- (1.) THIS is a test case under the Indian Income-tax Act. The petitioner Madangopal Kabra resiles and carries on business in the district of Jodhpur in the United State of Rajasthan where income-tax had not been levied prior to 1st of April 1950. In the Rajasthan Gazette dated the 13th of May, 1950, the following notice was published: - "in pursuance of sub-section (1) of section 22 of the Indian Income-tax Act, 1922 (XI of 1922) we the Income-tax Officers mentioned in column 1 of the table below hereby give notice to every person subject to our jurisdictions as specified in the corresponding entry in column 3 whose total income during the previous year exceeded the maximum amount not chargeable to income-tax to furnish within sixty-five days from the date of publication of this notice a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as are required by the said form) his total income and total world income during that year. Penalty.- Any person who fails without reasonable cause to furnish the return required by this notice or fails without reasonable cause to furnish it within the time allowed or in the manner re mired is liable under section 28 of the said Act to a penalty not exceeding one and a half times any tax paya-able by him. "
(2.) UNDERNEATH the notice were published the names of various Income-tax Officers with their addresses and jurisdictions. Thereafter, on 7th of August 1950, a notice was served upon the petitioner requiring him to produce his account books on 11th of August 1950 in connection with the income-tax assessment. The Constitution of India came into force on the 26th of January 1950 giving the Dominion Parliament power to legislate in matters relating to income-tax for the whole of India, while according to the Finance Act of 1950, Rajasthan became taxable territory from 1st of April 1950, The petitioner has approached this Court with an application under Article 226 of the Constitution of India objecting to his income being assessed to income-tax which accrued prior to 1st of April 1950 and has based it on two principal grounds, namely: - (1) That Rajasthan became taxable territory on 1st of April 1950 and, therefore, income accruing or arising before that date was not assessable to income-tax. (2) That the Dominion Parliament did not make any law authorizing taxation on income accruing prior to 1st of April 1950 and had no jurisdiction to make any law relating to the imposition of income-tax in Rajasthan prior to the 26th of January 1950. He accordingly prayed that the Union of India be restrained by means of a writ of mandamus, or certiorari or an appropriate writ, direction or order from taking any action under any provision of the Indian Income-tax Act for making any assessment of such a tax or for levying and realising the same on the income which accrue i to the petitioner prior to 1st of April 1950 and further be directed to direct its Income-tax Officers posted in Rajasthan not to harass the petitioner or to demand any account books or other information for the purpose of. making any assessment or to make any such assessment or realize the amount from the petitioner. The Income-tax Officer, Jodhpur affirmed in an affidavit dated 6th of' November 1950, that the petitioner had been called upon to produce his account books only in connection with his application for import and export licence and that with a view to ascertain the number of persons liable to income-tax, a survey of Jodhpur was undertaken and a notice was issued to him. No statutory notice under the Indian Income-tax Act was issued or served with a view to assess him to income-tax. On 7th of December 1950, the Income-tax Commissioner supported the above position in his reply to the petition and further stated that the petitioner was liable to pay income-tax for the assessment year 1950-51 in respect of his total income for the year ending 31st March, 1950 computed in accordance with the provisions of the Indian Income-tax Act, as section 3 read with section 2 (14-A) proviso (b) (iii) authorized the levy of income-tax on incomes which accrued or were received in Rajasthan prior to 1st of April 1950. A reference was made by him to the agreement dated 25th of February 1950 entered into between the President of India and the Rajpramukh of Rajasthan, and it was stated that thereby the Union of India became entitled to impose a tax on incomes which accrued or arose prior to 26th of January 1950. It was stated in the end that a petition for the issue of a writ was incompetent as the petitioner had other specific and adequate remedy under the Indian Income-tax Act for the removal of any rightful grievance he may have in the matter of assessment under that Act. On the above, the following points emerge for decision: - (1) Whether Rajasthan became taxable territory on 1st of April 1950 and, therefore, incomes accruing or arising prior to that date were not liable to income-tax. (2) Whether the Parliament had no power to make law relating to the imposition of income-tax on incomes accruing prior to the 26th of