- (1.) This case is a sequel to the judgment pronounced by this Court on December 3, 1965: Commissioner of Income-tax, Madhya Pradesh v. Straw Products Ltd., 1966-2 SCR 881: (AIR 1966 SC 1113).
(2.) The assessee was incorporated in August, 1935 with its Head Office in the Indian State of Bhopal, and commenced business as a manufacturer of wrapping paper in 1939. The assessee entered into an agreement with the Ruler of Bhopal under which the assessee was exempted from payment of all taxes to the State for a period of ten years expiring on October 31, 1948.
(3.) The State of Bhopal merged with India on August 1, 1949. The territory was constituted into a Chief Commissioner's Province, and was later merged with the State of Madhya Pradesh under the States Reorganization Act, 1956. The Governor-General of India issued the "Taxation Laws (Extension to Merged States) Ordinance" 21 of 1949 to make certain taxation laws applicable to the merged States. By C1. 3 of the Ordinance, amongst other Acts, the Indian Income-tax Act, 1922 and all the orders and rules issued thereunder were extended to the merged States, and by Cl. 7 the corresponding laws in force in the merged States were repealed. By Cl. 8 the Central Government was invested with the power to make provisions or give directions, which appeared to the Government to be necessary, for removing any difficulty arising in giving effect to the provisions of the Ordinance.;