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3. Sikkim became part of India in April 1975. The Constitution (Thirty sixth Amendment) Act, 1975 inserted Article 371-F in the Constitution of India, in terms of which not all the laws of India were extended to the new State of Sikkim. Under Article 371-F (k) all laws in force immediately before the appointed day, i.e., 26th April, 1975, in the territories comprising the State of Sikkim or any part thereof were to continue to be in force therein until amended or repealed by a competent legislature or other competent authority. The Act was not made straightaway applicable to the State of Sikkim. Till such extension of the Act to Sikkim by a notification issued under Article 371- F (n), income tax was to be charged and collected under the Sikkim State Income-tax Manual 1948 (Sikkim Manual 1948). The recovery of tax was under the scheme of the Sikkim (Collection of Taxes and Prevention of Evasion of Payment of Taxes) Act, 1987.

4. By a Notification No. S.O. 1028 E dated 7th November, 1988 issued under Article 371-F(n) of the Constitution, the Act, the Wealth Tax Act, 1957 and the Gift Tax Act, 1958 were extended to the State of Sikkim. In terms of para 2 of the said Notification, the Central Government appointed, by Notification S.O. 148 E dated 23rd February 1989, the 1st of April, 1989 as the date on which the Act would come into force in the State of Sikkim in relation to the previous year relevant to the AY commencing on the 1 st day of April, 1989. However, subsequently by virtue of Section 26 of the Finance Act, 1989 the Act was made applicable to the State of Sikkim from the previous year relevant to the AY commencing from 1st April 1990, thereby extending the date of applicability of the Act by one year from the date specified in the notification dated 23rd February, 1989.

24. In the decision in the Assessees' petitions the Sikkim High Court analysed Article 371 F (k) and (n) of the Constitution of India and concluded that:

"The combined effect of both these clauses on the present controversy is that so long as the Act of 1961 was not extended to Sikkim, the Sikkim law of income-tax continued to be in force in respect of all incomes earned in Sikkim, notwithstanding the other provisions of the Constitution, and the provisions of the Indian Income-tax Act would not apply to such incomes irrespective of the length of stay in that part of India where the Indian Income-tax Act was in force. That is the natural consequence of the State law being inapplicable in a part of India to which part the Central law did not apply. But the Sikkim law being a State law cannot have extra- territorial operation so as to apply to incomes earned outside Sikkim. So, the only effect of the special provisions contained in Article 371F is that so long as the Indian Income-tax Act did not become applicable to Sikkim, the 1961 Act could not apply to incomes earned in Sikkim, but in respect of the incomes earned in other parts of India where the 1961 Act was in force, the Sikkim law could not operate and the 1961 Act would apply. As such, there cannot be any occasion for double taxation of the same income both under the Sikkim State Income-tax Manual and under the Act".

28. In Alankar Commercial Pvt. Ltd. v. Assistant Commissioner of Income Tax (supra) the High Court held that the jurisdiction of the ACIT, Delhi to issue notice under Section 148 of the Act was not ousted by Article 371 F of the Constitution of India . Consistent what was earlier held by it in the case of Assessees herein, i.e., Mansarover Commercial Pvt. Ltd. (supra), the High Court of Sikkim held that the said provision could not "stultify theoperation of the central law of income-tax with respect to a company registered in Sikkim concerning its income which accrued or was received outside Sikkim. Further, law of income-tax is not a personal law which a person may carry with him wherever he goes or functions." It was held that if ACPL had carried on its business activities or had received income outside Sikkim but within India, the same would be liable to tax under the Act.