section 2 of the Powers-of-Attorney Act, the rules (having statutory force under Section 59(5)) override the Powers-of-Attorney Act for the purpose of registration under the Income-tax Act (application of leges posterioris priores contraria abrogant).
- The word "personally" in Rules 2 and 6 excludes a duly authorised agent from signing an application on behalf of a partner; consequently an agent's signature under a power of attorney does not satisfy the "personally" requirement for registration under Section 26-A in the relevant rules.
- The assessee was ordered to pay the cost of the reference; specifically a hearing fee of Rs. 250 was directed to be paid.
- The opinion relied on existing authorities and statutory construction; it does not purport to announce a novel legal principle beyond applying established precedent and statutory text. The immediate legal consequence is adverse to the assessee (as above), and the court's reasoning explains why the particular rules must be treated as having statutory force and why the word "personally" must be given the effect applied.
Answered accordingly.
1. In this case the assessee is a partnership firm consisting of two partners, Bhuramal Tewari and Paluram Agarwal, having equal shares. The partnership was registered under Section 26-A of the Income-tax Act for the assessment years 1945-1946, 1946-1947 and 1947-1948. For the assessment year 1948-1949, the partnership firm filed an application for renewal of the registration. The application was made on 8-9-1948. Together with the application the assessee produced a partnership deed dated 29-7-1944. The application was signed by one of the partners Paluram. The other partner Bhuramal did not sign the application personally but one Surajmal signed on his behalf. On 31-7-1949, a second application was filed on behalf of the assessee linn. The application was accompanied by another partnership deed dated 29-6-1949. This time the application was signed by Paluram and also by one Jutaram who held a power of attorney from Bhuramal. The application was rejected by the Income-tax Officer who refused registration on three grounds, one of which was that Bhuramal did not personally sign the application. An appeal was taken on behalf of the assessee to the Appellate Assistant Commissioner. The appeal was allowed by the Appellate Assistant Commissioner and the Income-tax Officer was directed to register the firm. The Department preferred an appeal to the Appellate Tribunal who allowed the appeal taking the view that the assessee firm was not entitled to registration under S. 26-A as Bhuramal did not sign personally the application form. In this state of facts the Appellate Tribunal has submitted the following questions of law for the opinion of the High Court;
“(1) Whether R. 6, Income-tax Rules, 1922, which requires that an application for renewal of registratron should be signed personally by the partners is ‘ultra vires?’ and (2). Whether the word ‘personally’ in R. 6, Income-tax Rules would exclude the duly authorised agent of a partner from signing the application for renewal of registration under S. 26-A of the Act, read with R. 6, Income-tax Rules on behalf of a partner?”
2. As regards the first question Mr. Dutt on behalf of the assessee put forward the argument that Rr. 2 and 6, Income-tax Rules were repugnant to the Powers-of-Attorney Act and, therefore, these rules were in excess of the statutory power conferred on the Central Board of Revenue and should be held to be ‘ultra vires’. Learned counsel pointed out that S. 26-A of the Act does not itself provide that the application for registration of the partnership firm must be signed personally by each of the individual partners. Learned counsel referred to S. 26-A which is in tile following terms:
“(1) Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax, (2). The application shall be made by such person or persons and at such time and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.”
3. Counsel also referred to Rr. 2 and 6 framed by the rule-making authority under Section 59 of the Income-tax Act. Rule 2 states:
“Any firm constituted under an instrument of Partnership specifying the individual shares of the partners may, under the provisions of Section 26-A of the Income-tax Act, 1922 (hereinafter in these rules referred to as the Act), register with the Income-tax Officer, the particulars contained in the said Instrument on application made in this behalf. Such application shall be signed by all the partners (not being minors) personally, or in the case of a dissolved firm by all persons (not being minors) who were partners in the firm immediately before dissolution and by the legal representatives of any such partner who is deceased and shall, for any year of assessment up to and including the assessment for the year ending on 31-3-1953, be made before 28-2-1953, and for any year of assessment subsequent thereto, be made…………”
4. Similarly, R. 6 requires that an application for renewal of the registration should be signed personally by all the partners. Rule 6 reads as follows:
“Any firm to whom a certificate of registration has been granted under Rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. Such application shall be signed personally by all the partners (not being minors) of the firm, or, where the application is made after dissolution of the firm, by all persons (not being minors) who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased; and accompanied by a certificate in the form set out below………”
5. The argument of Mr. Dutt is that these rules are repugnant to Section 2 of the Powers-of-Attorney Act which states:
“The donee of a power-of-attorney may, if he thinks fit, execute or do any assurance, instrument or thing in and with his own name and signature, and his own seal, where sealing is required, by the authority of the donor of the power; and every assurance, instrument and thing so executed and done, shall be as effectual in law as if it had been executed or done by the donee of the power in the name, and with the signature and seal, of the donor thereof………”
6. In support of his argument Mr. Dutt referred to the principle that in making rules under the power conferred by a particular statute the rule-making authority mint exercise the power not merely within the limits laid down by the statute but the rules framed must not entrench on other legislative enactments. Counsel referred in this connection to passage from Craies on Statute Law at page 299:
“A by law to be valid, says Sir John Comyns (Digest, tit, by law, B. 1); must, be ‘legi fidei rationi consona’. This is in accordance with the proposition stated in 5 Co. Rep. 63 namely, that ‘all by laws are allowed by the law which are made for the true and due execution of the laws or statutes of the realm, or for the well government and order of the body incorporate. And all by-laws which are contrary or repugnant to the laws or statutes of the realm are void and of no effect.’ It is sometime expressly stated in a statute that a bylaw must not be repugnant to the statute or the general law; but whether so stated or not a bylaw which in whole or in part is not confined to the particular circumstances contemplated by the statute or is repugnant to the general law is invalid. From this rule it follows, as was said by Lush J., in — ‘Hall v. Nixon’, (1875) 10 QB 152 at p. 159 (A), ‘obedience to a bylaw cannot be enforced by the imprisonment of the offender or by the forfeiture of his goods, because these are both against Manga Charta’.”