January 1950. (3) Whether the petitioner was not competent to ask for a writ of prohibition because a specific and adequate remedy was available to his under the provisions of the Indian Income-tax Act. Along with the above, two other points were agitated on behalf of the respondent, and these are: - (a) That the Union of India had done no judicial act in respect of which a writ of prohibition may be issued against it and further that in any case, since the Income-tax Commissioner or the Income-tax Officer, Jodhpur, were not parties to the petition, a writ could not be issued against them. (b) That the Instrument of Accession was a contract between the Government of India and the Rajpramukh of Rajasthan and while it was open to either of them to claim enforcement of its provisions, the subject was not competent in law to do so. In connection with the first question it may be pointed out that the Indian Income-tax Act, 1922 was not applicable in Rajasthan prior to 1st of April 1950 and barring the Covenanting State of Bundi, there was no law in the other Covenanting States of Rajasthan imposing a tax on income. The petitioner who was a resident of the Covenanting State of Jodhpur thus enjoyed complete immunity from the levy and assessment of his income accruing from his business carried on by him in that area prior to the formation of Rajasthan and thereafter as well since the same state of things continued till the passing of the Indian Finance Act 1950 (Act XXV of 1950) by the Dominion Legislature on 31st of March 1950. It was for the first time suggested by the Indian States Finance Enquiry Committee in their report dated 9th of July 1949 (vide Part I, paragraph 33) that for the financial integration, it was necessary that income-tax should ordinarily be levied in all States and it was recommended (vide Part I, paragraph 34) that the date from which integration should come into force should be the 1st of April 1950. An agreement was executed between the Rajpramukh of Rajasthan and the President of India on 25th of February, 1950 according to Article 278 of the Constitution of India accepting the above recommendation of the Committee. The result was the enactment of the Finance Act (XXV of 1950) which amended the Indian Income-tax Act (XI of 1922) and made it applicable to the whole of India except the States of Jammu and Kashmir and in place of clause (14 A) of section 2, as it stood before, a totally new clause defining "taxable Territories" was substituted. It would be necessary for the purpose of disposing of the points involved in this petition to deal with this clause at length but before doing so, it may be pointed out that the tax is charged under section 3 of the Indian Income tax Act which is a permanent Act and that the income-taxed is that of the previous year and not that of the year of assessment. This is clear from a plain perusal of the relevant portion of this section which runs as below: - "where any Act of the Central Legislature enacts that income-tax. shall be charged for any year at any rate, tax at that rate shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the previous year. " Again, according to the relevant portion of section 4 of the Act, 'the total income of any previous year' of any person includes all income, profits and gains from whatever source derived which (a) are received or deemed to be received in the taxable territory in such year by or on behalf of such person or (b) if such person is resident in taxable territories during such year. (i) accrue or arise or deemed to accrue or arise to him in the taxable territories during such year or (ii) accrue or arise to him without the taxable territories during such year, or (c) if such person is not resident in the taxable territories during such year accrue or arise or deemed to accrue or arise to him in the taxable territories during such year. 9. Reading these two sections together, two important principles, emerge, namely: - (1) That the income should have accrued during the previous year, that is, the year previous to the year of assessment. (2) That this income should have been received or accrued or deemed to have been received or accrued to the assessee in the taxable territory during the previous year or the assessee should be a resident of the taxable territory during the previous year. The contention of the learned counsel for the respondent is that it is the unascertained income of the current year which is actually taxed and that the income of the previous year is used merely as a yard-stick or measure. It however, runs counter to the plain language of sections 3 and 4 of the Income-tax Act and also to the various authorities of different Courts on the point. Up to a certain stage, the law in England and India was identical but from 1922 it became different and since that year, the subject of the charge is the income of the previous year and not the income of the year of assessment. In 54 Cal. 630 (1) (Biharilal Mullick vs. In re.), the learned counsel for the assessee contended that the previous year's income