Anjan Banerjee
v.
Union of India

(High Court Of Judicature At Calcutta)

Civil Order No. 8509(W) Of 1992 | 29-03-1993


SUHAS CHANDRA SEN, J

(1) THE writ petitioner, Anjan Banerjee, is employed as Assistant Resident Commissioner-cum-Assistant Director, Tourism, Government of Sikkim. The petitioner was appointed in 1974 under the State Trading Corporation of Sikkim having its office at 4c, Poonam, 5/2, Russel Street, Calcutta-700 017.

(2) THE case of the petitioner is that, although the petitioner was appointed in the year 1974, his salary is being deducted at source under the provisions of the Sikkim State Income-tax Manual, 1948, since 1982. The petitioner lodged repeated protests against this deduction from his salary because he was posted at Calcutta. The authorities in Sikkim being respondents Nos. 8 to 11 did not pay any heed to the protest lodged by the petitioner.

(3) THE petitioner's case now before this court is :

"the petitioner states and submits that, in view of the facts and circumstances stated hereinbefore and in view of the fact that the petitioner is a resident of India within the meaning of Section 6 of the Income-tax Act, 1961, and in view of the fact that the Income-tax Act, 1961, has been extended to the State of Sikkim with effect from April 1, 1989, the income-tax, under any circumstances, cannot be deducted under the provisions of the Sikkim State Manual, 1948. It is humbly submitted that the income-tax of the petitioner is to be governed under the provisions of the Income-tax Act, 1961, and not under the Sikkim State Income-tax Manual, 1948. "

(4) SIKKIM was a Himalayan kingdom ruled by the Chogyal of Sikkim (earlier known as the Maharaja of Sikkim). By virtue of the Government of Sikkim Act, 1974, an assembly of Sikkim was set up with legislative powers within the territory of Sikkim. On April 10, 1975, the Sikkim Assembly passed an unanimous resolution that led to a special poll of referendum on April 14, 1975, which in turn resulted in merger of Sikkim with India.

(5) THIS was followed by the amendment of the Constitution of India (Thirty-sixth Amendment) by which Sikkim was admitted as a State of the Union of India with effect from April 26, 1975. Article 371f was inserted in the Constitution providing for special provisions with respect to the State of Sikkim. The material part of Article 371f, which falls for consideration in this case is as under :

"371f. Notwithstanding anything in this Constitution,-- (a) the Legislative Assembly of the State of Sikkim shall consist of not less than thirty members ; (b) as from the date of commencement of the Constitution (Thirty-sixth Amendment) Act, 1975 (hereafter in this Article referred to as the appointed day)- -. . . . (iii) the said Legislative Assembly of the State of Sikkim shall exercise the powers and perform the functions of the Legislative Assembly of a State under this Constitution ; (k) all laws in force immediately before the appointed day in the territories comprised in the State of Sikkim or any part thereof shall continue to be in force therein until amended or repealed by a competent Legislature or other competent authority ; (1) for the purpose of facilitating the application of any such law as is referred to in Clause (k) in relation to the administration of the State of Sikkim and for the purpose of bringing the provisions of any such law into accord with the provisions of this Constitution, the President may, within two years from the appointed day, by order, make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedient, and thereupon, every such law shall have effect subject to the adaptations and modifications so made, and any such adaptation or modification shall not be questioned in any court of law ; (n) the President may, by public notification, extend with such restrictions or modifications as he thinks fit to the State of Sikkim any enactment which is in force in a State in India at the date of the notification ; (o) if any difficulty arises in giving effect to any of the foregoing provisions of this article, the President may, by order, do anything (including any adaptation or modification of any other article) which appears to him to be necessary for the purpose of removing that difficulty ;"

(6) IT has been stated from the Bar that, after the provisions of Article 371f of the Constitution came into force as many as 166 Acts of the Indian Parliament have been extended to Sikkim. There has been no difficulty in implementing those Acts in Sikkim.

