Karnataka High Court
Srikanta Datta Narasimha Raja Wadiyar vs Assistant Commissioner Of Wealth-Tax ... on 31 May, 1999
Equivalent citations: ILR1999KAR3146, [1999]240ITR87(KAR), [1999]240ITR87(KARN)
JUDGMENT V.K. Singhal, J.
1. This is a second round of litigation, challenging the recovery proceedings under the Wealth-tax Act. Earlier in W. As. Nos 626-635 of 1992 by judgment dated April 2, 1992, recovery proceedings were quashed on the ground that a valid recovery certificate has not been issued. Thereafter the Tax Recovery Officer has issued the certificate under Section 222 of the Income-tax Act, 1961, read with Section 32 of the Wealth-tax Act, 1957. The facts of the case are that the petitioner in his capacity as karta of the Hindu undivided family filed the application for settlement before the Settlement Commission in respect of the assessment years 1976-77 and 1977-78. The applications were filed as karta of the minor Hindu undivided family, as well as in his individual capacity. The Settlement Commission on September 29, 1998, passed the order determining the petitioner's wealth for the various assessment years, however, the Commission did not quantify the wealth-tax liability. Consequential orders under Section 16(3) of the Wealth-tax Act, read with Section 22D of the Act were passed and demand notices were also issued. The order passed by the Settlement Commission have become final and the demand notices so served have made the amount payable by the petitioner. The recovery proceedings now initiated by the recovery certificate issued on April 20, 1992, by the Tax Recovery Officer has been assailed on the ground that the provisions of Section 222 have been reamended by the Direct Tax Laws (Amendment) Act, 1989, with effect from April 1, 1988. Earlier, it was the Assessing Officer who could have forwarded the certificate to the Tax Recovery Officer and by virtue of the amendment now the Tax Recovery Officer could issue the certificate. It is stated that since the legislation is by incorporation, therefore, the subsequent amendment under the Income-tax Act, could not be invoked.
2. Arguments have been heard. The controversy is settled by the following decisions of the apex court.
3. In Article 143, Constitution of India and Delhi Laws Act, (1912), In re, AIR 1951 SC 332, the following question was framed by Mr. Justice Fazl All (pages 349, 355) :
"Can a Legislature which is sovereign or has plenary powers within the field assigned to it, delegate its legislative functions to an executive authority or to another agency, and if so, to what extent it can do so ?"
4. This was answered in the following terms :
"(1) The Legislature must normally discharge its primary legislative function itself and not through others.
(2) Once it is established that it has sovereign powers within a certain sphere, it must follow as a corollary that it is free to legislate within that sphere in any way which appears to it to be the best way to give effect to its intention and policy in making a particular law, and that it may utilise any outside agency to any extent it finds necessary for doing things which it is unable to do itself or finds it inconvenient to do. In other words, it can do everything which is ancillary to and necessary for the full and effective exercise of its power of legislation.
(3) It cannot abdicate its legislative functions, and therefore while entrusting power to an outside agency, it must see that such agency acts as a subordinate authority and does not become a parallel Legislature."
5. In State of Tamil Nadu v. K. A. Ramudu Chettiar and Co. , it was found that the power conferred under Section 9(2) of the Central Sales Tax Act, 1956, as amended by the Central Sales Tax (Amendment) Act, 1969, embraced all the powers that the assessing authority had under the sales tax law of the State in force during the relevant assessment year.
6. In State of Kerala v. Attesee (Agro Industrial Trading Corporation) , after referring to Secretary of State v. Hindustan Co-operative Insurance Society Ltd. [1931] 58 IA 259, the apex court has observed as under (page 9) :
"On a consideration of these authorities, therefore, it seems that the following proposition emerges ;
Where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act. This principle, however, will not apply in the following cases :
(a) where the subsequent Act and the previous Act are supplemental to each other ;
(b) where the two Acts are in pari materia ;
(c) where the amendment in the previous Act, if not imported into the subsequent Act also, would render the subsequent Act wholly unworkable and ineffectual ; and
(d) where the amendment of the previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act."