was taken as a basis on which the assessment was provisionally made and that the tax was levied on the income of the current year. He relied on the well-known Brown's case reported as 1921 (2) A. O. 222 (2) (Brown v. National Provident Institution) but the learned counsel for the Government urged that the principle, in this case, could not apply to India as the tax was charged O. 1 the income of the previous year which was the subject matter and not the basis of assessment. The legislature, it was argued, had intentionally departed from the principle followed in the previous Acts. Rankin C. J. held that under the Indian Act of 1922, the income of the previous year appeared not as a standard by which the next year's income was to be computed nor as a measure but as being itself the subject matter of the tax. The Indian Legislature in seeing its way to impose the income-tax directly upon actual receipts got rid of notional or statutory incomes altogether and thereby avoided the labour of subsequent adjustments and the inconvenience of refunds. There was nothing absurd, impossible or unjust, according to Rankin C. J. , in levying income-tax upon the actual receipts of a completed year in the year which follows. The same view was taken in A. I. R. 1929 Mad. 35 (1) (Commissioner Income-tax vs. Karuppiah Kangani.), which was a Full Bench case. It was held that under the Act, the income of the year previous to the year of assessment was not to be taken as merely a guide to the ascertainment of the income of the year of assessment but as the actual sum which was subject to taxation. 54 Cal. . 630 (2) (Biharilal Mulick vs. In re.) was followed while Brown's case was distinguished. In A. I. R. 1945 P. C. 89 (3) (Maharajah of Pithapuram vs. Commissioner of Income-tax.), their Lordships made some general observations as to Indian Income-tax law for the purpose of clearing away a certain confusion of thought which appeared to effect the contentions in the case. In the first place, their Lordships held that under the express terms of section 3 of the Income-tax Act, the subject of charge was not the income of the year of assessment but the income of the previous year. This was in direct contrast to the English Income-tax Act under which the subject of assessment was the income of the year of assessment though the amount was measured by a yard-stick based on previous years. Their Lordships referred to the able judgment of Rankin C. J. in 54 Cal. 630 (2) and agreed with it. In the second place, it was observed by their Lordships that the Income-tax Act, as amended from time to time, formed a Code which had no operative effect except so far as it is rendered applicable for the recovery of tax imposed for a particular fiscal year by a Finance Act. In 1940 Income-tax Reports 1 (4) (Maharajah of Pithapuram vs. Commissioner of Income-tax.), the assesees, who were merchants carrying on business at Bombay and Rangoon were assessed in the year 1937-38 on their total income for their previous year which ended on 14th of November 1936. In assessing the income, the income-tax authorities disallowed a certain sum on account of loss in Rangoon business in the previous year on the ground that Burma had ceased to be a part of British India in the assessment year 1937-38. Beaument C. J. held, after relying on 54 Cal. 630 (2), that as the tax was imposed for the year of assessment on the actual income of the previous year and Burma was part of British India in 1936-37, the assessees were entitled to set off the loss in Rangoon against the profits in Bombay. The law is thus well settled that the previous year is the financial or accounting year and it is the income during that year which is taxed in the subsequent year which is the year of assessment. The other principle as stated above is that the income in the previous year must have been received or accrued or arisen or deemed to have been received or accrued or arisen in the taxable territory or the assessee himself must have been a resident of the taxable territory in the said previous year. The distinction between persons ordinarily resident or not ordinarily resident may be left out for the present as it is not relevant for the purposes of this case. This point was brought out in the Special Bench case reported as 1939 Mad. 77. (5) (Income-tax Commissioner vs. Veliammai Achi w/o S. M. A, M. Ramaswami Chettiar.) The assessee, who was a resident in the Madras Presidency, owned a saw mill in Burma in the account year, that is, the year commencing 1st of April, 1936. The saw mill business resulted in a loss and her income consisted solely of interest received from investments. For the purpose of assessment of income-tax, she sought to set off the loss sustained in the saw mill business against the profits of her assessment. The Income-tax Officer refused to allow her to do [so on the ground that on 1st of April 1937, Burma had ceased to be a pad of British India and that the loss having been sustained outside British India could not be set off. A very ingenious argument was advanced by