(7) DIFFICULTY has arisen in the case of the Income-tax Act. Although, the Constitution (Thirty-sixth Amendment) Act, 1975, was given retrospective effect from April 26, 1975, no attempt was made to extend the Income-tax Act in Sikkim till November 7, 1988, when the following notification was issued (see [1989] 176 ITR (St.) 222) :

"ministry of Home Affairs Notification new Delhi, the 7th November, 1988. S. 0. No. 1028 (E).--In exercise of the powers conferred by Clause (n) of Article 371f of the Constitution, the President hereby extends to the State of Sikkim the enactments specified in the Schedule annexed hereto, subject to the modifications, if any, specified in that Schedule and the following further modifications, namely :

(1) Any reference in the said enactments to a law not in force, or to a functionary not in existence, in the State of Sikkim shall be construed as a reference to the corresponding law in force, or to the corresponding functionary in existence in that State : provided that if any question arises as to who such corresponding functionary, is or if there is no such corresponding functionary, the Central Government shall decide as to who such functionary will be and the decision of the Central Government shall be final.

(2) Notwithstanding anything contained in the relevant provisions, if any, of each such enactment for the commencement thereof, the provisions of each such enactment shall come into force in the State of Sikkim on such date as the Central Government may, by notification in the Official Gazette, appoint : provided that different dates may be appointed for different provisions of the enactment and for different areas in the State of Sikkim and any reference in any such provision to the commencement of the Act shall be construed as a reference to the coming into force of that provision in the area where it has been brought into force :

Sr. No.

Year

No.

Short title

(1)

1961

43

Income

(2)

1957

27

Wealth

(3)

1958

18

Gift

(3) The provisions of Chapter XVII of the Income-tax Act shall be made applicable with immediate effect.

(4) In the case of all assessees liable to advance tax of current income of the previous year relevant to the assessment year 1989-90, the instalment of advance tax payable on or before the 15th day of September, 1988, shall be payable on or before the 15th of December, 1988, along with the second instalment of advance tax. (R. Venkataraman), president no. 11013/2/88-NE-III k. K. Sinha, Joint Secretary. "

(8) THIS was followed by another notification dated February 23, 1989, which was to the following effect (see [1989] 176 ITR (St.) 223) :

"new Delhi, the 23rd February, 1989, 4th Phalguna, 1910 (Saka)Notification/direct Taxes S. O. No. 148 (E).--In pursuance of paragraph (2) of the notification of the Government of India in the Ministry of Home Affairs No. S. O. 1028 (E), dated the 7th November, 1988. the Central Government hereby appoints,-- (a) the 1st day of April, 1989, as the date on which the Income-tax Act, 1961, shall come into force in the State of Sikkim in relation to See [1989] 176 ITR (St.) 222. the previous year relevant to the assessment year commencing on the 1st day of April, 1989 ; (b) the 1st day of April, 1990, as the date on which the Wealth-tax Act, 1957, shall come into force in the State of Sikkim in respect of the net wealth of an assessee, residing in the State of Sikkim, on the valuation date being 31st March, 1990 ; (c) the 1st day of April, 1990, as the date on which the Gift-tax Act, 1958, shall come into force in the State of Sikkim in respect of the gifts made by a person, residing in the State of Sikkim, on or after the 1st day of April, 1958. (Vijay Mathur), director (TPL-II). Ministry of Finance department of Revenue. "

(9) THE aforesaid two notifications were followed by the Finance Act, 1989, Section 26 of which provided-

"26. Notwithstanding anything contained in the notification of the Government of India in the Ministry of Home Affairs, No. S. O. 1028 (E) dated the 7th November, 1988, [1989] 176 ITR (St.) 222, and the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. S. O. 148 (E) dated the 23rd February, 1989, [1989] 176 ITR (St.) 223, in so far as it relates to the commencement of the Income-tax Act, 1961 (43 of 1961), in the State of Sikkim, the provisions of the Income-tax Act, 1961, shall come into force in the State of Sikkim with effect from the previous year relevant to the assessment year commencing on the 1st day of April, 1990, and any law corresponding to the Income-tax Act, 1961, which, immediately before such commencement, was in force in the State of Sikkim shall be deemed never to have ceased to have effect in relation to the previous year beginning with the 1st day of April, 1988, and ending with the 31st day of March, 1989, and shall continue to be in force for the purposes of the levy, assessment and collection of income-tax or for the purpose of imposing any penalty or for any other purpose whatsoever connected with, or incidental to, any of the purposes aforesaid, under such law. "

(10) THE writ petition has been opposed by the State of Sikkim. The contention of the writ petitioner, however, has been supported by the Central Government, because of the importance of the case, a notice was issued to the Attorney-General of India to appear in this case. Mr. Somen Bose, advocate, has appeared on behalf of the Attorney-General.

