COMMISSIONER OF INCOME TAX MYSORE CUM TRAVANCORE COCHIN BANGALORE Vs. MYSORE ENGINEERING CO

JUDGEMENT

(1.) This is a reference by the Commissioner of Income-tax, Mysore cum Travancore-Cochin, Bangalore, which was formerly made by the Income-tax Appellate Tribunal, Bombay, under Section 66 (1), Indian Income-tax Act of 1922 as amended by Section 92, Income-tax (Amendment) Act of 1939 to the High Court of Judicature at Madras. That reference was heard on 4-8-1948 by Rajamannar C.J. and Yaha Ali J. who directed the return of the records in the case to the Income-tax Appellate Tribunal as it was represented to them that the Madras High Court had ceased to have jurisdiction to deal with the reference in view of the retrocession of the C. & M. Station, Bangalore, wherefrom the reference arose, to the Government of Mysore.

(2.) The assessees, who are respondents before us, are a firm of Engineering Contractors who had their office within the Mysore State limits. During the conferred account year ending March 1942 they did some building construction work for a war camp in Bangalore at Jalahalli which place is also situate within the limits of the Mysore State. It is not disputed that the contract for these works was accepted by the Commander, Royal Engineering, Bangalore, whoso office was then in the C. & M. Station, Bangalore. The then Income-tax Officer of the C. & M. Station assessed the income which the firm had derived from these contracts as he was of the view that the same was derived from contracts made in the C. & M. Station, Bangalore and the income therefrom accrued or arose in the station within the meaning of Section 4 (1), Indian Income-tax Act as applied to it. The assessees carried up the matter in appeal and the Appellate Assistant Commissioner of Income-tax, C. & M. Station, Mr. P. W. A. Morris, the then Collector of the Station, by an order dated 4-12-43 allowed the appeal and set aside the assessment. He held that the income of the respondents was not liable to taxation in the station either on the ground of accrual or receipt and that no part of the business operations of the firm was carried out in the station. The Income-tax Department took up the matter before the Income-tax Appellate Tribunal, Madras Bench. That Bench concurred with the view that neither under Section 42, Indian Income-tax Act nor by virtue of Section 4 (1) (c) read with Section 10 of the Act the income of the assessees was liable to be taxed in the C. & M. Station, and they dismissed the Department's appeal. Thereafter the Department asked for and obtained a reference by the Appellate Tribunal to the High Court of Madras and that Court made the order above referred to. Subsequently, quite a long time afterwards, the present Commissioner of Income-tax has purported to re-file the reference in this Court; and thus the matter has come up for decision before us.

(3.) Mr. Section K. Venkataranga Iyengar, learned counsel for the assessee, has raised certain preliminary objections against the present reference to this Court. He contends that this petition if treated as a reference is very belated; and is not competent if it is to be treated as a mere refiling in this Court of a reference already made to the Madras High Court. He urges that the Madras High Court returned the reference so far back as 4-8-1948 and the same reference was refiled in this Court on 24-6-1950 nearly two years afterwards, that the explanation for the delay, viz. that the Income-tax authorities were taking legal or administrative advice from the Central Government is not sufficient justification for the very long delay. The present petition, however, does not purport to be and is not a fresh reference by the Appellate Tribunal under Section 66 (1) on any application by the Commissioner. The period of limitation of 60 days within which the Commissioner has to make an application to the Appellate Tribunal for making a reference does not, therefore, apply to this petition. Under Section 5 (c) of Act 31 of 1948, the Mysore Income-tax and Excess Profits Tax (Application to the Retroceded Area) (Emergency) Act, 1948, it has been specifically provided that an appeal or application pending before an income-tax or excess profits tax authority in the Retroceded Area immediately prior to the first day of July 1948 shall be deemed, on that date, to be an appeal or application pending before an income-tax or excess profits tax authority in Mysore vested with or ordinarily exercising the functions of such authority and the Indian Income-tax Act, 1922, or the Excess Profits Act, 1946, as the case may be, as in force in the Retroceded Area immediately prior to the first day of July 1948, shall apply to such appeal or application. By Section 4 of Act 23 of 1947, the Retrocession (Application of Laws) Act, 1947, the words "High Court" and "Court of Resident" in any enactment in force in the C. & M. Station shall be construed as a reference to the High Court of Mysore; and under Section 5 of Act 24 of 1947, the Retrocession (Transitional Provisions) Act, 1947, any proceeding under a law in force in the Civil and Military Station prior to the date of retrocession initiated before an authority in the Civil and Military Station which is not finally disposed of or decided before that date, shall on that date be deemed to be a proceeding initiated before an authority in Mysore vested with or ordinarily exercising the functions of such authority and the proceeding may be continued thereafter before the authority in Mysore, as if first initiated before him. If the High Court of Madras was an authority which was exercising jurisdiction in the C. & M. Station under the Indian Income-tax Act of 1922 then proceedings which were pending before it and which were not finally disposed of on the date of the retrocession have to be continued before the Mysore High Court as if first initiated before it. It appears to us, therefore, there is no substance in this objection.