Mr. Patanjali Sastri, who appeared for the Commissioner of Income-tax, that as the Income-tax Act did not come into operation in any year until the (Finance Act had been passed, the Income-tax Act must be treated as a statute which is passed every year and the words, British India must be deemed to mean British India as it stands at the time of the passing of the Finance Act and not what it was in the previous year. This argument was not accepted by Leach C. J. who held that "while the Income-tax Act could not be applied in any year until the Finance Act had been passed, the Act could not be treated as a statute which is passed annually. It was a permanent enactment and may not be enforced in any particular year until the Finance Act had been passed. " It was further held that ''section 4 of the Act could not be divorced from section 3 and that as section 3 charged the tax on the income of the previous year, it must be charged on the income received in what was British India during the previous year. " Accordingly, it was held that since Burma was a part of British India during the financial year, the loss must be deemed to have been sustained in British India. The above observations by Leach C. J. are sufficient also to dispose of the contention of the learned counsel for the respondent that the taxing enactment was the Finance Act and not the Income-tax Act. Reference may also be made to the statement of law by Lord Dunedin in Whitney v. I. R. (1926) A. C. 37 that there were three stages in the imposition of a tax: - "there is the declaration of liability that is the part of the statute which determines what persons in respect of what property are liable. Next there is the assessment. Liability does not depend on assessment that ex hypothesis has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay. It is the Income-tax Act which determines what persons in respect of what property are liable and how the tax is to be recovered, but assessment is settled under the Finance Act which is the annual Act and only determines the rate. Section 67-B of the Income-tax Act provides for the contingency if in any year the Finance Act is not passed by 1st of April or no provision is made therein for the charging of income-tax in any year. Thus, the Income tax Act is the fiscal and taxing statute laying down the incidence of taxation. The next important question calling for a determination is whether Rajasthan became taxable territory during the financial year in this case, that is, 1949-50, for, if the answer is in the negative, the petitioner must be held to be immune from liability to assessment on the income of that year.
(3.) THE relevant section which calls for a careful consideration is section 2 (14-A) of the Income-tax Act, as amended by the Finance Act of 1950, which defines "taxable territories," and is as under: - 'taxable territories' means - (a) as respects any period before the 15th day of August, 1947, the territories then referred to as British India, but including Berar, (b) as respects any period after the 14th day of August, I947, and before the 26th day of January, 1950, the territories for the time being comprised in the Provinces of India, but excluding the merged territory of Cooch-Behar, (c) as respects any period after the 25th day of January and before the 1st day of April, 1950, the territories comprised in Part A States, but excluding the merged territories of Cooch-Behar, and the territories comprised in Part C States, but excluding the States of Manipur, Tripura and Vindhya Pradesh, (d) as respects any period after the 31st day of March, 1950, and before the 13th day of April, 1950, the territory of India excluding the State of Jammu and Kashmir and the Patiala and East Punjab States Union, and (e) as respects any period after the 12th day of April, 1950, the territory of India excluding the States of Jammu and Kashmir: Provided that the taxable, territories shall be deemed to include - (a) the merged territories - [i] as respects any period after the 31st day of March, 1949, for any of the purposes of this Act, and [ii] as respects any period included in the previous year, for the purpose of making any assessment for the year ending on the 31st day of March, 1950, or for any subsequent year; and (b) the whole of the territory of India excluding the State of Jammu and Kashmir - [i] as respects any period, for the purposes of sections 4a and 4b, [ii] as respects any period after the 31st day of March, 1953, for any of the purposes of this Act, and [iii] as respects any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subsequent year. " The territory of India was rapidly changing after the Indian Independence Act, 1947, and instead of defining India separately for the different periods of its expansion, the Legislature provided different meanings to the expression "taxable territories" according to the successive stages of expansion of India. Upto 14th of August, 1947, the operation of Income-tax Act has been limited to what was British India, including Berar. On the 15th of August, 