(11) THE Advocate-General of Sikkim contended that there was already in existence a law relating to income-tax in Sikkim. That law has not been repealed. By virtue of the provisions of Clause (k) or Article 371f, all laws in force in the State of Sikkim on the date of merger (April 26, 1975) should continue to be in force until amended or repealed by a competent Legislature or other competent authority. The Sikkim tax laws have not been repealed by any competent Legislature or authority.

(12) IN support of this contention, the Advocate-General has produced a copy of the Sikkim State Income-tax Manual. It is not clear when the law contained in this Manual was promulgated and how it came into force. The petitioner's case is that he was appointed by the Sikkim Government in the year 1974, but deduction of his salary at source started only in 1982. Moreover, the Manual handed up in court contains a series of composite tax laws. It is not something corresponding to the Income-tax Act, 1961. There is a tax under business heading, which is in the nature of a turnover tax. The levy is on "gross sale-proceeds of previous year of all persons engaged in business". Thereafter, there is a tax on agricultural produce (maize and paddy). There is also a tax on employees of the Sikkim State under the heading "salary". Other employees of any other employers are not affected by this tax. There is also patta tax and also a tax on "principal loans in cash or in kind above Rs. 2,000". A uniform rate of three per cent. of tax has been provided in all the aforesaid headings. The field of operation of the Sikkim State Income-tax Manual appears to be quite distinct and separate from the Income-tax Act, which levies a tax on the "total income" of every person to be calculated in the manner laid down in the Income-tax Act.

(13) ASSUMING that there was an income-tax law in force in the Sikkim State before merger, even then the argument advanced by the Advocate-General is not tenable. Section 26 of the Finance Act categorically provides for two things. It has laid down that the provisions of the Income-tax Act, 1961, shall come into force in the State of Sikkim with effect from the previous year relevant to the assessment year commencing from April 1, 1990.

(14) SECTION 26 has also made it clear that any law corresponding to the Income-tax Act, 1961, which immediately before such commencement was in force in the State of Sikkim shall be deemed never to have ceased to have effect in relation to the previous year beginning with the 1st day of April, 1988, and ending with the 31st day of March, 1989. . . . There is no ambiguity in the language of Section 26. Any law corresponding to the Income-tax Act, 1961, which was in force in the State of Sikkim will cease to be operative on and from the date on which the provisions of Income-tax Act, 1961, became applicable to the State of Sikkim. In my view, this is not a case of implied repeal. The Sikkim income-tax law, if any; has been categorically repealed by Section 26 of the Finance Act, 1989.

(15) FURTHERMORE, it is to be noted that it has been held by the Supreme Court that a repeal of a statute may be express or implied. In the case of State of Orissa v. M. A. Tulloch and Co. , the Supreme Court held that by the enactment of the Mines and Minerals (Regulation and Development) Act, 1957, made by Parliament, the provisions of the Orissa Mining Areas Development Fund Act, 1952, which covered the same field of legislation were impliedly repealed. At paragraph 15 of the said judgment, the Supreme Court held as follows (at page 1291) :

"but, even if the matter was res integra, the argument cannot be accepted. Repugnancy arises when two enactments both within the competence of the two Legislatures collide and when the Constitution expressly or by necessary implication provides that the enactment of one Legislature has superiority over the other then to the extent of the repugnancy the one supersedes the other. But two enactments may be repugnant to each other even though obedience to each of them is possible without disobeying the other. The test of two legislations containing contradictory provisions is not, however, the only criterion of repugnancy, for, if a competent Legislature with a superior efficacy expressly or impliedly evinces by its legislation an intention to cover the whole field (supplied) the enactments of the other Legislature, whether passed before or after, would be overborne on the ground of repugnance. Where such is the position, the inconsistency is demonstrated not by detailed comparison of the provisions of the two statutes but by the mere existence of the two pieces of legislation. In the present case, having regard to the terms of Section 18 (1), it appears clear to us that the intention of Parliament was to cover the entire field and thus to leave no scope for the argument that, until rules were framed, there was no inconsistency and no supersession of the State Act. "

(16) THE theory of implied repeal under the Indian Constitution was also noted by the Supreme Court in the case of Zaverbhai Amaidas v. State of Bombay.