7. In Western Coalfields Ltd. v. Special Area Development Authority, , a distinction was drawn between legislation by incorporation and legislation by reference in as much as in the latter case the amendments made in the earlier legislation would be applicable to the referring legislation and it was observed at paragraph 15 as under (page 703):
"The principle, broadly, is that where a statute is incorporated by reference into a second statute, the repeal of the first statute by a third does not affect the second (see Clarke v. Bradlaugh [1881] 8 QBD 63, 69). Likewise, logically, where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it. (see Secretary of State for India in Council v. Hindustan Co-operative Insurance Society Ltd. [1931] 58 IA 259 ; AIR 1931 PC 149. But these rules are not absolute and inflexible. In the case last cited, the Privy Council qualified its statement of the law by saying that the principle, that an amendment of the first law which is not expressly made applicable to the subsequent incorporating Act cannot be deemed to be incorporated into the second Act, applies 'if it is possible for the subsequent Act to function effectually without the addition' (IA page 267). Besides, as held by a Constitution Bench of this court in Collector of Customs v. V. Nathella Sampathu Chetty , the decision of the Privy Council could not be extended too far so as to cover every case in which the provisions of another statute are adopted by absorption (see SCR 837 at page 336 of AIR). Finally, in State of Madhya Pradesh v. M.V. Narasimhan , this court held, after an examination of the relevant decisions, that the broad principle that where a subsequent Act incorporates provisions of a previous Act then the borrowed provisions become an integral and independent part of the subsequent Act and are totally unaffected by any repeal or amendment in the previous Act, is subject to four exceptions, one of which is that the principle will not apply to cases' 'where the subsequent Act and the previous Act are supplemental to each other'."
8. In the case of Gwalior Rayon Silk Mfg (Wvg.) Co. Ltd. v. Asst. Commissioner of Sales Tax , the decision given in Shama Rao v. Union Territory of Pondicherry was distinguished as under (page 219 of 94 ITR) :
"We think that the principle of the ruling in Shama Rao v. Union Territory of Pondicherry , must be confined to the facts of the case. It is doubtful whether there is any general principle which precludes either Parliament or a State Legislature from adopting a law and the future amendments to the law passed respectively by a State Legislature or Parliament and incorporating them in its legislation. At any rate, there can be no such prohibition when the adoption is not of the entire corpus of law on a subject but only of a provision and its future amendments and that for a special reason or purpose."
9. In the case of Bajya v. Smt. Gopikabai, , the apex court has observed that broadly speaking legislation by referential incorporation falls in two categories : First, where a statute by specific reference incorporates the provisions of another statute as of the time of adoption. Second, where a statute incorporates by general reference the law concerning a particular subject, as a genus. In the case of the former, the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute.
10. In the case of Gauri Shankar Gaur v. State of U. P., , it was observed that if a later Act merely makes a reference to the earlier Act or existing law, it is only by way of reference and all amendments, repeals, new law subsequently made will have effect unless its operation is saved by Section 8(1) of the General Clauses Act or void under Article 254 of the Constitution.
11. Section 32 of the Wealth-tax Act provides that the provisions contained in Sections 221 to 227, 228A, 229, 231 and 232 of the Income-tax Act and the Second and Third Schedules to that Act and any rules made thereunder shall, so far as may be, apply as if the said provisions were provisions of this Act and referred to wealth-tax and sums imposed by way of penalty, fine and interest under this Act instead of to income-tax and sums imposed by way of penalty, fine and interest under that Act and to the corresponding wealth-tax authorities instead of to the income-tax authorities specified therein. It is by virtue of Section 32 of the Wealth-tax Act, that the provisions of the Income-tax Act have been incorporated.
12. The Income-tax Act and the Wealth-tax Act have been enacted by Parliament and could be considered supplemental to each other and in many respects they are pari materia. Parliament could have incorporated separate provisions under the Wealth-tax Act, in respect of procedure for recovery. Instead of incorporating separate provisions in the Wealth-tax Act, the provisions of the Income-tax Act have been made applicable. Section 32 of the Wealth-tax Act incorporates those provisions by general reference to the law concerning recovery as is provided under Sections 221 to 227, 228A, 229, 231 and 232 and the Second and Third Schedules and the rules made thereunder. Application of the provision (so far as may be) makes it clear that they are applicable to the Wealth-tax Act as on the date the power for recovery is exercised. The subsequent amendment therefore under the Income-tax Act would also be taken note of. It is not the law as on the date of incorporation of the provisions of Section 32 of the Wealth tax Act as were existing under the Income-tax Act, but even the subsequent amendment thereof under the Income-tax Act that will have to be taken into consideration. The incorporation is by general reference in the matter of process of recovery and therefore the subsequent amendments under the Income-tax Act could not have been ignored.
13. In view of the law laid down by the apex court in the aforesaid decisions, it would be seen that not only the law which was at the time of incorporation of the Wealth-tax Act and the Income-tax Act, as also the provisions which have been amended from time to time will be made applicable. At the time of issue of notice the Tax Recovery Officer alone was competent to issue the tax recovery certificate. In these circumstances, there is no illegality committed by the Tax Recovery Officer in issuing the certificate.
14. The petition having no force is dismissed.