1947, British India ceased to exist as such, but that territory became divided into Provinces of India followed by the important expansion of the Provinces by merger of a large number of Indian States, and while some were merged in the Provinces, other were constituted into certain Chief Commissioner's Provinces. Reference may be made to the States Merger (Governor's Provinces) Order, 1949, and the Stales Merger (Chief Commissioners' Provinces) Order, 1949. The Taxation Laws (Extension to Merged States and Amendment) Act, 1949, extended the Income-tax Act to the merged States mentioned in the Order, and was brought into force in the merged States on the 1st of April, 1949. So during the second period, taxable territories meant the Provinces of India from the 15th day of August, 1947, to 31st day of March, 1949, and from the 1st of April, 1949, to 25th of January, 1950, the Provinces of India plus the merged States. The third period began on the 26th of January, 1950, with the coming into force of the Constitution of India. The old division into Governor's Provinces and Chief Commissioner's Provinces and Native States was done away with, and India was re-constituted into a Union of States classified as Part A, B, C, and D States. For this period from 26th January, 1950, to 31st March, 1950, the definition of "taxable territories" did not include part B States. The fourth period is from 1st April, 1950, when the taxable territories were to include Part-B States except Patiala and East Punjab States Union. The fifth period starts from the 13th of April, 1950, when the whole of India, except the States of Jammu and Kashmir became included in "taxable territories. " So far as the language of the section goes, it is clear that Rajasthan became a taxable territory only from the 1st day of April, 1950. Toe learned counsel for the Union of India relied upon proviso (b) in support of his contention that for the period of twelve months from 1st April, 1949, to 31st March, 1950, Rajasthan (for that matter, Part-B States) was also included within the term "taxable territories. " Reliance was placed on clause (iii) of that proviso, and the construction sought to be placed on that clause is that the said clause makes the whole of the territory of India, including Rajasthan, as a taxable territory for the purpose of making any assessment for the year ending on the 31st day of March, 1951. It was contended that as under section 3 of the Income-tax Act, the assessment is made for the income of the previous year, the assessment made for the year ending 31st March. , 1951, i. e. the year beginning on 1st April, 1950, and ending on 31st March, 1951, will be made in respect of the income of the previous year, i. e. , 1st April, 1949, to 31st March, 1950. In other words, the argument is that the said proviso makes Rajasthan a taxable territory during the period of the year previous to the 1st day of April, 1950. On the other hand, it v as contended by the learned counsel for the petitioner that there was a difference in the language used in the different parts of the section, which was important. Attention was drawn to clause (ii) of proviso (a), where the words used are ''for the purpose of making any assessment for the year ending on 31st day of March, 1950. " It was pointed out that the language Used in el. (iii) of proviso (b) is slightly different. The words used are "for the purpose of making any assessment of the year ending on the 31st day of March, 1950. " Leaving aside the difference of date, the difference in language is that while in proviso (a) clause (ii) the words used are "assessment for the year" in clause (iii), proviso (b), the words used are "assessment of the year. " The contention of the learned counsel for the petitioner is that assessment of the year should mean 'assessment of the income for the year,' and on that construction clause (iii), proviso (b), would mean that the income of the year from 1st April, 1950, to 31st day of March, 1951, would only become chargeable in the next assessment year beginning on 1st of April, 1951, and when the assessment is actually made in that year, the income would be of the previous year. The learned counsel urged that the necessity for clause (iii) arose from the fact that the Patiala and East Punjab States Union became a taxable territory only on the 13th day of April, 1950, and it was contended that clause (iii) made it possible for taxing the income of the broken period from 1st April to 12th April, accruing, arising or received in the Union. After giving careful consideration to the arguments of the learned counsel appearing for the Union of India, we are of opinion that the construction sought to be placed on clause (iii) of proviso (b) is not correct. According to the scheme of the definition, clause (d) clearly makes Rajasthan a taxable territory from 1st of April 1950, and the extended meaning given by the proviso is to be restricted so far a may be expressly stated therein. The proviso (b) can be divided into three portions, and the whole of the territory of