(17) THE question about competence of the Indian Parliament to repeal the prevalent laws of Sikkim after merger is also of no substance.

(18) THE State of Sikkim does not have any legislative competence to pass law in respect of tax on income which is exclusively within the domain of Parliament under entry 82 of List I of the Seventh Schedule. In view of the provisions of Article 371f (k), any law relating to tax on income, if any, which was prevailing in Sikkim as "a law in force" has been repealed by a competent Legislature. It is only Parliament which can pass legislation on "taxes on income other than agricultural income".

(19) IN the case of Raj Kumar Rai v. State of Sikkim [1979] Crl. LJ 210, the Sikkim High Court held that the Indian Arms Act, 1959, had been validly extended to the State of Sikkim and thereby it impliedly repealed the corresponding State law on this subject.

(20) IT was contended on behalf of the Advocate-General that Article 371f is a code in itself. Clause (k) declares that all laws in force in $ikkim before the date of merger shall continue to be in force until amended or repealed by a competent Legislature or authority. The President, under Clause (1), has been given power to extend Indian law to Sikkim with such restriction and modification as he may think fit. The Income-tax Act could not have been extended to the State of Sikkim by the Finance Act, 1989. This argument again appears to be misconceived. The Income-tax Act, 1961, is a standing piece of legislation. It provides for levy of a tax on income of every person on an annual basis. The Finance Act provided for the rate of tax and other provisions which make the charge imposed by the Income-tax Act, 1961, valid and effective. The Presidential Notification dated November 7, 1988, [1989] 176 ITR (St.) 222, extended the application of the Income-tax Act, 1961, the Wealth-tax Act, 1957, and the Gift-tax Act, 1958, to the State of Sikkim from the date which was to be notified by the Central Government. The provisions of Chapter XVII of the Income-tax Act which related to payment of advance tax on current income of the previous year relevant to the assessment year 1989-90 were made applicable to the State of Sikkim immediately. The Presidential Notification dated November 7, 1988, fixed April 1, 1989, as the date on which the Income-tax Act, 1961, was to come into force in the said State of Sikkim. Therefore, the extension of the Income-tax Act, 1961, to the State of Sikkim was done by the President in exercise of the power contained in Clause (n) of Article 371f of the Constitution.

(21) THERE is nothing in Article 371f which restricts the power of Parliament to pass legislation in respect of "taxes on income other than agricultural income" which falls within List I of the Seventh Schedule to the Constitution. Since, after the merger, Sikkim became part of the Indian Union and one of the States mentioned in the First Schedule to the Constitution, Parliament was competent to pass any legislation on any matter mentioned in List I in the Seventh Schedule throughout the territory of India including Sikkim. The special provisions of Article 371f have not whittled down the legislative competence of Parliament in regard to any income arising or accruing in Sikkim in any manner. Parliament was competent to levy income-tax on income received in Sikkim or accruing or arising in the State of Sikkim.

(22) MOREOVER, in my judgment, the enabling provisions of Clause (n) of Article 371f have not restricted the power of Parliament to legislate on any matter concerning Sikkim. The President has been given certain powers for administrative convenience. The enabling powers of the President do not take away anything from the legislative competence of Parliament to restrict or enlarge the area of operation of a Central Act.

(23) IN that view of the matter, this writ petition succeeds and there would be an order as prayed for in terms of prayers (a), (b) and (c). The writ petition is finally disposed of as above. Each party will bear and pay its own cost.

Advocates List

For the Appearing Parties A.C. Maitra, Gurudas Mitra, Milan Bhattacharya, N.P. Sharma, P.K. Samanta, R.C. Prasad, R.N. Das, R.N. Mitra, T. Chakravarthy, V. Partha Sarathi, Advocates.

For Petitioner
  • Shekhar Naphade
  • Mahesh Agrawal
  • Tarun Dua
For Respondent
  • S. Vani
  • B. Sunita Rao
  • Sushil Kumar Pathak

Bench List

HON'BLE MR. JUSTICE SUBHAS CHANDRA SEN

Eq Citation

(1994) 207 ITR 130

(1994) 77 TAXMAN 17