7. In our opinion the argument addressed by Mr. Dutt on behalf of the assessee cannot be accepted as correct. It is no doubt true as a matter of general principle that the rules made under statutory power should not be repugnant to general principles of common law or statute law. But that principle has no application to the present case. The reason is that Section 59 of the Income-tax Act which confers the rule-making power on the Central Board of Revenue has also provided that the “rules made under this section shall be published in the Official Gazette, and ‘shall thereupon have effect as if enacted in this Act’. It is not suggested on behalf of the assessee that Rules 2 and 6 of the Income-tax Rules are ‘ultra vires’ of any provisions of the Income-tax Act. On the contrary, S. 26-A read with Section 59 of the Income-tax Act confers power on the Central Board of Revenue to make rules prescribing the person or persons by whom an application for registration of firm should be signed and made and the form, verification and other particulars of such application. Section 26-A(2) states that the application shall be made by such person or persons and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed.
8. The expression “prescribed” has been defined in S. 2(10) of the Act to mean “prescribed by rules made under this Act. “Section 59(2)(e) confers power on the Central Board of Revenue to enact rules in order to “provide for any matter which by this Act is to be prescribed.” It is therefore clear that Rr. 2 and 6 which have been made by the Central Board of Revenue in exercise of the rule-making authority are in consonance with the provisions of the Income-tax Act and they are intra vires of the said Act. Section 59(5) of the Income-tax Act states that the rules made under the section shall be published in the Official Gazette and “shall thereupon have effect as if enacted in this Act.” It follows therefore that these rules have same effect and force as if they are a part of the Income-tax Act as it was originally enacted. Rules 2 and 6 are no more statutory rules but they have become by the force of Section 59(5) a part of the Income-tax Act itself. If that is the correct position it is not open to the assessee to challenge these rules on any of the grounds upon which subordinate legislation can be challenged. For instance, the rules cannot be challenged on the ground that they are unreasonable or on the ground that they contravene any principle of common law or any provision of statute law.
9. It is true, as contended on behalf of the assessee, that Rules 2 and 6 are repugnant to some extent to Section 2 of the Powers-of-Attorney Act. But in such a case the principle applicable is embodied in the legal maxim ‘leges posterioris priores contraria abrogant’. If this principle is applied, it is clear that Rr. 2 and 6 must override the provisions of the Power-of-Attorney Act so far as the registration of a firm under the Income-tax Act is concerned. We cannot, therefore, accept the argument of Mr. Dutt that Rr. 2 and 6 of the Income-tax Rules are ‘ultra vires’ or invalid on the ground that there is repugnancy between these rules and the provisions of the Powers-of-Attorney Act.
10. The view that we have expressed is borne out by the decision of the House of Lords in — ‘Institute of Patent Agents v. Lockwood’, 1894 AC 347 (B). The question at issue in that case was whether certain rules made by the Board of Trade under the statute of 1883 were ‘ultra vires’. Section 101 of the Patents, Designs, and Trade Marks Act, 1883, empowered the Board of Trade to make such general rules as they thought expedient subject to the provisions of the Act for regulating the practice of registration under the Act. Sub-section (3) of S. 101 enacted that general rules made under the statute shall “be of the same effect as if they were contained in this Act, and shall be judicially noticed”. It was argued on behalf of the respondent in that case that the rules were ‘ultra vires’ as the Board of Trade had no express statutory power to impose taxation and if the Legislature had intended to give the Board the power of imposing fees such power would have been expressly given. It was held by the House of Lords that the provisions of S. 101(3) of the statute which enacted the rules shall be of the same effect as if they were contained in the Act precluded any kind of enquiry as to whether the rules were ‘ultra vires’ or not. Lord Herschell was indeed of opinion that the formula “as if enacted in this Act” had the effect of “making the subordinate legislation as completely exempt from judicial review as the statute itself. There is a decision of the Madras High Court also on the same point— ‘Kandasami Pillai v. Emperor’, AIR 1919 Mad 24 (C).
11. Counsel (sic) on behalf of the assessee referred also in the course of his argument to — ‘Subba Rao v. Commr. of Income-tax’, AIR 1932 Mad 127 (D). Counsel based his argument upon the dissentient judgment of Satyanarayana Rao J. in that case. For the reasons we have already given we are unable, with great respect, to accept as correct the line of reasoning followed by Satyanarayana Rao J. We prefer the judgment of Viswanatha Sastri J. in this case and we consider that the law on this point has been correctly stated in his judgment. We accordingly answer the first question referred to the High Court in favour of the Income-tax Department and against the assessee.
12. As regards the second question Mr. Dutt conceded that in view of the decision of the Supreme Court in — ‘Commr. of Agricultural Income-tax v. Keshab Chandra Mandal’, AIR 1950 SC 265 (E) and of the Madras High Court in — ‘Commr. of Income-tax v. Ravula Subba Rao’, AIR 1946 Mad 411 (F) the word “personally” in Rr. 2 and 6 of the Income-tax Rules would exclude a duly authorised agent of a partner from signing an application under S. 26-A of the Act on behalf of the partner himself. The second question referred to the High Court must also be answered against the assessee and in favour of the Income-tax Department. The assessee must pay the cost of this reference; hearing fee Rs. 250.
D.S.P
13. Answered accordingly.
Alert