India (excluding Jammu and Kashmir) is declared to be the taxable territory of India, firstly as regards any period for the purpose of sections 4a and 4b. These sections relate to a definition of persons who may be classed as 'residents' or 'not ordinarily residents' in taxable territories in any year, and residence for certain periods prior to the year for which assessment has to be made, is directed to be taken into account. The first clause in proviso (b) means' to say that the earlier residence in Part-B States will be taken to be residence in taxable territories while taking account of the residence for a certain prior period. The said proviso secondly declares the whole of the said territory to be taxable territory as respects the period after the 31st day of March, 1950, for any of the purposes of Income-tax Act, 1922. So far as Rajasthan is concerned, the same matter is stated in clause (d) of the definition, but it also makes Patiala and East Punjab States Union as taxable territories for the period from 1st April to 12th April, although according to clause (e) in the definition, it was not declared to be taxable territory in that clause. Clause (ii) of the proviso was obviously enacted in order to get over the difficulty of separate assessment of tax for the period from 1st April to 12th April as regards individuals in Patiala and East Punjab States Union. In this second clause -the words "for any of the purposes of this Act" clearly signify that the aforesaid territory including Rajasthan is a taxable territory for the purposes of levy, assessment and collection of income-tax. In the third clause, the whole of the territory of India (excluding Jammu and Kashmir) is declared to be taxable territory as regards any period included in the previous year for the purpose of making any assessment of the year ending on the 31st day of March, 1951, or for any subse-quent year. Assuming for the moment that the words "assessment of the year" mean the same thing as 'assessment for the year', and assuming that the previous year of the individuals affected runs from 1st of April of any year to 31st day of March of the succeeding year, the previous year referred to in the clause for the purpose of making any assessment in the year beginning on 1st March, 1950, and ending on 31st March, 1951, would be the year from 1st April, 1949, to 31st March, 1950, but the proviso makes whole of the territory of India taxable territory only for the purpose of making any assessment of the year 1950-51, and for no other purpose. According to the scheme of the Indian Income-tax Act, it is divided into seven chapters, and while 'charge of income-tax' is dealt with in Chapter I, the 'assessment' is dealt with in Chapter IV. Their Lordships of the Privy Council have observed in the case of Commissioner of Income-tax v. Khem-chand Ramdas (1) (A. I. R. 1938 P. C. 175.) that, "one of the peculiarities of most Income-tax Acts is that the word 'assessment' is used as meaning sometimes the 'computation of income', sometimes 'the determination of the amount of tax 'payable', and sometimes 'the whole procedure laid down in the Act for imposing liability upon the tax-payer'. The Indian Income-tax Act is no exception in this respect". Section 23, which occurs in Chapter IV, refers to Assessment, as the margi-nal note to the section indicates, and the word "assess" and its derivatives "assessment" and "assessed" have been used in the sense of 'computation of income'. In our opinion, it is at best in the sense of 'the determination of the amount of tax payable' that the word has been used in clause (Hi) and not ill the sense of 'the whole procedure laid down in the Act for imposing liability upon the tax-payer'. The above interpretation is also supported by a reference to section 13 of the Finance Act. According to section 13, any law relating to income-tax or super-tax in force in Part -B States and certain other territories mentioned in the section immediately before the 1st day of April, 1950, was declared to cease to have effect except for the purposes of the levy, assessment and collection of income-tax and super-tax in respect of any period not included in the previous year for the purposes of assessment under the Indian Income-tax Act, 1922, for the year ending on the 31st day of March, 1951, or for any subsequent year. What this provision means is that in territories where income-tax law was in force prior to 1st April, 1950 that law will cease to have operation on that date, but nevertheless levy, assessment and collection of income-tax will be made in the assessment year beginning from 1st April, 1950, and ending on 31st day of March, 1951, in respect of the income of any period not included in the previous year for the purpose of assessment under the Indian Income-tax Act, 1922 for assessment year 1950-51. In plain language it means that for the period which remains excluded from the "previous year" for purposes of assessment under the Indian Income-tax Act for year 1950-51 the levy, assessment and collection will be done according to the old State Act. The "previous year" would be the period from 1st April, 1949 to 31st March 1950, assuming that the accounting period in respect of the assessee is from 1st April to 31st March 1950. The period 'not included in the previous year' would thus be prior to 1st April 1949. Section 13 thus authorises levy, assessment and collection of Income-tax in respect of income arising, accruing etc. in the year from 1st April 1948 to 31st March 1949 in B States where income-tax law existed prior to 1st April, 1950. It has already been seen that the whole of India (except Jammu and Kashmir) has been defined to be taxable territory from 1st April, 1950 and income accruing etc. from 1st April, 1950 becomes taxable by Virtue of the provisions in sections 3 and 4 of the Act. In order that persons may not escape taxation during the intervening period from 1st April, 1949 to 31st March 1950 in areas where there existed law relating to income-tax, the provision appears to have been made in clause (iii) of proviso (b) to section 2 (4a ). This clause makes the territory in which tax was leviable by any other law as also taxable territory for the purpose of making assessment in the year 1950-51. The language used in clause (iii) is "for the purpose of making any assessment of the year ending on the 31st day of March, 1951". As observed earlier, there are three stages in connection with the imposi-tion of a tax. The first is the declaration of liability, the second is the assessment and the third is the collection. This clause makes the territory a taxable territory for the purpose of making any assessment, but not for the purpose of chargeability. The chargeability is left to arise by some other law, and that law is the previous State law referred to in section 13 of the Finance Act, 1950. It arises in a twofold manner. In the first place, under section 6 of [the General Clauses Act the repeal of the State law as from 1st April, 1950 did not affect any liability incurred under the repealed enactment and secondly though the language used in section 13 is very complicated, a careful perusal makes it clear that the State law is not only kept alive for the purpose of levy, assessment and collection of income-tax on the income of the year 1948-49 but also for the above purposes in the subsequent year. The previous year in relation to the subsequent year 1951-52 is the year 1950-51 and the period not included therein would be the year 1949-50 and the State law is directed to apply if the income remains untaxed under Indian law. Again, the previous year is not invariably the twelve months ending on the 31st day of March next preceding the year for which the assessment is to be made, since according to the definition given in item (ii) of section 2, it may mean this year or "if the accounts of the assessee have been made upto a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee the year ending on the day to which his accounts have so been made up" would also be the previous year. Therefore, if somebody is liable to income-tax in any territory where such law was in force prior to 1st day of April, 1950, but certain period has not been included while assessing him to income-tax, but the chargeability existed, the proviso (b), clause (iii), would become applicable for such period as he was not charged but the liability had accrued, and the territory would become taxable territory for the purpose of making any assessment of the year 1950-51. The existence of this proviso only makes those persons liable whose income was chargeable to income-tax under any law in force in those territories, but that law was superseded by the Income-tax Act. According to the information given in the Report of the Indian States Finance Enquiry Committee, Part II, only one of the Covenanting States of Rajasthan, namely Bundi, had law relating to levy of Income-tax. In Bikaner, though an Income-tax Act existed in 1941, it was repealed in 1943, but in the Rules for licensing of minor factories provision was made for levy of Income-tax at the rate of 12-1/2% on the net profits of any company. As discussed above, while clause (d) would only make Rajasthan a taxable territory from 1st of April, 1950, the territory of the former Covenanting State of Bundi would be taxable territory for the purpose of assessment in the year 1950-51 in respect of the income of the previous year. It may be pointed out that even if there was any doubt in the interpretation or there could be two interpretations, it is sound rule of law that in construing a taxing statute, the construction most beneficial to the subject should be adopted (A. I. R. 1945 Bom, 402) (1) (Commissioner of Income-tax, Bombay v. Great Eastern Life Insurance Co. Ltd,) [crawford's Statutory Construction (1940) page 502 ). We are accordingly of the view that the State of Rajasthan, except Bundi only, became taxable territory from 1st April, 1950, and, therefore, income received, accru-ing or arising in Rajasthan for any period prior to the aforesaid date was not liable to assessment to income-tax. ;